Feb 10, 2010
Restocking to drive steel demand recovery in Q1Back
Construction|Africa|Packaging|Africa|Brazil|China|Germany|South Africa|United States|Automotive|Building|Gross Domestic Product|Manufacturing|Packaging|Steel|Steel Demand|Transport|Nonkululeko Nyembezi-Heita
© 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 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 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 network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
This Week's Magazine
Three-dimensional (3D) printers being sold in South Africa by electronics distributor Rectron currently print in two types of plastic, but have a clear upgrade path over the next five years to eventually print in wood, ceramics and metal-alloy materials, says Rectron...
The world’s two dominant commercial aircraft manufacturers, Airbus of Europe and Boeing of the US, both recently announced that they had made record aircraft deliveries in 2014. Boeing set a global record for the industry with 723 commercial aircraft delivered, while...
The Western Cape is shifting further into the renewable-energy space with the official opening of a factory specialising in solar inverters, a key component of solar photovoltaic (PV) plants. The investment in the manufacturing facility in Cape Town aims to boost the...
Business Leadership South Africa (BLSA) last month welcomed Cabinet’s establishment of a technical team war room to undertake various interventions to improve electricity supply security over the short- and medium-term, but added that the private sector also had a...
Despite a rapid rise in mobile connections and the economic and social benefits of such connectivity, more than half of the world ended 2014 unconnected. For this reason, industry commentators believe the biggest impact of mobile technology is still to come –...