Steel task team to report back soon

Cape Town - Officials investigating ways to lower domestic steel prices will report their findings within two months, a senior government official said on Wednesday.

The task team, comprising officials from the departments of trade and industry (DTI), mineral resources and economic development, was formed after a bitter pricing row between ArcelorMittal South Africa and Kumba Iron Ore threatened the country's steel industry.

"Certainly our Minister (of Trade and Industry Rob Davies) has instructed us to try and expedite this work as rapidly as possible... we are talking about a month, six weeks, maybe two months down the line," Nimrod Zalk, deputy director general of industrial policy at the DTI, told lawmakers.

South Africa, a top global exporter of iron ore, is trying to add value to the ore to sell finished steel products. It sees lower steel prices as vital to stimulating the growth of new industries.

The government helped ArcelorMittal SA [JSE:ACL], a unit of the world's biggest steelmaker, and Kumba Iron Ore [JSE:KIO] - an arm of global miner Anglo American [JSE:AGL] - to agree an interim pricing deal following a prolonged dispute.

Under the terms of July's deal, ArcelorMittal will pay Kumba a fixed price of $50 per tonne for ore for its Saldanha plant and $70 per tonne for its inland plants for one year until July 2011. The mandate of the task team is to make recommendations to government, which may include changes to policy and legislation.

He said government aimed for a development pricing model for steel that would make local prices competitive in a global conext.

Zalk said the government wanted steel producers to pass arrangements on cheaper prices to downstream industry. "To us that forms the upper limit of what can be considered a developmental steel price," he said.

Zalk said an argument could be made for even lower steel prices, such as an export parity price.