South Africa's PE shortage to last until end of March 2012

07 December 2011 15:38  [Source: ICIS news]

LONDON (ICIS)--South Africa’s polyethylene (PE) shortage is likely to last at least until the end of March next year because of a lack of supply from local producer Sasol and reduced imports, market sources said on Wednesday.

The market’s reaction came only a few days after coal-to-oil converter Sasol confirmed its supply shortage is likely to extend at least until March 2012.

The company had been experiencing a shortage of low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) film grades because of feedstock ethylene constraints.

In a letter to customers dated 2 December, Sasol said it had restarted its LDPE plant on 1 December, and the company intended to supply the full allocation for the month of December.

However, it added that short delays might be experienced in the supply of some LLDPE grades during the coming weeks, although it intends to “supply the full LLDPE allocation for the month of December”.

The company said its stock position in January will not be “optimal” for either LDPE or LLDPE.

“A further downward adjustment of current volume allocations to customers will be implemented over this period in an effort to replenish safety stock levels and provide more reliable supply in the longer term,” it said on February and March volumes.

Supply levels for April and beyond will be confirmed during January 2012, the company said, adding: “This will be dependent on the successful start-up and stable operation of other upstream supply units.”

Sasol’s announcement comes at a time when the South African market is low on imports, as Saudi Arabia-based petrochemical major SABIC recently suspended offers of LLDPE and high density polyethylene (HDPE) into the country on tax concerns.

Regarding trades out of South Africa, a source at Sasol said the company’s exports would be limited in December but might pick up towards the end of January.

When contacted, a second source at the company said: “The recent production issues are resolved.”

A recent problem with a coal conveyor that affected coal supply to the Secunda East plant has contributed to the LDPE and LLDPE production problems, the source said.

“The coal conveyor incident did affect LDPE, LLDPE, but there were other incidents before that affected supply,” the source added.

The company is structurally short on both grades, the source said, and cannot “in any case supply the entire domestic market.”

For more on polyethylene visit ICIS chemical intelligence

By: Cuckoo James
+44 (0) 208 652 3214

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