UPDATE 4-ArcelorMittal SAfrica to shut plant over Kumba dispute

* Says to cut exports, up to 4,000 jobs at risk

* Kumba threatens to supply at pay-and-take basis from Aug

* ArcelorMittal unit rejects two pricing models proposed

(Adds minister calling meeting, updates shares)

By Shapi Shacinda

JOHANNESBURG, July 16 (Reuters) - ArcelorMittal's South African unit (ISPA.AS) said on Friday it would close a plant and cut all exports after it failed to reach an interim deal with Kumba Iron Ore (KIOJ.J) over prices for the supply of ore.

Shares in the company (ACLJ.J) fell to a 15-month low in intraday trade and at 1510 GMT traded down 4.45 percent at 72.70 rand. Kumba's shares were up 1.07 percent at 339.10 rand.

Kumba, a unit of global miner Anglo American (AAL.L) said on Friday it would make the steelmaker pay for ore in advance from August after the ArcelorMittal unit rejected Kumba's proposed two new pricing systems while the dispute was in arbitration.

"ArcelorMittal now has no alternative, but to immediately initiate plans for the immediate closure of the Saldanha plant, for the curtailment of all exports, and for a material reduction in domestic market production, resulting in market allocation," the company said in a statement.

The minister for trade and industry called a meeting with the two companies on Monday to resolve the dispute. [ID:nWEA9897]

ArcelorMittal said the proposals tabled by Kumba would have had an extremely negative impact on its profitability and added it could not agree to them on an interim basis or otherwise.

Up to 4,000 jobs would be affected by the closure, it said.

Saldanha produces 1.2 million tonnes of steel per year. The ArcelorMittal unit produced a total of 8 million tonnes in 2009.

Kumba, the world's 10th largest iron ore producer, in February terminated the long-term deal under which it sold ore to the ArcelorMittal unit at a discount and said it would then sell iron ore at market rates from March. [ID:nLDE61P15S]

The dispute has been in mediation since.

PRICING PROPOSALS

Pending the outcome of arbitration in the dispute, Kumba had proposed to supply the steelmaker with iron ore at cost plus 3 percent from its subsidiary Sishen Iron Ore Company (SIOC), with the difference from the market price paid into an escrow account.

Kumba's second proposal was to supply the steelmaker at a price of $50 per tonne of iron ore delivered to its Saldanha Steel plant and $80 per tonne delivered to the steelmaker's inland plants pending the outcome of arbitration.

"There remains considerable commercial risk to SIOC and its shareholders, if it continues to supply iron ore to Mittal without agreement as to the terms of supply," Kumba said.

The government said before ArcelorMittal's announcement that it was concerned about the impact of the dispute on the economy, especially if it led to cuts in steel output or to iron being exported rather than processed locally.

"A dispute between two companies should not escalate to the point that it risks imposing negative consequences on the economy," the department of trade and industry said, adding it was willing to mediate between the two parties.

Analysts said the dispute would continue to hurt ArcelorMittal South Africa's shares.

They estimated costs for the company could rise by over $250 million a year if it had to pay for ore at market prices. [ID:nLDE62016W]

"It's basically an ultimatum and clearly a positive for Sishen Iron Ore Company, but a negative (for ArcelorMittal)," Sasha Naryshkine, an analyst at Vestac, said. (Editing by Agnieszka Flak, James Jukwey and Alison Birrane)