Catalytic converter exports from South Africa declined dramatically in 2009, as the global recession decimated global vehicles sales, but it appears the worst is over as the 2010 numbers hint at a significant market improvement.

Catalytic converters are South Africa’s biggest automotive component export segment. They are used in the exhaust systems of vehicles to reduce harmful emissions.

Catalytic Converter Interest Group (CCIG) chairperson and Johnson Matthey South Africa commercial manager Paul Thompson says that the local industry exported 9,9-million catalytic converters in 2009, earning export revenues of R12,7-billion – 43% down on the 2008 peak of 17,3-million units, earning R22,1-billion.

Thompson says the significant drop in demand comes courtesy of the global recession. He says the majority of catalytic converters made in South Africa are destined for Western Europe, which is still affected by the economic downturn.

However, there is some good news.

Despite the fact that data for the first six months of catalytic converter exports for 2010 has not yet been released, CCIG’s first quarter statistics reflect a 31,5% improvement over 2009 levels.

Thompson notes, though, that this is still “significantly lower than those [levels] achieved in the peak years”.

“I think that 2010 will close higher than 2009, but will be significantly short on the 2008 levels.”

Direct employment within the industry peaked at 5 162 people in 2008, but the recession has seen this drop to the current level of 4 319 people.

“If you add in the indirect element, then it is estimated that the industry supported around 36 000 jobs at its peak. Again, the effect of the recession has seen this drop to around 30 000, most of which are in the Eastern Cape,” says Thompson.

None of the catalytic converter manufacturers closed their doors as a result of the recession.

Thompson says that the current upturn in demand is owing to incentive schemes introduced by several European governments to bolster new vehicle sales.

Several governments, such as Germany, last year offered financial incentives to consumers to buy new vehicles, thereby creating a surge in demand.

“Many of these incentive schemes have now come to an end, but it is difficult to predict exactly where we will be, come the end of the year,” says Thompson.

All in all, he says that 2010 is proving to be “quite a good year”, although “very difficult to manage”.

The recession caused supply-chain havoc, he explains.

The downturn saw many companies focus heavily on working capital reductions, with inventory being the number one target.

“In a supply chain where your typical lead-time is 26 weeks, not having the necessary inventory in place is a recipe for disaster, especially when demand is so volatile, and this is exactly what happened when the European governments introduced the [incentive] schemes,” says Thompson.

“Our supply chain was left scrambling to try and not only support demand, but replenish inventory in the pipeline. I must say though that as a supply chain, we have reacted quite well and that we have probably seen the worst.”

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