"VERY sensitive" negotiations are under way between the Industrial Development Corporation (IDC) and global steel industry players to establish a new steel production facility in South Africa, the Department of Trade and Industry says.

The government regards a competitive steel price as crucial for iron and steel beneficiation and the industrialisation of the economy.

Talks about the new plant were "far advanced" and prefeasibility and feasibility studies would be completed next year, department deputy director-general Garth Strachan said on Thursday.

He said "strong conditionalities" would be attached to the deal to ensure that the state’s developmental objectives were achieved.

The government would prioritise the provision of electricity to the new steel producer.

These negotiations had nothing to do with the IDC’s acquisition of 74% of steel group Scaw from Anglo American for R3.4bn.

The Cabinet announced on Thursday that it had endorsed the findings of a report by an interdepartmental task team on the iron ore and steel value chain, which was mandated to devise measures to bring down the high price of steel.

It had adopted a range of measures, including an amendment of the Competition Act, to force ArcelorMittal South Africa to pass on iron ore price concessions to downstream steel users. ArcelorMittal said on Thursday that it could not comment until it had studied the proposals.

The Cabinet also gave the green light to measures to control the export of scrap metal.

Mr Strachan said the Competition Act would be amended "to ensure that iron ore price concessions accruing to the primary steel industry are indeed passed on to downstream steel users".

"This will require appropriate powers to determine pricing methodologies, monitor compliance and sanction noncompliance. The amendments will be finalised in 2013," he said.

Performance Monitoring and Evaluation Minister in the Presidency Collins Chabane said the Cabinet wanted the recommendations to be implemented urgently.

They included the amendment of the Mineral and Petroleum Resources Development Act and amendments of shareholder compacts with state-owned enterprises.