BMI's Executive Summary

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Project overruns in the petrochemical sector are raising costs and undermining South Africa's external competitiveness, putting future growth at risk, 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 455,000tpa of ethylene, 550,000tpa of alkylbenzene, 600,000tpa of C6, 800,000tpa of 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 polypropylene (PP) unit and a 220,000tpa low density polyethylene (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 monopsony, Sasol.

In BMI's Middle East and Africa Petrochemicals Business Environment matrix, South Africa comes seventh with 54.4 points, putting it 0.6 points behind Israel and 5.6 points ahead of Egypt. 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.

Contents

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Chapter 1 - Executive Summary

Industry Overview

Industry Developments

Economic Climate

Business Environment

South Africa Petrochemicals Industry SWOT

South Africa Economic SWOT

South Africa Political SWOT

South Africa Business Environment SWOT

Chapter 2 - Market Overview

Market Structure

Table: South Africa Cracker Capacity Data and Forecasts

Chapter 3 - Industry Trends and Developments

Sasol

Other

Impact Of Accidents On Sasol

Chapter 4 - Industry Forecast Scenario

Table: South Africa Chemicals & Petrochemicals Sector – Historical Data and Forecasts

Chapter 5 - Economic Outlook

The Slowdown Begins

Growth Peaks In Q2

Table: Economic Indicators

Serious Risks To Outlook

Foreign Direct Investment

Tax Regime

Business Environment Outlook

Chapter 6 - Company Monitor

Sasol

Dow South Africa

AECI

Shell

Air Liquide

Chapter 7 - BMI Forecast Modelling

How we generate our industry forecasts

Chemicals & Petrochemicals Industry

Chapter 8 - Cross checks

Competitive Landscape for Middle East & Africa Petrochemicals Reports: Sample of Companies Ranked

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Comparative company analyses and rankings by US$ sales, % market share, employee size, registration date and ownership structure. Company SWOTs (Strengths, Weaknesses, Opportunities, Threats) on all leading international and national operators in each market, including competitive intelligence in the following: Overall geographic presence, competitive positioning against local companies; production capacity, sales and market share; joint ventures, foreign direct investment, projects and acquisitions strategy.