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In a recent public statement, Industry Minister Rob Davies and TRADE announced that a pricing committee would be set up to monitor the pricing principles of ArcelorMittal SA (ADR)(NYSE:MT) that it agreed upon with the state. As per the reports, this committee would consist of people from the steel industry, government and other downstream and primary industries.

Insights of Matter

The details of this plan were disclosed in a letter written by Mr. Davies to Dean Macpherson, Democratic Alliance MP. The letter was focused on ArcelorMittal’s decision to increase the steel prices without any prior notification. The decision was against the undertaking signed by the company under which it agreed that it wouldn’t increase steel prices if the government imposed tariff duties on Chinese steel importers.

According to Mr Macpherson, it was a great decision to set up a pricing committee right away to ensure that ArcelorMittal couldn’t do away with rising prices. In his opinion, ArcelorMittal defended the decision to raise prices saying the imports were affected by weakening exchange rate; however, 35% input costs of the company were dollar-based. The department has been in constant touch with the top management executives of the company for over a year now.

Talking about the prime objective of setting up this new pricing committee and communicating these pricing principles to ArcelorMittal is but to ensure that all the future hikes in steel prices in the country are done in accordance with these principles. It will get rid of any confusion as well as maintain a balance in country’s steel industry.

These pricing principles will safeguard the interests of downstream, labor and steel-intensive manufacturing sectors.

The International Trade Administration Commission agreed to increase custom duty on colour-coated and galvanised steel in September 2015, and on rebar, wire rod and structural steel in December.

ArcelorMittal couldn’t be reached to comment on this decision; however, Davies believes that it will lead to a balanced market eco-system in the future.

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