Me­tal sec­tor set to show mar­ginal growth

Big­gest gains in zinc and lead

The Star Early Edition - - BUSINESS NEWS - Ka­belo Khu­malo

SOUTH Africa’s metals and en­gi­neer­ing in­dus­try was for the first time in three years ex­pected to grow by 1.4 per­cent.

How­ever, this would do lit­tle to ar­rest the blood­bath of job losses in the sec­tor, the Steel and En­gi­neer­ing In­dus­tries Fed­er­a­tion of South­ern Africa (Seifsa) said on Fri­day.

Tafadzwa Chiban­guza, a se­nior econ­o­mist at Seifsa, said the cur­rent com­mod­ity prices’ surge had con­trib­uted favourably to the fore­cast de­spite un­cer­tainty about whether the trend was cycli­cal or struc­tural.

Slight re­cov­ery

“Com­mod­ity prices were sig­nif­i­cantly low at the start of 2016, but the ma­jor­ity of them re­cov­ered, point­ing to a pos­si­ble fur­ther mo­men­tum in 2017,” Chiban­guza said.

The re­bound of steel prices was seen last year af­ter ArcelorMit­tal posted its high­est quar­terly profit since 2014.

The com­pany had posted prof­its of $1.9 bil­lion (R25.52bn) for the three months ended Septem­ber.

In a re­port re­leased ear­lier this month, the World Bank’s Com­mod­ity Mar­kets Out­look found that stronger global de­mand had led to the positive out­look of the metals sec­tor.

“Metals’ prices are pro­jected to in­crease by 11 per­cent in 2017 due to tight­en­ing mar­kets for most metals, es­pe­cially those fac­ing im­mi­nent re­source con­straints.

The largest gains are ex­pected in zinc (27 per­cent) and lead (18 per­cent) due to mine sup­ply clo­sures brought on by per­ma­nent and dis­cre­tionary clo­sures,” the bank said.

South Africa’s steel in­dus­try has been on the brink of col­lapse over the past few years, with many jobs hav­ing been shed in the sec­tor.

The bone of con­tention in the in­dus­try has been for trade author­i­ties to pro­tect do­mes­tic steel pro­duc­tion by im­pos­ing tar­iffs on cheap im­ports.

Last year, Evraz Highveld and Vana­dium closed shop af­ter a failed at­tempt at busi­ness res­cue and 2 000 jobs were lost in the process.

In 2015, 11 000 jobs were shed in the in­dus­try

Chiban­guza said it was likely the in­dus­try would ex­pe­ri­ence fur­ther job losses this year.

“Given the his­tor­i­cal char­ac­ter­is­tics of the labour mar­ket in the sec­tor for clear­ing ex­cess ca­pac­ity, we fore­cast a risk of fur­ther job losses. The strong cor­re­la­tion be­tween pro­duc­tion and em­ploy­ment af­firms this syn­op­sis.”

The in­dus­try em­ploys about 381 330 peo­ple in South Africa.

Chiban­guza said the in­dus­try hoped there would be no dis­rup­tions to pro­duc­tion dur­ing the 2017 wage ne­go­ti­a­tions as this might add to the woes fac­ing work­ers in the sec­tor.

“We high­light this as a def­i­nite risk, be­cause in the event of a pro­duc­tion dis­rup­tion, a new, deeper down­ward spi­ral could be ini­ti­ated and lead a to fur­ther deep­en­ing of the cri­sis.”

The in­dus­try is hop­ing there will be no pro­duc­tion dis­rup­tions as wage ne­go­ti­a­tions could add to its woes.

PHOTO: REUTERS

A worker in the hall that houses the rolling mill in the ArcelorMit­tal steel fac­tory in Eisen­hüt­ten­stadt, 120km east of Ber­lin. The metals in­dus­try in South Africa is ex­pected to grow by just un­der 1.5per­cent, but the fore­cast for jobs doesn’t look promis­ing. Last year ArcelorMit­tal posted its high­est quar­terly profit since 2014.

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