Cost rises may erode benefits of firming demand for metal products
While the improvement in international demand for metals and metal-containing products could lead to export growth, cost increases in the metals and engineering sector are a concern, Steel and Industries Federation of South Africa (Seifsa) chief economist Henk Langenhoven has warned.
Seifsa welcomed that the improvement in international demand for metal and metal- containing products and said this reflected the potential for export growth for South African manu- facturers of these products, while Langenhoven expressed the hope that producers were preparing themselves for the growing demand.
He added that the weakening exchange rate would provide windfall benefits over the short term.
“On the downside, however, there is great concern about cost increases in the metals and engineering sector. “The price index of the latest Kagiso Purchasing Managers’ Index (PMI) has gone up as well, indicating that this concern is widespread.
“Comparisons between the PMI cost index and the headline or final products producer price index do not show the very close relationship evident between the former and both steel producers and merchant prices,” Langen-hoven said.
He pointed out that several of the PMI subindices showed a divergence between the domestic outlook and global prospects.
“The business activity index, which is of importance for the metals and engineering sector, has declined by nearly 3%, while the overall PMI held steady.”
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