https://www.engineeringnews.co.za

Seifsa warns of possible further job losses in metals and engineering sector

4th August 2016

  

Font size: - +

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) says it is “extremely concerned” about persistently lower confidence and production levels, which could lead to possible further job losses in the metals and engineering sector as indicated by analysis of recent data.
 
“The metals and engineering sector is probably on a cliff and not at the bottom of a trough. The first half 2016 data has disappointed.
 
“The latest capacity utilisation data for the sector, as well as the July purchasing managers’ business activity subindex, do not indicate the bottoming-out of the current contraction experienced by the metals and engineering sector,” Seifsa chief economist Henk Langenhoven said on Thursday.
 
He explained that, after a slight improvement in resource utilisation during the first quarter, the sector fell back into lethargy by nearly 0.8% in the second quarter, with utilisation recorded at 77% against the full capacity benchmark of 85%.
 
He added that capacity utilisation during the first half of the year was 1% lower than in the first half of 2015.
 
“Anecdotal evidence from both primary producers in the sector and merchants taking orders from downstream industries, as well as the mining and construction sectors leads to a description of the situation in the following words: ‘the bottom has fallen out of demand’ and ‘we are becoming stockists again’.

“The second quarter of 2016 was better for only the rubber, plastics and basic ferrous subindustries,” Langenhoven pointed out.
 
He added that the trends in the July purchasing managers’ business activity subindex, which leads metals and engineering production by 12 to 18 months, confirmed the above conclusions. He said that while the index had declined by only 1.7% over the first seven months of 2016, compared with the same period during 2015, recently there appeared to be renewed severe weakness.
 
July was nearly 9% lower than June and 5% lower than July 2015, he said.
  
“The PMI indicates that order backlogs increased during the year as producers tried to fulfil orders and their inventories declined,” Langenhoven said.
 
Purchasing commitments declined strongly (-10%) and expectations of future business conditions declined by nearly 20%. A further indication that the situation has recently turned for the worse is that the prices subindex declined by 11% month-on-month in July.

Langenhoven said this showed that price increases during the year were not sustainable as a result of weak demand. He added that actual prices of some products produced in the sector, as measured by Seifsa, had started to decline, supporting the trend in the price confidence indicator of the PMI.
 
Seifsa expects a 3% year-on-year contraction in production for 2016: the 5% year-on-year and 6% year-to-date actual declines are, therefore, worse than the federation had anticipated and were of extreme concern.

Langenhoven said this was particularly the case if one considered that production declines during any comparable period over the last one-and-a-half years had been more severe than the recorded job losses.
 
He said this meant that job losses were likely to accelerate over the coming months, in keeping with the worsening trend since 2015.
 
“The metals and engineering sector is in a critical condition and it seems more certain that the patient will suffer more setbacks over the next six months before improvements can be expected,” Langenhoven stated.

Edited by Creamer Media Reporter

Comments

Showroom

Multotec
Multotec

Multotec, recognised industry leaders in metallurgy and process engineering help mining houses across the world process minerals more efficiently,...

VISIT SHOWROOM 
Rio-Carb
Rio-Carb

Our Easy Access Chute concept was developed to reduce the risks related to liner maintenance. Currently, replacing wear liners require that...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.095 0.149s - 142pq - 2rq
Subscribe Now