ArcelorMittal South Africa’s announcement that it has reached an agreement with gold producers Harmony and DRDGold is a blow to construction contractors hoping for more competitively priced steel in the South African market.

The long-running dispute concerned the pricing of flat steel products and began in 2002 when the mining companies first lodged a complaint with the Competition Commission. They claimed that ArcelorMittal had a dominant position in the country’s flat steel market and had abused this by charging excessive prices. This was to the detriment of customers for flat steel.

The case was referred to the Competition Tribunal in 2004. In 2007 the Competition Tribunal found against ArcelorMittal and imposed a fine of R691 8-million (USD 86.4-million).

The finding of the Competition Tribunal was taken on appeal by ArcelorMittal and the Competition Appeal Court referred the matter back to the Competition Tribunal to hear further evidence leaving ArcelorMittal at risk.

That has now been settled and an ArcelorMittal SA spokesperson said that there would be no further hearings at the Competition Tribunal about the case, following the settlement.

The case at the Tribunal will, in all likelihood, be withdrawn, as there was no one left to pursue the matter.

The agreement between the parties was reached without any admission of liability on the part of ArcelorMittal SA. Other than that the parties have agreed to keep the terms of the settlement confidential.

“The parties wish to focus on their respective core business activities, rather than pursue protracted and costly litigation of this matter,” the spokesman for ArcelorMittal said.

“Harmony and DRDGOLD withdrew their complaint, which remained unresolved after several years of litigation, following the conclusion of a settlement agreement with ArcelorMittal. The settlement agreement reached will permit the gold miners to focus their energies and resources on their core businesses, and represents a satisfactory outcome to the matter for them,” Harmony and DRDGold said in a statement.

The factors which led to the settlement were presumably the length of time it had taken to get this far with still no resolution in sight, together with the legal costs that had already been incurred and would continue to be incurred had the dispute continued.

This highlights that the steel industry in South Africa has very few key players who, as a result, can control pricing and supply. Many hoped this case would resolve the dominant position of ArcelorMittal, however, as the complaint has settled the position for construction contractors requiring competitively priced steel is as unsatisfactory as ever.

It is interesting that Iscor was a state owned steel monopoly that was sold to private investors who re-named it ArcelorMittal. Sasol (oil from coal) was also a state owned company whose monopolistic tendencies appear to have continued under private ownership. Sasol has been fined in South Africa and Europe for anti-competitive behaviour.

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