South African steel prices stabilize in August
South African steel prices for both flat and long products were unchanged for the second consecutive month in August. Along with global market trends, a number of factors influence the current pricing policies adopted by local factories.
The recent civil unrest in South Africa has created a period of disruption. This delayed steel deliveries and hampered economic activity. Investor confidence has been negatively affected. This should lead to an extension of the project deadlines.
Cancellation of guarantees
The eight percent safeguard duty was removed on August 10 on all steel imports. This has provided buyers with additional sourcing options, but purchasing activity will depend on vessel availability and global prices.
Increase in stocks
Inventories have increased over the past two months except for high quality products and thin coils. Domestic hot-rolled sheet stock levels increased, driven by a combination of improved domestic supply and recovering import volumes. This forced the high priced stockists to cut their quotes to secure the orders. Reports suggest that these prices are lower than current replacement costs.
Softening of demand
Traditionally, the demand for steel falls in July and August. The IHS Markit Purchasing Managers Index for South Africa fell from 51.0 points in June to 46.1 in July. This is the first contraction in activity in ten months. The demand for construction is reduced. On a positive note, however, auto activity is expected to increase. Additionally, the news that the Ford Silverton plant upgrade is nearing completion is welcomed by this industry.
Exchange rate volatility
The South African rand has always been a volatile currency. This year was no exception. From a peak against the US dollar in June, it weakened in July and August, falling below the level of 1 USD = ZAR 15 last recorded in March of this year. The rand subsequently began to strengthen.