Slow growth in output worries steel federation

Steel production is approaching the peak 2007 levels prior to the global financial crisis that triggered a drop in production in 2009. Image: Arcelormittal

It said the latest production data for the sector, released by Statistics SA, followed the pattern of recent years. This pattern indicated improvements on the previous year during the first three quarters, and then a relapse in the final quarter.

The latest production data for November showed only a 2% increase in the sector for last year, compared with 2012.

But Seifsa, representing 27 employer associations providing more than 200,000 jobs, welcomed positive confidence levels for sector growth this year indicated by the latest Kagiso/Bureau for Economic Research purchasing managers index.

Seifsa chief economist Henk Langenhoven said he was "optimistic" that 2% real production growth in the sector would be realised for last year.

However, he added that confidence levels were outpacing actual production levels by a fairly large margin.

Data for the 12 months ended November showed annual production in steel and engineering grew only 1.5%. But when production in the first 11 calendar months of last year was compared with the same period of 2012, the sector grew 2%.

"There is some hope that growth for the full calendar year in 2013 might be better than 1.5%," Langenhoven said. But month-on-month figures for October and November showed a general contraction of 0.8%.

The performance of different sub-industries in the sector also differed widely.

Rubber production in the 12 months ended November fell by 3%, while output of structural metal products was down 11%, with general purpose machinery declining by 6%.

Langenhoven said the latest data showed production levels in the overall sector to be about 15% higher than at the bottom of the trough of 2009, but still 25% below the peak before the global financial crisis.

"The trend is upward, albeit moderating recently. The confidence level is now 128% higher than at the trough and only 14% below the peak in 2007," Langenhoven said.

"The rates of change in these two indicators give equally interesting results. Whereas confidence is now growing at about the rate before the crisis production is growing at about half the rate it did at the peak," he said.

"(But) more importantly, it seems as if both indicators are on a 'second resurgence' since the doldrums of 2009," he added.

Source: Business Day via I-Net Bridge