Johannesburg - The devaluation of the Chinese yuan is likely to further sink South Africa’s struggling steel industry.
China accounts for half of the global steel and aluminium production and the yuan’s devaluation has triggered fears of accelerated imports from that country.
“There are fears that China will export more steel because of the weak currency. That is not a good sign for South Africa, because we have seen record high imports from China”, said Kobus Lamprecht, a chief commodity economist at Cape Town-based Afriforesight yesterday.
South African producers are seeking a 10 percent tariff to protect the industry from cheap imports, particularly from China.
Related commodities aluminium and copper fell to six-year lows.
China buys 45 percent of the worlds’ copper, and supply has increased this year.
“The gross profit margin for copper producers is high compared with other commodities. Producers report 40 percent profit margin,” said Lamprecht.
“There is also a risk that copper supply will be disrupted because of the current strike in Chile and Peru and electricity problems in Zambia and the Democratic Republic of Congo,” Lamprecht added.
The decision by the People’s Bank of China triggered the biggest one-day drop in the yuan since 1994 and sent commodity, equity and Asian currency markets tumbling.
On the JSE, resource counters bucked the trend and strengthened yesterday with Kumba Iron Ore rising 2.42 percent to R98.99, Harmony Gold rose 4.79 percent to R12.70, Lonmin added 3.63 percent to R8.28 and Anglo American Platinum jumped 4.97 percent to R284.91.
BUSINESS REPORT