Business Report reported that approximately 60% of downstream steel firms said they would increase employment by more than 10% if steel prices were 30% lower.
The portfolio committee on trade and industry, which was hearing evidence relating to ArcelorMittal South Africa's local pricing strategy, was also told by the Competition Commission and the Department of Trade and Industry that there was no evidence it had implemented the lower basket price it had undertaken to implement in 2006.
Mr Garth Strachan chief director of industrial policy at the DTI told the committee that the department had been largely unsuccessful in its efforts to introduce companies to compete with ArcelorMittal SA. He said that "We did make efforts to introduce either a large multinational player or a niche player but were largely unsuccessful because of problems securing cheap iron ore supplies and securing concessional industrial financing."
He also said that, although the DTI had been involved in the original negotiations relating to the agreement that Kumba Iron Ore would supply ArcelorMittal SA with iron ore at cost plus 3% and that the steel maker would pass on the benefits to downstream consumers, this agreement was not legally enforceable by the DTI.
Mr Strachan said that "It's become apparent that the two companies do their own thing? We are now looking to see what legally enforceable measures we can take."
He acknowledged that the Industrial Development Corporation was one of the parties responsible for the agreement.
The committee has been tasked with identifying ways in which the government could ensure that ArcelorMittal SA pursues a competitive steel pricing regime that will support developmental objectives.
Mr Bhekisizwe Radebe ANC committee member said that the critical issue that had to be addressed was the looting of a South African resource.
In his presentation to the committee, Mr Paul Jourdan, a development consultant, said that steel was the most important feedstock into manufacturing and had high job creation potential. He said downstream steel companies had indicated that they would significantly increase output and employment if there was a reduction in the price of steel.
He added that "The country is well endowed with the main minerals for steel making. However, steel is only made available at monopoly prices import parity prices, which destroys tens of thousands of potential downstream jobs in manufacturing."
Mr Shan Ramburuth, the competition commissioner, said that because of its monopoly position, ArcelorMittal SA was able to charge local consumers an import parity price that was 40 percent higher than the export parity price, at which it sold to export customers. He said the steel maker's monopoly position had not been earned by being more efficient than its competitors but had been bestowed upon it by dint of its history as a state owned entity.
Mr Ramburuth said that local steel prices had generally been on a par with those charged in high price countries such as the US, Canada and the EU. This was despite the fact that costs of iron ore, electricity, coal and transport were lower in South Africa than in the high price countries.
(Sourced from www.busrep.co.za)
