The latest South Africa petrochemicals report examines the way in which South Africa’s basic
petrochemicals producer Sasol is defending its market position as it competes with an influx of cheap
products from Asia, while attempting to maintain strong operating margins.
We also analyse the key challenges in the sector and look at a range of factors that include labour, power
supply and a weakening external environment. BMI also explores the opportunities for long-term growth
which emanate from the automotives and construction sectors – both at home and elsewhere in Sub-
Saharan Africa (SSA). We also examine the impact of slowdown in China and the eurozone crisis on
South African polymers.
While South African petrochemicals producer Sasol is aiming to boost its earnings in 2012/13, the
producer is coming under pressure from increased feedstock prices and softening international
petrochemicals prices. The weakening of the domestic economy as a result of external pressures will have
an impact on consumption levels, although private consumption should hold up well. The market became
increasingly competitive in Q312, in part due to the influx of cheap polyethylene (PE) from China and
Qatar, which challenged Saudi dominance of supply to South Africa. This prompted Sasol to lower PE
prices for domestic businesses.
Over the last quarter, BMI has revised the following forecasts/views:
?? BMI believes that despite the softening of demand and prices, Sasol is still likely to report a
relatively strong performance by end-FY2012/13 and is likely to retain its 80% share of the local
?? Margins will remain under pressure, although the high volatility of the rand/dollar exchange rate
makes the outcome hard to predict and would support higher import prices.
?? Sasol is reported to have overcome the PE supply issues it faced in early 2012 due to ethylene
supply problems at Sasolburg. The opening of a new ZAR1.8bn ethylene purification unit with
48,000 tonnes per annum (tpa) capacity at Sasolburg in H213 is expected to yield enough
additional ethylene to support steady polymer output over the medium-term.
?? In BMI’s Middle East and Africa Petrochemicals Risk/Reward Ratings (RRRs), South Africa
ranks seventh with 54.6 points, up 0.1 point since the previous quarter due to an improvement in
its country risk score.
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