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Results of the July Short Track Survey

 

The sassda Short Track survey had 86 respondents in July. This survey uses the same questions as those used in the monthly International Stainless Steel Forum’s (ISSF) Short Track Report. However, the ISSF survey is only of stainless steel primary producers and thus the results are not directly comparable, but are used to give context.

For sassda respondents, the results of the first question were:

27% of sassda respondents had a positive response to the current order situation which is lower than last month (32%) and much lower than the same month last year (36%). The weighted average is slightly down on last month and considerably lower than July, 2016. Both the weighted average and ther percent positive response is the lowest since this survey began.

For ISSF flat products producers, the results are as follows:

For ISSF flat product producers, 65% of respondents had a positive response to orders levels, which, is about the same as a year ago. The weighted average is significantly lower than the same month last year (2.56 vs. 2.71).

For ISSF long products producers, the results are as follows:

For ISSF long product producers, the order situation improved (78%) compared to the previous month (71%), and was up on a year ago (69%). The weighted average (2.97) was higher than the previous month (2.83) and higher than a year ago (2.75).

For sassda respondents, the results of the second question were:

24% of sassda respondents thought the current business situation was positive, which is slightly down on last month (25%) and down on a year ago (30%). However, the weighted average has now dipped below 2.00 and is at the lowest level since the survey began.

For ISSF flat products producers, the results are as follows:

The percent of respondents who felt that the current business situation was sufficient or good stood at 52% in June, compared to 39% in the previous month. This is slightly down on the same month a year ago (57%).

For ISSF long products producers, the results are as follows:

June had a 64% positive response compared to 50% in the previous month. This was also up on the same month last year (50%). The weighted average of (2.71) was up on last month (2.57) and significantly higher than a year ago (2.44).

For sassda respondents, the results of the third question were:

The outlook was better than last month with 21% % thinking that things would get better (11% last month) and 11% expecting things to get worse (19% last month). Expectations are also better than the same month last year with a weighted average of 2.64 compared to 2.57.

The above data can be converted to the Sassda Expectations Index, where the index is calculated as 0.5 x % unchanged + % better. Above 50 would predict expansion in the next three months.

July saw a significant improvement in outlook compared to the last two months and the index is once again above 50.

For ISSF flat products producers, the results are as follows:

All respondents felt that things would remain the same for the next three months. The weighted average (2.50) is the same as June last year.

For ISSF long products producers, the results are as follows:

7% of ISSF long product respondents felt that business would get better in the next three months, with 21% thinking it would get worse. This shows a deterioration in sentiment on the same month last year with the weighted average falling from 2.72 to 2.29 but an improvement from last month 1.96.

The comments received from sassda members were:

  • All imports need to comply with the same SABS specification – which is not happening at the moment. Any stainless steel product imported that has not been passed by the SABS should be subjected to additional import duties.
  • Any incentives for export assistance would be very beneficial. South Africa is very price competitive but breaking the markets initially is the difficulty.
  • As a buyer, I find that most stockists do not keep enough stock Perhaps this is because in their gauging the market, it gives them a negative view of the future and this causes them to be overly cautious.
  • Consumer spending is under pressure from inflation and various government actions. Higher duties on imported finished consumer/industrial products might assist local manufacturers. Retailers and importers are bypassing/ignoring local manufacturing for lower cost product offering higher margins, in effect laying waste to local manufacturers and flooding [the] market with cheap products.
  • Despite facing their own set of challenges, Columbus [Stainless] has been a very supportive business partner, unlike other suppliers in the carbon steel industry. I do hope that nationally, employees will stand against industrial action as a mindless route to negotiating wage increases.
  • Doing a lot of tenders at the moment.
  • Government corruption and state capture will, unless quickly reversed, see the economy sliding further negatively with worsening unemployment.
  • Further downgrades will exacerbate an already fragile economic situation, resulting in less foreign direct investment and foreign loans with rising interest rates.
  • Drastic and urgent State changes is the only way out of this morass.
  • It is encouraging to observe that some sassda members engaged in fabrication are now participating in the latest SAB InBev expansion plan at Rosslyn, Alrode and Chamdor. This reflects the importance of the South African stainless steel industry over the challenges from overseas suppliers.
  • Local supply of stainless steel, especially 316, is not stable and consistent enough, with many merchants just not carrying adequate stocks. Mill production timelines are forcing clients up in Africa to import directly from Europe, China or Australia.
  • Market is still quiet with the only real potential tied up in tenders for waterworks, etc. which means orders are still some way off.
  • We are looking forward to the next six months, strong pipeline and solid enquiries.
  • We are not prime product producers and find our balustrade component sales are poor
  • We are trying to compete with the Chinese. The Chinese products are inferior and cheap.
  • We cannot compete with imported products.
  • We find little light on the horizon for improved business opportunities.

From the Bureau for Economic Research “The Absa Manufacturing PMI started 2017Q3 on the back foot. The index fell by 3.8 points to 42.9 in July. The last time the index was at this level was during the global financial crisis in the second half of 2009. The business activity index, which is a good proxy for manufacturing production, dropped by 6.1 points to 39.3 against the backdrop of weak demand conditions. New orders fell, while business expectations for the next six [months] remains subdued. The July outcome tells a discouraging story about the manufacturing sector, suggesting that production will come under renewed pressure in 2017Q3.”

The sassda survey confirms this state of affairs, with the current situation in our stainless steel industry at its worst level since the survey began. The stainless steel trade statistics also bear this out. Based on the first six months of this year, sassda’s forecast is for a drop of 15% in primary product supply into the local market. This will be the third year in a row of contraction, is 38% off the peak seen in 2014 and the lowest level seen since the global financial crisis in 2009.

Although apparent consumption is expected to recover due to the drop in non-producer primary products exports, real consumption is expected to more closely follow the downward trend of primary product supply.

The news is not all negative though. One glimmer of hope from this survey is that the outlook for the next three months has improved (the Sassda Expectations Index is now at 54.8) and is now at its best level since the cabinet reshuffle at the end of March.

Regards

Angie Baker
KwaZulu-Natal Regional Manager
Southern Africa Stainless Steel Development Association
Tel: +27 11 883 0119 | Cell: +27