Battle over steel prices

The gold mining duo took on Mittal, blaming the steel maker for “high” steel prices, which have been attributed as the cause of stunted development of the downstream steel sector, which includes gold producers and other mining concerns reliant on steel. Harmony Gold and DRDGold management particularly lamented the fact that the high steel prices charged by Mittal were responsible for eliminating the South African industry’s job creating opportunities – something government concurs. Harmony representatives argued that not only was Mittal engaging in excessive pricing, but that it was also using its market power to fend off competition from imports, as well as preventing its customers from importing through a selective system of rebates and discounts. Mittal employs a controversial pricing structure called import-parity pricing, and it featured strongly in last week’s hot debate as the steel maker’s management denied that the practice was still in use. The case by the two gold producers is a class action in terms of Roman Dutch law, the law system that governs South Africa and Zimbabwe. If the two companies win the case, it spells disaster for Mittal, as other mining companies dependent on the company’s steel, will claim the benefits of the action that may cost Mittal billions of rands. This is despite the fact that most mining companies refused to jump on board and join DRDGold and Harmony Gold in its litigation against Mittal. Mittal and President Thabo Mbeki’s government have been locked in a deadlock since 2004, and have since that period failed to come up with a considerate pricing model for local steel buyers. While all parties were supposed to have concluded more than a year ago, the parties have been unable finalise talks.

March 2006
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