Johannesburg - Steel costs to the mining industry have gone up 85% in the last year, CEO of Harmony Gold, Graham Briggs said on Monday, responding to recent Competition Commission raids on Cape Town Iron and Steel Works, South African Iron and Steel Institute and Highveld Steel.
The commission has alleged there is a pricing cartel fuelling increases of up to 100%.
The high steel price had added 30% to 45% to capital costs such as the sinking of shafts, said Briggs. "We are fighting costs on all fronts. SA is in danger of becoming uncompetitive," he said.
"When we buy steel locally, we have a situation where they either don't quote, all quote the same, or just say the price is high."
Briggs said Harmony was considering importing steel products.
Last year, complaints levied by Harmony Gold and rival, DRDGold, saw the Competition Tribunal levy a R69.2m penalty against Africa's largest steelmaker, ArcelorMittal.
However, Gavin Maile, KPMG industrial, automotive and petrochemicals and industrial markets partner said: "You can't blame SA (steel) companies because the international price of steel is rising at a higher rate. SA steel is still slightly cheaper."
High prices were essentially a factor of globalisation. "If the Competition Commission succeeds in forcing the price down, you could see local steel manufacturers sell overseas, at present only around 40% of their sales are to the international market," he said.
Global demand for steel was high, Maile said. "China will consume 35% of the world's steel next year and growth in India is significant too. If you look at the automotive industry 60% of a vehicle is steel, there are no real alternatives to its strength."
Pieter Dietrich, secretary general of the South African Iron and Steel Institute (SAISI) - whose offices were raided by the Commission said: "I personally have no knowledge of anti-competitive behaviour and look forward to (the Commission's) investigations."
He categorically denied that any "anti-competitive discussions had taken place in SAISI offices and meetings."
Arcelor's money tree
In June the steel industry announced a five percent increase, its fifth price increase of 2008.
The Competition Commission, in a busy year that has included judgements and investigations of the bread, tyre, pharmaceutical, poultry breeders and banking industries, has been dogged in pursuing ongoing complaints against ever-escalating prices in the steel industry.
ArcelorMittal, which is the largest steel producer in Africa, saw earnings rise 31% for the first quarter this year to R2bn with exports down 47% and domestic sales moving from 79% to 85% of sales.
The Competition Commission said it received a Corporate Leniency Policy (CLP) application confirming "the existence of a cartel among competitors for reinforcing bar (rebar), wire rod, sections (rounds and squares, angles and profiles), roofing bolts and fencing products (including droppers)discussions and meetings took place between the parties where agreements were reached to fix prices, exchange price lists and fix discounts."
In a statement the Commission said information received "indicates that parties allocated customers by agreeing on which customers to supply for various long steel products, and shared commercially sensitive information through SAISI.
"These steel products are critical in the infrastructure sector, which has been identified as a priority area by the Commission and as a key driver of government's Asgisa programme," the Commissioner, Shan Ramburuth said.
- Fin24.com