New Market Research Report: South Africa Petrochemicals Report Q4 2012

New Energy market report from Business Monitor International: "South Africa Petrochemicals Report Q4 2012"

by Bill Thompson

(WireNews+Co) - Boston, MA - 26 October 2012

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.

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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 market.
- 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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