The performance of South Africa’s automotive, building and construction sectors, two key consumers of coil coatings, had started showing signs of slowing down early in the year, a situation exacerbated by the outbreak of the unprecedented COVID-19 pandemic that shut down the economy for several months.

Although no latest data is available to confirm consumption levels of coil coatings in South Africa, there is a likelihood of falling consumption should some of the predicted short term market trends in the automotive and the building and construction sectors come to pass.

The likelihood of South Africa’s coil coating market reporting a muted growth in 2020 and possibly 2021 looks real because of the widespread adverse effects of the COVID-19 crisis on the country’s economy.

For example, although South Africa exported an average 386,863 vehicles by the end of 2019, an 18 percent growth compared to 2018, there has been a global decline in demand since March 2020 according to market consultancy firm Deloitte.

The diminishing appetite for new vehicles in the global market and also in South Africa will have a direct impact on the consumption of coil coatings, a market that had previously looked into the future with optimism as vehicle production was projected to rise to 1.4 million units by 2035.

“In all likelihood, the Automotive Production and Development Programme’s (APDP’s) manufacturing target of 1.4 million vehicles by 2035 is now in jeopardy and much will depend on the global economy’s medium-term recovery,” Deloitte said in a report on South Africa’s automotive industry trends.

“It is highly likely that domestic forecast for 2020 will be significantly less with analysts forecasting this in the region of 450,000 units,” Deloitte added.

In fact, in 2020, Deloitte foresees a 30 percent drop in new vehicle sales in South Africa, a trend likely to impact consumption levels for coil coatings in the country especially by end-users keen on having a variety of colors and textures and also durable structures.

Furthermore, South Africa’s construction sector, though having multi-billion-dollar expansion projects lined up for implementation in the medium term, is expected to finish 2020 on a low note, hence less likely to trigger increased consumption coil coatings especially of polyester resin that is largely preferred in roofing and wall cladding for buildings.

Previously, the construction industry accounted for nearly 50 percent of overall steel consumption in South Africa.

“Expansion prospects for the South Africa construction industry will remain weak over the next decade, owing to the slowdown in economic growth and difficult business climate spurring the disappearance of major domestic players,” according to a report by U.S.-based Market Research.com Inc, a market research analyst.

South Africa is a top steel and aluminum producer in Africa with previous industry reports indicating the country’s steel production has fallen from an all high average of 885,000 tons at the end of 2008 to a record low of 3,000 tons in April of 2020 at a time when the COVID-19 pandemic was tightening its grip on the South Africa economy, a country that consumes an average five million tons of steel annually.

The country has an installed capacity of 10 million tons but produces about 6 million tons annually with the national basic iron and steel, non-ferrous and ferrous metal products and machinery accounting for nearly one-fifth of South Africa’s entire manufacturing output by 2019.

According to a report by Business Wire, a Berkshire Hathaway company, which distributes press releases and regulatory disclosure, the South African structural metal products manufacturing sector, which is involved in the production of metal structures and parts using aluminum, iron or steel, could be significantly impacted by COVID-19 combined with a weakening economy.
“Demand for steel products depends heavily on the fortunes of the construction sector, which has been under significant pressure,” the Business Wire market report stated.

It adds “the volume and value of structural metal products produced decreased between March 2019 and March 2020.”

Construction of bridges to towers, masts, piers, prefabricated buildings, doors, staircases, gates, fences, roofing and scaffolding are some of the activities that have slowed down in recent months because of South Africa’s “weakening economy, lack of large infrastructure projects, and the weak mining and engineering sectors.”

“In March 2020, production effectively came to a halt, but companies have ramped up production as lockdown restrictions have progressively eased,” added Business Wire.

While proposing for the tariff protection to safeguard the steel industry, some of the industry players in South Africa, according to Business Wire, are predicting a “significantly lower local steel demand as the pandemic shows no sign of abating.”

But it may not be all doom and gloom as some economic revival and industry-specific measures by South Africa that are either already in place or proposed have raised optimism of the steel industry growth and consumption of coil coatings including polyester, siliconized polyester, polyvinylidene difluoride, plastisol and polyurethane.

For example, the government has set a minimum local content requirement for the railway sector, with up to 100 percent local content for rail permanent way sector and 70 percent for railway maintenance of way plant and equipment.

This policy will not only increase the consumption of metal but the coil coatings that enable infrastructure design flexibility and resistance to weathering and corrosion.

Despite the unpredictability of the market trends post-COVID-19, there is optimism South Africa’s economy, like many in the African continent, could quickly achieve a turnaround hence enabling growth in demand for new vehicles and also the implementation of construction and building projects that are key coil coatings consumers.

Moreover, the planned search for more oil and gas and the likely improvement of living standards especially for the middle class could push up demand for durable metal in exploration, production and processing of hydrocarbons and also the consumption of electrical and electronic products that are known to consume high levels of coil coatings.

The global coil coatings market is dominated by big names, many of them with a footprint in South Africa, such as PPG Industries, Axalta Coatings Systems, Henkel AG, Wacker Chemie, Dow Dupont, and Beckers Group.