South Africa: Cartel in SA Steel Industry 'Exposed'
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Business Day (Johannesburg)
18 July 2008
Posted to the web 18 July 2008
Mathabo Le Roux
Johannesburg
THE Competition Commission said yesterday it had uncovered a cartel in the steel industry, which it believed involved all producers in the industry.
It is also understood to be one of the biggest collusion cases the commission has had to handle.
Early indications are that steel users have been paying at least 20% more for steel because of the collusive behaviour.
The investigation into the industry comes as the price of steel has shot up more than 70% this year, contributing to a spike in input costs in the construction sector.
The allegation of cartel behaviour follows recent raids and the seizure of documentation at Cape Town Iron and Steel Works, a subsidiary of construction group Murray & Roberts, and Highveld Steel & Vanadium in Witbank, which is owned by Russian steel maker Evraz.
The offices of industry body the South African Iron and Steel Institute (Saisi) were also searched.
The commission would not name other steel makers suspected of collusion, but other primary steel producers implicated include ArcelorMittal SA, Scaw Metals and Cape Gate.
This is the second antitrust offence that steel giant Mittal is being investigated for.
It has already been found guilty by the Competition Tribunal for abusing its dominant position in the steel market and fined a record R692m.
Head of the commission's enforcement and exemptions division Thulani Kunene said the commission believed the price fixing and collusion involved all steel producers and long steel product lines, including reinforcing bar, wire rod, roofing bolts and fencing products.
With the state's multi-billion-rand infrastructure development programme and building projects for the 2010 Soccer World Cup under way, unprecedented volumes of steel are consumed locally, making the price-fixing scam one of the largest to be investigated in the history of the commission, Kunene said.
Steel producers had used Saisi as a platform to collude on long steel products and the price it would pay for scrap metal, he said. Producers also decided among themselves who would provide customers and projects with steel, which meant that prices were marked up by at least 20%, he said.
After the raids, the commission received an application for leniency from one of the companies which can be done under its corporate leniency policy. Information provided by the applicant showed that steel makers met and agreed to fix prices, exchange price lists and fix discounts. Other commercially sensitive information was also shared.
Saisi secretary-general Peter Dieterich was taken aback by the news yesterday: "This sounds strange to me, because it is certainly not the case that these issues are discussed at Saisi. I'm very surprised."
The commission has prioritised the construction sector for investigation.
Earlier this year the commission said it had also uncovered cartel behaviour in the scrap metal industry, which means that virtually the entire value chain of the steel industry is being investigated for anti-competitive behaviour. If found guilty, companies face administrative penalties of up to 10% of their annual turnover.
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Kunene said the commission would interact with all the firms and then make a referral to the Competition Tribunal.
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It's about time, Mittal Steel is holding the country to ransom,but the real problem was allowing previous legislation to pass making such "rip offs" par for the course.