South African steel prices stabilise in August

South African steel prices, for both flat and long products, were unchanged for the second consecutive month, in August. Along with trends in the global market, a number of factors are influencing the current pricing policies adopted by the local mills.

Civil unrest

The recent civil unrest in South Africa created a period of disruption. This delayed steel deliveries and impeded economic activity. Investor confidence was negatively affected. This is expected to result in lengthening project timelines.

Removal of safeguards

The eight percent safeguard duty was removed on 10 August, for all steel imports. This has provided buyers with additional supply options, but purchasing activity will be dependent on vessel availability and global pricing.

Increasing inventories

Inventories have grown over the past two of months, except in high-grade products and thin gauge coils. Domestic stock levels of hot rolled plate have increased, due to a combination of improved domestic supply and an upturn in import volumes. This has forced high priced stockists to reduce their quotations to secure orders. Reports suggest that these prices are below current replacement costs.

Softening demand

Traditionally, steel demand falls during July and August. The IHS Markit Purchasing Managers’ Index for South Africa declined from 51.0 points in June, to 46.1 in July. This is the first contraction in activity in ten months. Construction demand is muted. On a positive note, however, automotive activity is expected to increase. Moreover, the news that the Ford Silverton plant upgrade is nearing completion is welcomed by this sector.

Exchange rate volatility

The South African rand has always been a volatile currency. This year has been no exception. From a high against the US dollar in June, it weakened in July and August, falling below the 1 USD = 15 ZAR level last registered in March of this year. The rand has, subsequently, started to strengthen.