Domestic sales plunge in South Africa
During the January-September period, domestic steel sales decreased by 18.9% in South
Africa, the latest industry reports reveal. The major reason behind this fact is seen as the severe economic weakening in the country. Thee economic growth recorded in the third quarter this year is 1.1%.
Developments in the steel industry covering wide application areas such as
manufacturing and mining industries, is seen as a good indicator of economic activity. According to the latest survey results by the South African Iron and Steel Institute, the slowdown of steel sales started in the second quarter of last year and is observed to level out in the third quarter of this year. Such conclusion can be made based on the data revealing 9% higher sales in the third quarter compared to the second quarter of 2003.
South African Steel Institute expects the steel sales to pick up due to the interest rate cuts, falling inflation and increasing disposable income. The interest rates have been dropped by 5 percentage points by South
Africa's Central Bank this year, bringing same to the seventeen-year low 8.5% level. However, if the economic consistency can not be maintained, added on to the strong state of rand, further pressure could be felt on the
manufacturing industry, the officials point out. The strong rand hurts exports and cuts economical growth. Some economists do not expect a GDP growth higher than 3% in 2004 due to this reason.
Manufacturing industry contracted by 1.7% in the third quarter after contracting by 4.5% and 4.7% in the previous two quarters.
South African steel producers, such as Iscor, and Highveld have already been experiencing the negative impacts of the slow domestic demand and are running
production below capacity.
On the other hand, despite the low domestic demand, exports of South African steel
production continued to increase in the third quarter as well, at a rate of 2.6% over the second quarter of this year. It must also be noted that steel imports into South
Africa increased by 12.8% over the second quarter. The total increase of imports seen in the first nine months is 2.2%.
India has become the major importer in South
Africa, almost doubling its share this year.