Africa’s biggest steelmaker, ArcelorMittal South Africa, on Wednesday said it was keen on gaining greater exposure to the raw materials that it used, and that coal was “definitely an immediate interest”.

The company would also have a gap in its iron-ore supply by 2012, when it reached its expanded production capacity of ten-million tons a year, and would have to secure some four-million tons from South Africa’s resource base, FD Kobus Verster said.

The company was currently locked in a confidential arbitration process with Anglo American’s Kumba Iron Ore (KIO) regarding its participation in the miner’s Sishen South project, which it hoped to conclude by the first quarter of next year.

“Iron-ore supply remains a top priority,” CEO Nonkululeko Nyembezi-Heita told media and analysts, presenting ArcelorMittal South Africa’s results for the six months to June 30.

Asked about the company’s strategy regarding vertical integration, she said that ArcelorMittal South Africa’s was no different from its London-based parent.

Also on Wednesday, ArcelorMittal chairperson and CEO Lakshmi Mittal said that this was part of its plan.

“We continue to look for opportunities to further enhance our raw material self sufficiency, with recent investments being announced in Africa, the Americas and Australia,” he said in a statement.

However, Nyembezi-Heita said that the issue was “whether we have any real realistic opportunities there to implement and pursue that strategy”.

“These assets are all fairly expensive at the current point in time, and where we are looking at stuff, we would prefer not to publicly discuss that before hand,” added Verster.

Meanwhile, ArcelorMittal increased its stake in South African junior mining company Coal of Africa Limited to 17,8%. The company also bought 50% Kalagadi Manganese, which has mineral assets in the Northern Cape.

IRON-ORE SUPPLY

While Verster said that there would be a gap in ArcelorMittal South Africa’s iron-ore requirements once its production capacity neared the 10-million ton a year level, looking at current contracts, getting the additional tons would not be a problem.

The pricing of this extra material was the issue.

The firm currently procured some 6,25-million tons of the steelmaking ingredient from KIO on a cost-plus basis. The bulk of this came from the miner’s Sishen operation, with less being dug out of the old Thabazimbi mine, which was nearing the end of its life-of-mine.

Once that supply ceased, the gap would be even wider. It would then have to try secure as much of the material as it could on preferential pricing terms, rather than market-based prices. International iron-ore prices for this year nearly doubled.

Verster said that iron-ore currently accounted for some 11% of ArcelorMittal South Africa’s cash costs.

Meanwhile, the price of metallurgical coal had also shot up over the past year, increasing steelmakers’ costs.

To mitigate this, ArcelorMittal South Africa was looking to use cheaper pulverised coal in its furnaces.

Luxembourg-listed ArcelorMittal owns 52% of steelmaker ArcelorMittal South Africa, the former State-owned Iscor.

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