ArcellorMittal fine to be staggered

The Competition Tribunal has confirmed that ArcelorMittal SA can pay off an initial R300m annual penalty in tranches of R100m, in the first year of five years paying off a R1.5bn fine imposed for market fixing.

A first payment due in November 2017 has already been paid, with subsequent payments due to be paid on April 1 2018 and July 1 2018. The amended agreement takes pressure off the balance sheet of SA’s largest steel producer, which posted a loss of R5.1bn for the year to December 2017.

“Taking into account the company’s financial position resulting largely from the tough trading conditions in the global and local steel industries, the Competition Commission agreed to divide ArcelorMittal’s anticipated 2017 payment into three separate tranches,” the company said on Thursday.

In late 2016, ArcelorMittal SA concluded a settlement agreement with the Competition Commission, agreeing to pay R1.5bn, plus interest, for market manipulation. The agreement was confirmed by the tribunal in November 2016. The penalty was due to be paid in five annual instalments of R300m each.

The parties subsequently approached the tribunal for a variation of the agreement. ArcelorMittal SA’s penalty is the largest single settlement amount imposed by the tribunal to date.

No interest will be levied for the first 18 months of payment. Thereafter, the group will pay 10.5% interest annually.

The group admitted it had engaged in collusion with steel companies Cisco, Scaw and Cape Gate by fixing prices and discounts, allocating customers and sharing sensitive information in the market for the manufacture of long steel products. It had also fixed the price of scrap metal with Columbus Steel, Cape Gate and Scaw.

In terms of the agreement ArcelorMittal SA also undertook to limit its earnings before interest and tax for five years at a margin to 10% for flat steel products sold in SA. It also committed to R4.6bn in capital expenditure over the same period.