Many industries have suffered the effects of the pandemic. Some have suffered great loss and some seen profit, some in the balance while others are just hanging in there by a strand. The recent announcements of a steel price hike of 10.3% puts many within the industry in constraints. Even possibly yearning to ask government “Who is protecting business and other players whose businesses rely on steel?” – Production declines while prices increase. Steel manufacturers and fabricators, especially those with exposure to international competition are going to have it tough. Intervention from South African government is essential to retain the primary steel industry

According to data released by Statistics South Africa – total manufacturing production had declined by 2.1% in comparison to last year February 2021, while it fell by 1.2% in January 2021. Total manufacturing sales, however, increased by 3.5% year on year in February 2021 and by 3.2% from January 2021. Year-to-date production declined by 3.1%, while sales improved by 2.1%. Within the Metals and Engineering sector (M&E), which accounts for a 29% share in total manufacturing production – total production across the 13 sub-categories increased by an average of 0.6% in February 2021 year on year, with total sales increasing by 5.3% to reach R70.8 billion. “This decline in manufacturing production is worrying and may worsen further amid steep local steel tariffs and cost increases” – the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said on 8 April 21. (c. https://www.seifsa.co.za/latest-news/)

The downstream beneficiated steel industry is undeniably linked to the overall economy and in particular the expansion of industrial activity and infrastructure development. A number of serious challenges in the industry include rising operational costs while global influence puts downward pressure on selling prices. Manufacturers have to repeatedly find ways of being innovative in the way they manage their businesses. Increases in labour costs, electricity hikes and transportation have had detrimental impacts on margins, investments and expanded job creation in the last year to date – with all this, businesses might have to raise their prices.

The issue surrounding rising steel prices for 2021 isn’t that projects will become less profitable, rather that business might bring in lower revenue. Instead, the biggest risk is that business’ may run into cash flow issues. Higher steel prices can result in additional unexpected expenses, and if SMMEs don’t prepare, then they could find themselves in an unfortunate situation. While it’s too early for experts to say, the increase of steel prices could raise the cost of finished materials as well.

– The Cost Of Living…

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Boitumelo Lesenya

+2710 593 0544

info@intervent.co.za | www.intervent.co.za