Industry body, the Steel and Engineering Industries Federation of South Africa (Seifsa), has expressed concern over the relapse to slower growth in the metals and engineering sector in the last quarter of 2013, with only a 2% increase over the last three months of the prior year.

Seifsa chief economist Henk Langenhoven said this month that the latest production data for the steel and engineering sector, released by Statistics South Africa, followed a pattern established over the last several years, indicating year-on-year improvements during the first three quarters of a year and then a relapse during the last quarter.

“A seasonal pattern that has [emerged] in the last three years is that the first three quarters of every year is an improvement on the prior year, but when the fourth quarter data comes out, it actually relapses. This instability is baffling,” he told Engineering News, adding that labour tension in multiple industries was the likely driver of this instability.

The economist said further that he was “fairly hopeful” that the same pattern would emerge in 2014 and that the domestic steel and engineering sector would recover, but that this pattern was not in line with the international steel market, which was currently in recovery and posting strong growth figures.

“Internationally, there is growth; however, domestically, these sectors are languishing as a result of instability in the construction, mining and vehicle industries to which the metals and engineering sectors are strongly linked. I suspect that we may be losing our competitiveness,” he noted.

Over the shorter term, he said mixed signals were evident in the production performance, with the data from November showing that yearly production in steel and engineering grew by only 1.5%, showing declines for rubber (-3%), structural metal products (-11%) and general purpose machinery (-6%).

Moreover, production in November declined, with the month-on-month figures showing a general contraction of 0.8%, with only plastics (1%), electrical machinery and equipment (7%) and household appliances (2.7%) growing.

The latest year-on-year comparison also showed a contraction of 1.5% for November.

“However, when the year-to-date production is compared to the same period of 2012, the sector grew by 2%, which gives some hope that the full calendar year may be better than the 1.5% mentioned above. “The losing industries were rubber (-3.5%), structural metals (-10.5%) and general purpose machinery (-7.3%),” he commented.

He added that production levels were now some 15% higher than at the “bottom of the trough” of 2009, but still 25% below the peak before the financial crisis.

“The trend is upward, albeit moderating recently,” he said.

Despite the third-quarter volatility, Langenhoven remained optimistic that a 2% real production growth for the steel and engineering sector for the full 2013 would be realised, and welcomed indications that confidence levels for growth in 2014 were on the uptick.