Metal sector set to show marginal growth
Biggest gains in zinc and lead
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.