New Materials Research Report: South Africa Metals Report Q1 2012

(live-PR.com) - A severe contraction in the South African steel industry is unlikely to be alleviated in 2012 with exports failing to recover and the domestic market stagnating, according to BMI's latest South Africa Metals Report.

In the first 10 months of 2011, South African crude steel output fell 19.1% y-o-y, to 5.53mn tonnes, and the country's industry looked set to reverse the

 

13.3% gain it reported in 2010. ArcelorMittal South Africa's Newcastle operations were taken offline between August and December with the loss of 200,000 tonnes of output, causing upward pressure on local long prices. As a result, BMI has revised down its crude steel forecast for 2011 from 6.83mn tonnes to 6.71mn tonnes, a decline of 11.9% year-on-year (y-oy). We expect the industry to undergo a gradual recovery from 2012 with crude steel returning to above 10mn tonnes by 2016. By this time, it will be lagging behind Egypt as Africa's leading steelmaking country.

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Low rates of output and a strong rand have undermined the competitiveness of South African steel on export markets, particularly Asia where demand slowed in H211. As a result, BMI has revised down export forecasts for 2011 from 3.3mn tonnes to 2.6mn tonnes. Additionally, we now do not expect a recovery in exports in 2012 given the external headwinds, which means that all growth in output will be devoted to domestic consumption. Growth will be restrained by an expected slowdown in the Chinese economy and the government's attempts to prevent overheating, while the European market will experience continuously low growth. If the Chinese economy experiences a burst bubble scenario, we expect the impact to be felt in metals markets. Another factor that will determine recovery in South Africa is the strength of the regional metals market. Producers are hoping to raise product prices to return the healthy margins eliminated amid the economic downturn. The market is likely to remain volatile as Chinese and Middle Eastern output ramps up, risking oversupply.

BMI remains pessimistic about the short-term outlook for South African finished steel consumption, forecasting a 10% decline to 4.47mn tonnes in 2011 and 5.1% growth to 4.70mn tonnes in 2012. The South African consumer remains heavily indebted, there are adverse wealth effects owing to the weakness in the housing market and subdued growth in private sector credit. In our view, rising inflation is likely to dampen consumer confidence and increase expectations for interest rates to be hiked.

Report Table of Contents:

SWOT Analysis
- South Africa Political SWOT
- South Africa Economic SWOT
- South Africa Business Environment SWOT
Global Steel Market Overview
- Steel
- Table: BMI's Steel Forecasts
- Table: Steel Price Data
Commodities Forecast
- Gold
- Copper
- Aluminium
- Lead
- Nickel
- Tin
- Zinc
Africa Overview
- Steel
- Aluminium
- Table: Aluminium Smelters in Africa
Forecast Scenario
- Table: South Africa's Steel Industry, 2008-2016 ('000 tonnes unless stated)
- Macroeconomic Forecasts
- Table: South Africa - Macroeconomic Activity, 2011-2016
Competitive Landscape
- Table: ArcelorMittal Steel Mills In South Africa
Company Profile
- BHP Billiton
Global Assumptions
- Table: Global Assumptions, 2009-2015
- Table: Global And Regional Real GDP Growth, 2010-2013 (% y-o-y)
- Table: Selected Developed Market Exchange Rates, 2010-2013 (average)
- Table: Selected Emerging Market Exchange Rates, 2010-2013 (average)
- Developed States
- Table: Developed States Real GDP Growth Forecasts, 2010-2013 (% y-o-y)
- Emerging Markets
- Table: Emerging Markets Real GDP Growth Forecasts, 2010-2013 (% y-o-y)
- Consensus
- Table: Real GDP Growth Consensus Forecasts, 2011-2012 (%chg y-o-y)
Country Snapshot: South Africa Demographic Data
- Section 1: Population
- Table: Demographic Indicators, 2005-2030
- Table: Rural/Urban Breakdown, 2005-2030
- Section 2: Education And Healthcare
- Table: Education, 2002-2005
- Table: Vital Statistics, 2005-2030
- Section 3: Labour Market And Spending Power
- Table: Employment Indicators, 2001-2006
- Table: Consumer Expenditure, 2000-2012 (US$)
- Table: Average Annual Wages, 2000-2012
BMI Methodology
- How We Generate Our Industry Forecasts
- Cross Checks

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