Some steel producers applied for corporate leniency and turned whistle-blower

Tag : high carbon steel
South African steel producers raked in billions of rands bycolluding to fix prices and share commercially sensitiveinformation.
This is according to an affidavit submitted by the CompetitionCommission to the Pretoria High Court during an in-camera hearing.
The affidavit was filed in support of the commission’sapplication to conduct a search-and-seizure operation on steelcompanies accused of price- fixing and collusion.
The court ordered the raid on the steelmakers at the end of June.
In the affidavit, the commission revealed that the NationalTreasury and 2010 World Cup host cities had raised concerns aboutthe impact of steel prices on the construction of stadiums for thesoccer tournament.
The government last month announced that costs related to building2010 stadiums had shot up by more than R2-billion — partly asa result of high steel prices.
The affidavit shows that nine steelmakers are being probed.

The alleged cartel includes ArcelorMittal South Africa, BarloworldRobor, Pro Roof Steel Merchants, Kulungile Metals Group, ScawMetals Group, Cape Gate and Cape Town Iron Steel Works, TridentSteel, Macsteel Holdings, and Highveld Steel & VanadiumCorporation.
A preliminary probe by the Competition Commission found that someof the implicated steelmakers earned significantly high margins onvarious carbon steel products between July and September last year.
It is not the first time that ArcelorMittal has faced anti-trustauthorities’ scrutiny.
Last September, the Competition Tribunal imposed a R692-millionfine on the world’s top steelmaker for abusing its dominanceand for excessive prices. The fine did not stop it from hikingprices further this year.
In March, it was reported that ArcelorMittal South Africa’smarket capitalisation had rocketed to a record R92-billion —43% higher than in February, when the first of three price hikestook effect.

According to the affidavit, the commission is also investigating aclaim by Seftel Engineering — a manufacturer and supplier ofdeck equipment for the fishing and shipping industries — thatArcelorMittal and Highveld Steel are engaged in price fixing.
In support of its claim, Seftel provided the commission withcopies of price adjustment notices that it had received from Mittaland Highveld.
“These notices revealed that the two companies had on threeseparate occasions announced price increases on their respectiveflat and long steel products,” the document reads.
“Of particular note is the fact that these increases wereannounced at more or less the same time and, even more striking, onall three occasions, were scheduled to take effect on the samedate.”


The commission found that South African producers of long steelproducts had been charging prices to local customers at importparity levels since 2002, notwithstanding the fact that the countryis a net exporter of steel.
“A competitive price under such conditions would approximatethe net export price, reflecting the comparative cost advantagethat South Africa has in producing steel,” it reads.

The commission believes the steel producers have agreementsdesigned to “prevent local customers from importing cheapersteel”.
It said the agreements represented a strategy to “lock localsteel merchants into long-term exclusive agreements in order toprevent them from sourcing from foreign manufacturers.

Last month, one of the implicated steel producers applied forc orporate leniency and turned whistle-blower.
The company — not named — will receive indemnity inexchange for information in the investigation into price fixing andcartel activities.


The company said “discussions took place between the parties(cartel) where agreements were reached to fix prices, exchangeprice lists and fix discounts”.

This week, the commission announced that it had turned down severalmerger applications involving steel merchants because of concernsthat the mergers could strengthen cartel-like behaviour.