Production in the steel and engineering sector has been increasing slowly since 2008; however, severe volatility remained the overwhelming feature, with highs and lows that were often above and below the 10% average, the Steel and Engineering Industries Federation of South Africa (Seifsa) said in a recent report.

The organisation pointed out that the latest data for the basic ferrous metals industry seemed to confirm that a low turning point for production was behind it, with output in June 2% higher than in May, and production up 20% year-on-year.

Further, production in the nonferrous metal industry had returned to the precrisis peak level of 2007, with production in June 30% higher than in June 2012.

“Capacity utilisation in the nonferrous industry has been continuously better than that of the ferrous industry, which was affected by production disruptions, owing to facility incapacity and labour unrest,” Seifsa stated.

Further, structural and fabricated metal production has been recovering since it reached its lowest point in 2009, with current production levels about 10% below the 2007 peak.

In contrast, the production of structural metal products showed an almost continued decline since the beginning of 2008, with the June figure still showing a 15% year-on-year contraction.

“These production figures still raise the question: why the large South African infra- structure projects do not seem to have an effect on these construction-related industries, with some of the answers certainly to be found in import penetration,” Seifsa stated.

Meanwhile, the long-term trend for the production of general machinery has shown a recovery from mid-2009, with production for the six months to June being 4% higher than that of the corresponding period in 2012.

The production of electrical machinery followed similar patterns to those of general-purpose machinery, albeit performing slightly better over a year-on-year period, as electrical machinery and equipment were input components into Eskom’s large electricity capacity expansions and reflected the improved demand to an extent.

“However, although both these industries show positive trends, actual production patterns are highly volatile and still between 40%, for general machinery, and 10%, for electrical machinery, below precrisis levels.

Meanwhile, Seifsa last week also reported that it was seeing increased inflationary pressure across all indices, mainly as a result of a weaker exchange rate affecting prices domestically, and electricity prices that peaked during the winter months.

The producer price index (PPI) for intermediate goods for the month of June recorded an 8.03% change year-on-year, while the PPI for final manufactured goods came in at 5.9%.

Meanwhile, the electricity and water PPI recorded a 5.9% year-on-year increase; however, owing to the price’s strong seasonal patterns, Seifsa stated that the best way to analyse the data would be to determine the sum of the monthly percentage increases between June 2012 and June 2013, which yielded a net increase of 17.1% for the year.

Further, Seifsa stated that the reversing of the trend of Statistics South Africa’s exported commodities index, from the negative values recorded in the previous months to 2.72% year-on-year growth in June, could be a result of the sustained weakness in the rand.

The rand had depreciated 19.47%, 19.03% and 25.77% against the dollar, pound and euro respectively.