Boston, MA -- (SBWire) -- 06/13/2013 --The South African metals industry will be characterised by steady consumption growth outstripping production growth in the coming years. Investment in production facilities will be constrained by several factors including persistently low output prices, rising energy costs and further aggressive wage negotiations by unions.
In terms of the domestic market, metals consumption will track the economic trend and economic growth in South Africa is expected to be slow but steady with a modest recovery expected over following years. We see autos production growth as the key driver of metals consumption in the years ahead rather than construction. We forecast autos production to grow by an annual average of 4.9% over 2013-2017, while construction industry value will grow by 3.5% annually over the same period.
The key immediate threat to the South African metals industry is the disruption of raw material supplies from strikes in the mining sector, but long-term structural problems such as high electricity prices will also be detrimental to investment. A national carbon tax is scheduled to be implemented in 2015. Although concessions are likely for energy-intensive industries such as steel production, the tax will further weigh on a deteriorating environment for metals production in South Africa.
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