Automotive employment, production up, but now steel, power worries surface

By: Irma Venter
19th April 2010
Source : Engineering News

Concerns over steel price increases and availability, as well as the impact of the recent electricity price hikes have emerged in South Africa’s automotive industry, just as it started to show signs of recovery following a global recession which had decimated new vehicle sales last year.

The National Association of Automobile Manufacturers of South Africa (Naamsa) on Monday reported that the country’s car and truck vehicle manufacturers added 1 196 new jobs to their payroll in the first quarter of the year, to reach employment levels of 31 357 people, compared with the 30 161 positions filled at the end of last year.

The association said the increase in head count was attributable to additional recruitment at three of the industry’s major employers.

Domestic vehicle production was expected to rise from 374 000 units in 2009, to 443 000 units in 2010 – an increase of 18,4%.

Vehicle assembly industry capacity utilisation levels had also recuperated to 69,6% for the first quarter of 2010 at passenger car plants, following a 59,4% rate prevalent in 2009. This was, however, still down on 2006‘s 80,1%.

Light commercial vehicle capacity utilisation levels increased to 65,1% from 56,5%, medium commercial vehicle to 69,6% from 64,6%, and heavy trucks to 74,1% from 66,1%.

Naamsa on Monday also revised it vehicle sales projections for 2010 upwards, and now expected the market to grow by around 14% – to 451 500 units – compared with 2009, after forecasting growth of a much more conservative 7% earlier this year.

Naamsa director Nico Vermeulen said that South Africa’s sales growth for the first quarter of 2010 was higher than in the rest of the world.

“By and large, it is a slightly more positive picture for the local industry,” he added.

However, it was not all good news as Naamsa reported that it expected local component pricing to be “significantly impacted” by the Eskom electricity price increase which came into effect on April 1, although it also noted that the magnitude of this remained murky.

The association added that several vehicle and component manufacturers had also raised concern over steel availability and steel pricing implications arising from steelmaker ArcelorMittal South Africa's (AMSA's) dispute with iron-ore supplier Kumba Iron Ore.

Kumba earlier this year ended a deal which allowed AMSA to obtain ore at a discounted rate, stating that it would sell its product to the steelmaker at market rates, as from March 1.

However, AMSA argued that the long-term preferential supply agreement was still valid, but noted that it would need to increase prices by $80/t to ease the impact of the dispute.

“Steel is a big issue – for more than one vehicle manufacturer – as are Eskom’s price increases and the increase in fuel costs,” said Vermeulen. “The combined effect of all of this is undermining the competitiveness of South Africa’s parts and vehicles in international markets, and it creates pressure on the affordability of vehicles in the local market.”
Edited by: Creamer Media Reporter