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ArcelorMittal, Kumba seal big iron ore deal

Johannesburg, July 23, 2010

ArcelorMittal South Africa, a unit of the world's biggest steelmaker, reached a stop-gap agreement to buy ore from Kumba Iron Ore over the next year at about half of recent market prices.

Shares of both companies rose sharply on Thursday after they announced the deal, however, with the end to a battle that has dragged on since late February between the steelmaker and its supplier, and which prompted South Africa's government to step in and mediate.

Kumba, an arm of miner Anglo American and the world's tenth-largest producer of iron ore, separately reported a 10 percent rise in first-half export sales volume and forecast increasing demand for ore due to rising crude steel output.

Under the terms of the deal, ArcerlorMittal will pay 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 outcome of the agreement wasn't exactly in (Kumba's) favour. It could have worked better for them if there was ... a phased-in approach,' said Sasha Naryshkine, a trader at asset manager Vestact.

'At least some sort of settlement has been reached, everyone is seen in more favourable light.'

The spot price for iron ore was $115 per tonne on Thursday, and Kumba has said the average price it received for iron ore exports in the second quarter was $136 per tonne.

Kumba, which previously sold to ArcelorMittal at a discount, had planned to sell at market rates starting in March, citing the impact of the strengthening rand on profit.-Reuters




Tags: ArcelorMittal | Kumba |

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