By Devon Maylie
JOHANNESBURG--ArcelorMittal South Africa Ltd. (ACL.JO) said
Tuesday it agreed to a new iron-ore pricing agreement with Kumba
Iron Ore Ltd. (KIO.JO), South Africa's largest iron-ore
producer.
Under the new agreement, which will start from January 2014,
Kumba will supply 6.25 million tons a year of iron ore to
ArcelorMittal at a price based on the cost of production plus a
margin of 20%, ArcelorMittal said in a statement. The companies
estimate the cost of iron ore per ton under this agreement will
average between $60 a metric ton and $65/ton for 2014 and 2015.
Under the agreement, the costs of producing iron ore at the
Thabazimbi mine will now be incurred by Kumba instead of
ArcelorMittal. Those costs have increased, ArcelorMittal said,
without giving a figure.
Kumba used to supply iron ore, a key raw material in steel
making, to ArcelorMittal at cost of production plus 3%. That
agreement ended after ArcelorMittal lost a stake in Kumba's key
sishen iron ore mine after it failed to apply through the
government for a renewal under a new system.
The companies have been in dispute over the iron ore pricing
agreement since 2010 and the new agreement ends a long period of
uncertainty.
Write to Devon Maylie at devon.maylie@wsj.com