"South Africa Petrochemicals Report Q3 2016" is now available at Fast Market Research
New Energy research report from Business Monitor International is now available from Fast Market Research
[ClickPress, Tue Jun 14 2016] The South African petrochemicals industry is set for stronger growth in 2016 as a result of low base effects, a modest upturn in local consumption and capacity growth in the C3 chain. However, the sector has been the worst affected area of an economy that is enduring sub-2% growth and falling competitiveness, weighed down by poor consumption, strike action and disruption to electricity supply.
In 2015, South Africa had ethylene capacity of just under 700,000 tonnes per annum (tpa) and propylene capacity of 960,000tpa. Meanwhile, polymer capacities included a total of 570,000tpa of polyethylene (PE), 60,000tpa of polyethylene terephthalate (PET), 680,000tpa of polypropylene (PP) and 200,000tpa of polyvinyl chloride. This gives South Africa a relatively small yet diverse petrochemicals base. However, capacities are unlikely to change over the medium term.
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In 2015, basic chemicals output fell 0.6% y-o-y, while plastic fell 1.9% and rubber declined 1.0%. Signs of recovery were seen in H215 and going into Q116 with uptrends in plastics and chemicals. In terms of end-markets, the construction sector is enduring a poor performance, which is helping to depress demand for construction-related polymers. On the upside, the automotive industry is seeing a recovery and rising local content in cars manufactured in South Africa offers further opportunities for consumption group.
The low value of the rand, coupled with low oil prices, has not helped lift local petrochemicals output, which will track poor GDP growth figures in the near term. The South African economy as a whole will grow at a slow pace. We maintain our 2016 growth forecast at 1.6%. Medium term, our core scenario is that growth will remain below 2% in the absence of structural reform momentum and the lack of a sustainable resolution of the electricity crisis. As such, a rapid recovery in petrochemicals is unlikely and BMI does not see a return to strong growth in petrochemicals until 2017.
In Q116, Continental Polymers expanded its operations into polypropylene and nylon compounds with a new production site in Westmead, KwaZulu-Natal. This is evidence that technical innovation and diversification in downstream, value-added segments is still being conducted by domestic producers.
In 2016, petrochemicals output should be boosted by the completion of the C3 Expansion Project, which will add 105,000tpa of propylene and 105,000tpa of polypropylene (PP) through debottlenecking.
In BMI's Middle East and Africa Petrochemicals Risk/Reward Index, South Africa ranks seventh out of 11 countries, with a score of 51.1 out of 100, down 0.4 points since the previous quarter due to worsening country risk scores. It lies 1.4 points behind Egypt and 1.6 points ahead of Turkey. As petrochemicals capacities expand in Turkey and Egypt, South Africa is likely to see its position in the regional rankings fall.
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