The Steel and Engineering Industries Federation of Southern Africa (Seifsa) has reiterated that the metals and engineering sector continues to face difficult conditions.

The follows Statistics South Africa’s publication, on Thursday, of the February manufacturing statistics, which showed that production in the metals and engineering sector had declined by more than 6%, when comparing the first two months of this year with the first two months of 2015, and by 4.3% year-on-year in February.

He pointed out, however, that the February  production was 2.8% higher than in January, noting that month-on month improvements would have to continue for some time to affect a lower turning point in the downward spiral, which the sector finds itself in currently.

He noted that the month-on-month improvement could reflect the anecdotal
and purchasing managers’ index (PMI) evidence that inventories were being worked down,
meaning that production needed to be increased to keep inventories at normal levels
to cater for future demand.

“However, the data does not change our view that recovery will only be felt towards the end of 2016, if not the middle of 2017.

“A lot will depend on growth in demand, from both the domestic and export clients,” said Seifsa chief economist Henk Langenhoven.

Seifsa pointed out that, although the general PMI subindex indicating new sales orders for manufacturing as a whole improved over the last three months, the indications from the Bureau for Economic Research’s (BER’s) quarterly manufacturing survey showed different and weak domestic and export sales orders for the metals and engineering sector specifically.

“Only the fabricated metals industries indicated that their export orders for the second quarter of the year had improved; the rest indicated lower export orders for the second quarter,” said Langenhoven.

Domestic sales orders for the second quarter deteriorated for all of the subindustries
in the sector, which indicated the uncertainty surrounding sustained production improvements.

“The production numbers released by Statistics South Africa are not in conflict with the BER manufacturing survey results. Structural metal and electrical machinery and equipment  production showed some improvement,” he stated.

Langenhoven added that plastic and rubber production was also accelerating, but that other subindustries recorded lower production over the first two months of 2016.