Packaging, Construction and Tourism continue to boost South African Commodity Plastics market

01-Oct-09
Fluctuating commodity prices and the small market size have significant knock-on effects on the South African commodity plastics industry, consequently resulting in a major price pressure for suppliers. As per Frost and Sullivan, new polymer producers do not see themselves getting established in the near future due to the small market size. The outlook for the long-term, however, is positive with drivers such as continued substitution of conventional materials with plastic, ongoing housing and infrastructural developments and tourism due to the 2010 Fédération Internationale de Football Association (FIFA) World Cup. This will present many opportunities and sustain market growth. "Packaging, construction and tourism industries are vital to sustain the demand for South African commodity plastics," says the analyst of this research. "Many opportunities will arise as the market sees increased consumer demand and government spending on housing and infrastructural development." High consumer demand is expected during and after the 2010 FIFA World Cup. An estimated 2 mln visitors are set to support significant growth, particularly in the plastics packaging industry. Promisingly, government spending on housing and infrastructural development has continued despite the global economic slowdown. The plastic packaging industry is the primary end user of commodity plastics in the South African market. This industry is anticipated to grow due to increasing consumer demand triggered by tourism and the expanding upper and middle class. Government spending on infrastructural developments will sustain the demand for commodity plastics in the industrial sector for many years as an emerging economy. Amongst the challenges in this industry, high technological barriers to entry are restraining local infrastructural growth. The high cost of equipment, together with the small market size, does not justify this investment. This makes its particularly challenging for smaller market participants to compete at the level of the already established producers. Further, South Africa's distance from high consumption markets restrains infrastructural development for exports. While the South African commodity plastics market size will only see opportunities for growth in the long term, much progress has been made in key sub-Saharan African countries to present opportunities, with energy-related infrastructural developments paving the way for industrial growth. Commodity plastic suppliers are looking into these emerging markets for expansion. Suppliers should focus on emerging sub-Saharan African countries and penetrate into these markets, concludes the analyst. Recent energy related infrastructural development in these countries will open the pathway for industrial growth, and present potentially lucrative.
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