Kumba proposed last month that Mittal buy iron ore at cost- plus-3%, and pay the difference between that price and the market price into an escrow or special account pending resolution of the dispute, or else provide a guarantee for its payment if Kumba won on arbitration.

Kumba, which supplies about 75% of Mittal’s iron ore, moved the dispute up a gear yesterday when it said it would consider ending supplies to the steel giant within weeks unless agreement was reached urgently.

It is understood that Mittal has already rejected that interim pricing proposal as “abnormally” high, and requested that Kumba make a revised proposal. This suggests the groups are squaring up for a marathon dispute.

“ArcelorMittal has thus far declined to accept that proposal, or make a firm counterproposal regarding an interim price or payment mechanism,” Kumba said.

“In the event that Mittal is not prepared to agree to a reasonable interim arrangement, SIOC (Sishen Iron Ore Company) will have to review the basis on which it supplies iron ore from the Sishen mine to Mittal, and it cannot discount the possibility that termination of supply is one possible alternative which it may have to consider in these circumstances,” it said.

A Mittal spokesman said the firm viewed this as a “very serious threat”. The dispute was being escalated from a price to a supply issue. This was likely to have serious consequences for steel supply in the country.

The two companies are at odds over a 2001 iron-ore supply agreement, under which Mittal paid a preferential rate. Kumba unilaterally terminated that agreement in February.

Kumba decided to end the agreement on the grounds that Mittal had failed to convert its old- order mining right on its stake in the SIOC to a new-order right, and demanded that Mittal pay market prices for the iron ore.

The government has since granted prospecting rights on Mittal’s stake to a company called Imperial Crown Trading.

mpofub@bdfm.co.za

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