South Africa Petrochemicals Report Q3 2008

Despite its relatively weak oil and gas reserves situation, South Africa provides the most low-risk option for the petrochemicals industry and possesses the continent's second-largest refining capacity, according to BMI's latest South Africa Petrochemicals Report. Most significant developments in the petrochemicals sector will concern the development of speciality chemical and industrial alcohol plants. Sasol's olefins and surfactants division, the largest petrochemicals producer in South Africa, produces: 455,000 tonnes per annum (tpa) ethylene, 550,000tpa alkylbenzene, 600,000tpa C6, 800,000tpa paraffins and olefins and 1mn tpa of surfactants. It also makes 170,000tpa of inorganic speciality chemicals. Sasol's polymer capacity will rise rapidly during 2007 when it opens a second 300,000tpa PP unit and a 220,000tpa LDPE unit. BMI forecasts that propylene polymer exports will gradually increase over the forecast period, rising to 135,000 tonnes in 2012, but that domestic demand will absorb most domestic output. Meanwhile, ethylene polymers will see a steady rise in demand, with imports set to reach 215,000 tonnes by 2012. Demand growth will not be as strong as previous years due to lower rates of economic activity, which will hit downstream plastics manufacturing. The outlook for different sectors in the South African downstream chemical market varies, with paints and coatings, plastics and cosmetics industries forecast to perform positively while agrochemicals are likely to face problems. Annual growth in the South African market in paints and coatings is around 6- 8%, outstripping GDP growth. The polymers and plastics market is set to expand due to the growth in the automotive and building industries, although imports will come at the expense of a domestic plastics industry that is suffering from high import tariffs and deliberately inflated feedstock prices from the local monopoly, Sasol. The South African petrochemical industry is the largest in Africa, although relatively small by international standards. It contributes about 5% of GDP and accounts for 25% of manufacturing sales. The industry is reshaping itself, striving to bring plant capacities closer to world production levels, exploiting niche markets, acquiring foreign assets and promoting foreign partnerships. South Africa has the second-largest refining sector in Africa, after Egypt, with a total refining/liquid fuels capacity of 695,000b/d, and it controls a significant portion of the regional market for refined products. Cracker capacity is likely to remain at 500,000tpa over the next five years BMI forecasts that propylene polymer exports will gradually increase over the forecast period, rising to 133,000 tonnes in 2011, but that domestic demand will absorb most domestic output. Meanwhile, ethylene polymers will see a steady rise in demand, with imports set to reach 212,500 tonnes by 2011. Demand growth will not be as strong as previous years due to lower rates of economic activity, which will hit downstream plastics manufacturing (www.companiesandmarkets.com)