The outlook for the South African metals and engineering sector this year is far from rosy as it faces a variety of headwinds locally and globally, according to the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) State of the Metals and Engineering Sector Report 2025.
Released by SEIFSA last week, the report examines the state of metals and engineering amid heightened geopolitical tension, low economic growth and slow execution of the reforms needed to unlock economic growth.
According to the latest full-year estimates for 2024, the sector’s production declined by 1,4% while it employed 362 210 people – an increase of only 0,5% on 2023.
“Where there was improvement in the numbers, it was marginal to negligible,” said SEIFSA’s Chief Operating Officer Tafadzwa Chibanguza.
Along with the fall in production, exports declined 6,3% and imports were down 6,9%. The sector’s GDP expanded by just 1,1% and capacity utilisation increased marginally to 75,4% – still below optimal levels. The sector’s trade balance remains negative although there was an 8% improvement from 2023. “Putting this statistic into context, this is because imports contracted more than exports did,” Chibanguza said.
Geopolitical tensions are of particular concern because the sector exports about 46% of its output. “What goes on outside the country is extremely important and the foreign policy decisions taken by the country also have implications for external trade,” Chibanguza said.
One such market is the US (the world’s largest economy), which accounts for 8,3% or R33 billion of the sector’s exports. The sector’s imports from the US amount to 6,7% or R40,6 billion. In 2024, the sector had a trade deficit of about R8 billion with the US. Although the overall trade balance is in deficit, sub-sectors such as non-ferrous metals and basic iron and steel have positive trade balances with the US. The concern is that these sectors may face new export taxes, which could have adverse effects on one of the few positive areas of trade, the report notes.
Another concern for the sector is the Carbon Border Adjustment Mechanism (CBAM). “There is considerable concern about the growing global tendency to lean on those instruments,” Chibanguza said, explaining that countries have responded to the European Union’s early introduction of the CBAM in three ways:
- Some oppose it.
- Others impose their own CBAM mechanisms.
- Certain nations are considering domestic emission trading systems (ETS) to capture carbon revenues locally and this is considered the first step towards developing their own CBAMs.
About 36% of the sector’s exports would be affected if all the countries currently imposing or considering ETS schemes applied CBAMs.
“There are also a number of domestic headwinds facing the sector including persistently pedestrian economic growth, the fact that well-intended reforms by the state have not yet borne fruit and widespread company closures such as contemplation of the closure of ArcelorMittal South Africa's long steel business and many other companies across the sector that face weak order books and strong import competition,” Chibanguza said.
