2010-03-30
JOHANNESBURG (Reuters) - ArcelorMittal South Africa, a unit of the world's top steelmaker, will raise prices by $80 per tonne in May to ease the impact of a dispute over iron ore supplies, it said on Tuesday.

The firm also said it might get iron ore from other domestic suppliers while its dispute with Kumba Iron Ore remained unresolved, and warned of further price increases due to fluctuations in international ore prices.

Kumba, a unit of global miner Anglo American Plc, last month terminated a deal which allowed the steelmaker to receive ore from Kumba at a discount and said it would sell its commodity to ArcelorMittal South Africa at market rates from March 1.

ArcelorMittal South Africa's Chief Executive, Nonkululeko Nyembezi-Heita, said that while the company insisted the long-term preferential supply agreement with Kumba was still valid, it would need to hike prices since resolving the dispute may take "an extended period" of more than three months.

"This will involve passing on increased prices to our customers, given the significant difference between the contractual rate for iron ore of cost +3 percent and the spot price for iron ore based on worldwide indices," Nyembezi-Heita said in a statement.

"For May deliveries across our steel products, the levy will be $80/tonne or 600 rand/tonne," she told Reuters.

Nyembezi-Heita said the levy would keep fluctuating because Kumba Iron Ore was referencing the price of iron to the spot price of international iron ore.

Shares in the company were trading 1.76 percent higher by 1414 GMT, compared with a 0.36 percent rise on the JSE Top-40 blue chip index. Kumba shares were down 0.84 percent.

Nyembezi-Heita said an arbitration panel could be in place within three months and it was confident it would win.

"We believe that ArcelorMittal has with Kumba a valid and binding agreement," she said.

The company said the surcharge would be refunded to customers if ArcelorMittal succeeded in its claims.

Kumba and ArcelorMittal South Africa struck a deal in 2001 giving the latter cheap iron ore providing it converted its mining rights at Kumba's Sishen mine into a stake in the mine.

Kumba says ArcelorMittal South Africa has failed to honour this agreement. ArcelorMittal South Africa denies any breach of contract.