Price of iron ore leads to dispute between steelmaker and supplierArcelorMittal, the world's largest steelmaker, and its supplier, Kumba Iron Ore, have been in the midst of a bitter commodity price dispute for almost half a year - and now a task force has been called in to investigate the issue over the next two months.

In March, the iron ore provider canceled a nine-year deal with ArcelorMittal so it would be able to raise its prices. The South African steelmaker is challenging that decision, demanding that Kumba provide the company with fairly-priced materials. ArcelorMittal is concerned that the termination of the pricing agreement, which had stood since 2001 and which provided the steelmaker with most of the ore it needed at 3 percent above what it cost to produce, will raise steel prices and hamper efforts to expand manufacturing in the country.

After the government intervened last month, the two companies agreed to interim prices for ore from the Sishen mine, which is one of the largest open-pit mines in the world and produced 34 million tons of iron ore in 2008 alone.

"The mandate of this inter-departmental task team is to make recommendations on appropriate policy tools to ensure" that the steel industry remains competitive, Nimrod Zalk, a deputy director general at the Department of Trade and Industry, told lawmakers in Cape Town, Bloomberg reports. "The focus is not on how should the spoils be shared of this iron-ore arrangement."

The government is seeking “developmental” steel prices, Zalk added, meaning that manufacturers should not pay more for the material than their rivals abroad.

ArcelorMittal has operations in more than 60 countries and is the leader in all major global steel markets, including automotive, construction, household appliances and packaging.
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