Feb 10, 2010
Restocking to drive steel demand recovery in Q1Back
© Reuse this
However, prices would probably remain flat for the remainder of the quarter, with the JSE-listed group having kept its prices stable for the past three months.
Any recovery would also be off a low base, with total dispatches having fallen 12% to 4,5-million tons in 2009, and with high-margin domestic consumption having fallen to 69%, or 3,1-million tons from 4,4-million tons in 2008.
The decline in sales volumes and prices (some of which declined by over 60% from the records achieved in the first half of 2008) resulted in a dramatic change of fortunes for the company in 2009.
Its year-on-year headline earnings descended in to loss of R440-million for the year ended December 31, 2009, compared with a record profit of R9,5-billion in the previous financial year.
Merchant inventory levels were currently estimated at about eight weeks, as compared with a historical average of ten weeks, while end-user stocks were closer to the four-week level.
Therefore, CEO Nonkululeko Nyembezi-Heita said that there was definitely room for replenishment, but warned that consumers remained cautious, following the ructions of 2009, and that this restocking would probably be "slow".
She said it was also difficult to be definitive about underlying demand, indicating that visibility would probably only begin to emerge from the second quarter.
"Steel use will be a leading indicator . . . so we could see the underlying demand coming through even before it hit the gross domestic product (GDP) numbers," she added.
The company was forecasting a 2,5% rise in South Africa's GDP for 2010, following the country's first recession in 17 years, and was particularly bullish about packaging and construction sector growth.
In fact, it expected the packaging sector to expand by 13,6% during the year and that the building and construction market would grow by 11,7%.
Manufacturing growth had been pegged at 4,8% for 2010, but the group was less bullish about transport- and automotive-sector growth rates, estimating these at 3,3% and 1,3% respectively.
The pricing outlook, meanwhile, would depend materially on the direction of the South African rand, which had emerged as one of the top-three performing currencies in 2009, after the Brazilian real and the Australian dollar.
Indeed, its decision to hold prices into February was based on the fact that the stronger rand was balancing out the effect of rising international steel prices.
The company sets its prices after analysing domestic selling prices in four markets (the US, Germany, Brazil and China) and then adjusting these to its expectations for the South African currency for the forthcoming month.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Video News
Recent Research Reports
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
This Week's Magazine
Energy analyst and EE Publishers MD Chris Yelland warned recently against excessive optimism regarding timescales for the proposed construction of new nuclear power plants (NPPs) in South Africa. He was speaking at a Nuclear Roundtable in Johannesburg. “I think we...
Malawi’s Lilongwe Water Board (LWB) is inviting eligible bidders to prequalify for the board’s efficiency improvement works, which will be implemented as part of the E24-million Lilongwe Water Resources Efficiency Programme. LWB CEO Alfonso Chikuni explains that...
CROATIA, AN EU MEMBER BUT NOT A TDCA MEMBER On July 1, 2013, Croatia officially became the twenty-eighth member of the European Union (EU). Despite Croatia’s accession into the EU, it is yet to become party to the Trade, Development and Cooperation Agreement (TDCA)...
The Council for Scientific and Industrial Research (CSIR) has announced that its new Inundu airborne electronics testing, evaluation and training pod had made its first test flight on September 10. The successful flight was undertaken from Lanseria International...
The Development Bank of Southern Africa (DBSA) – which disbursed a record R13-billion during 2015, from R12.7-billion in the prior year – remained optimistic that it could ramp-up loan disbursements to R25-billion a year by 2018 as it sought to give greater emphasis...