SA’s biggest steel producer cleared of excessive pricing

JOHANNESBURG- South Africa’s Competition Commission said on Wednesday the country’s largest steel producer Iscor was not abusing its dominant position by charging excessive prices.

The decision climaxed more than a year of investigations into complaints of anti-competitive behaviour from leading gold producers Harmony Gold Ltd and Durban Roodeport Deep (DRD) as well as the Conveyor Manufacturers Association and Volkswagen South Africa. “The investigation found that Iscor’s prices were comparable to prices of competing prices available locally, as well as to prices charged in other countries’ domestic markets,” said the competition commission.”Accordingly the investigation found no evidence that Iscor was abusing its dominance by charging excessive prices”.As a result of its findings, the competition watchdog said it would not refer the complaints to the higher Competition Tribunal for adjudication.Instead, the complainants have 20 business days from Tuesday, the day the Commission notified the Tribunal of its decision, to take the complaint to the country’s highest competition authority.Iscor welcomed the decision.It controls the flat steel products market with about an 84 percent market share and accounts for about 54 percent of the long steel products market.”We have consistently maintained that the domestic pricing of steel is totally in keeping with the global supply and demand of the commodity and no evidence was garnered to show that Iscor had abused its dominance,” Iscor said.Shares in Iscor extended earlier gains on the news to 29,70 rand, up 2,3 per cent but trimmed gains to 29,40 rand, still up 1,3 per cent by 16h49.IMPORT PARITYAt the heart of the dispute is the import parity pricing system.Iscor’s domestic prices take into account import tariffs and inland transport costs.Domestic sales account for about 60 per cent of group total annual sales of 6,04 million tonnes.One analyst said there was not enough information to justify cancelling the import parity pricing system and besides, transport costs from Iscor were lower because of its physical location relative to its customers.”This (ruling) is reasonable and I don’t think it’s a big surprise.It was always going to be difficult to move away from import parity which is a valid system,” said the analyst.Harmony and DRD said a decision on whether to challenge the decision before the Competition Tribunal would be taken in the next few days.DRD spokesperson Ilja Graulich said steel costs can eat up 20 per cent or more of the budget of a new underground gold mine, while steel spending for projects that are up and running averages around five to six per cent of the total.”We still believe that this is an issue that should have been referred to the Tribunal.If we feel strongly enough and believe that the reasons given are not the right reasons, then we will go directly to the Tribunal,” Graulich said.”We’re disappointed since we believe our complaints had merit,” Harmony Marketing Director Ferdi Dippenaar said.-Nampa-Reuters”The investigation found that Iscor’s prices were comparable to prices of competing prices available locally, as well as to prices charged in other countries’ domestic markets,” said the competition commission. “Accordingly the investigation found no evidence that Iscor was abusing its dominance by charging excessive prices”. As a result of its findings, the competition watchdog said it would not refer the complaints to the higher Competition Tribunal for adjudication. Instead, the complainants have 20 business days from Tuesday, the day the Commission notified the Tribunal of its decision, to take the complaint to the country’s highest competition authority. Iscor welcomed the decision. It controls the flat steel products market with about an 84 percent market share and accounts for about 54 percent of the long steel products market. “We have consistently maintained that the domestic pricing of steel is totally in keeping with the global supply and demand of the commodity and no evidence was garnered to show that Iscor had abused its dominance,” Iscor said. Shares in Iscor extended earlier gains on the news to 29,70 rand, up 2,3 per cent but trimmed gains to 29,40 rand, still up 1,3 per cent by 16h49. IMPORT PARITY At the heart of the dispute is the import parity pricing system. Iscor’s domestic prices take into account import tariffs and inland transport costs. Domestic sales account for about 60 per cent of group total annual sales of 6,04 million tonnes. One analyst said there was not enough information to justify cancelling the import parity pricing system and besides, transport costs from Iscor were lower because of its physical location relative to its customers. “This (ruling) is reasonable and I don’t think it’s a big surprise. It was always going to be difficult to move away from import parity which is a valid system,” said the analyst. Harmony and DRD said a decision on whether to challenge the decision before the Competition Tribunal would be taken in the next few days. DRD spokesperson Ilja Graulich said steel costs can eat up 20 per cent or more of the budget of a new underground gold mine, while steel spending for projects that are up and running averages around five to six per cent of the total. “We still believe that this is an issue that should have been referred to the Tribunal. If we feel strongly enough and believe that the reasons given are not the right reasons, then we will go directly to the Tribunal,” Graulich said. “We’re disappointed since we believe our complaints had merit,” Harmony Marketing Director Ferdi Dippenaar said.-Nampa-Reuters