Steel production plunged by 17.8% year on year in August. File Photo: IOL
Steel production plunged by 17.8% year on year in August. File Photo: IOL

Steel production plunged by 17.8% year on year in August

By Helmo Preuss Time of article published Oct 1, 2019

Share this article:

CAPE TOWN – South African steel production fell by 17.8% year-on-year (y/y) in August to an estimated 434,000 tonnes according to the World Steel Association (worldsteel). Global steel production on the other hand grew by 3.4% y/y. 

In the first five months, South African steel production had still grown by 1.1% y/y, but from May onwards there have been a series of double-digit y/y declines. In May the drop was 10.3%, followed by 17.0% in June and then 13.2% in July.

The plunge in steel production and its impact on industrial production may be a delayed reaction to the imposition of a 25% tariff by the US on steel imports. Last year ArcelorMittal South Africa (AMSA) offset weak domestic demand by increasing its exports by 21%.

The department of trade and industry had made representations to the US to be exempted from the imposition of US tariffs, but these fell on deaf ears. 

The 330,000 tons exported in 2017 from South Africa represented less than 1% of US steel imports, but 5% of South African production equivalent to roughly 7,500 jobs in the steel supply chain.

In 2018 South African steel production grew by only 0.4% to 6.3 million tonnes (Mt), the second consecutive year it was less than Egyptian production, which rose by 13.6% to 7.8 Mt.

World crude steel production for the 64 countries reporting to worldsteel showed a 4.6% increase in 2018 even after the imposition of the tariffs that applied equally to friends and foes. The Trump administration has made the renegotiation of foreign trade relations a core part of their foreign policy.

AMSA said this week it might close loss-making plants and production areas following a review after it reported a R222 million operating loss in the six months to June. AMSA has operations in Vanderbijlpark, Vereeniging, Saldanha and Newcastle.

The most vulnerable sites are those producing so-called “long” products, which are things like girders that are used in the construction industry. “Flat” products such as steel coil, which are used in making cars and fridges, are less likely to be affected, as the automobile industry continues to grow its exports. In August, new vehicle exports surged by 37.8% y/y to a record 44,566 units.

The construction industry by contrast has seen 30,000 jobs lost over the past year to the second quarter as contracts completed are not being replaced by new work.

The real value of building plans passed dropped by 8.5% y/y in the first seven months of 2019 as the real value of residential plans passed fell by 8.1% y/y, while the value of non-residential plans dropped by 16.6% y/y and those of additions and alterations declined by 2.0% y/y.


Share this article:

Related Articles