ArcelorMittal has announced that its 51% owned subsidiary and No. 1 African steelmaker, ArcelorMittal South Africa, has signed a long-term supply agreement with Sishen Iron Ore Co. Ltd. (SIOC), a subsidiary of Kumba Iron Ore.

Effective January 1, according to company officials, the deal allows ArcelorMittal South Africa to purchase up to 6.25 million metric tons per year (mt/y) of iron ore from SIOC, based on agreed specifications and lump-fine ratios. Kumba is a subsidiary of top miner Anglo American plc.

The price of iron ore sold to ArcelorMittal South Africa by SIOC will, in turn, be determined by costs associated with DMS Plant production at the Sishen Mine plus a 20% margin, said company representatives; a ceiling price equal to the Sishen Export Parity mine gate price is also applicable.

With all prices referenced to Sishen Mine costs plus 20%, said ArcelorMittal officials, the deal also mandates a pre-determined iron ore quantity during the first two years. The 6.25 million mt/y volume additionally includes ore delivered to ArcelorMittal from the Thabazimbi mine, under the agreement, while operational and financial risks will pass from ArcelorMittal to Kumba.