Research and consulting firm Frost & Sullivan expects that the South African plastics sector will have grown by only about 2% during 2010, following the impact of the global economic recession. The sector also continues to feel the effects of the strong rand and volatile raw materials prices.
Frost & Sullivan chemicals, materials and food industry analyst Kholofelo Maele reports that the global economic crisis strongly impacted on the local manufacturing sector and that overall the plastics sector experienced sluggish growth last year.
“The different appli- cations for plastics showed varying growth trends following the downturn. For example, the automotive plastics sector contracted, while the plastic packaging market experienced low growth during 2009,” she says.
The recovery of the South African economy is currently the most significant driver of growth for the sector. Maele notes that consumer spending is still relatively low, but that this has started to increase, driven by low interest rates. This is expected to drive demand for plastics in applications such as packaging and consumer goods.
Maele believes that the recovery of the manu- facturing sector will also lead to increased demand for industrial plastics. Growth in the South African construction sector, another major driver of growth for the plastics sector, has slowed relative to its previously high growth, which was boosted by the 2010 FIFA soccer World Cup. “The construction sector is a significant end-user of plastics and continued government spending on infrastructure and housing projects is expected to contribute to demand growth for plastics,” she says.
However, imports of polymers from the Middle East and China are increasing the level of competition.
Nevertheless, Frost & Sullivan reports that local polymer suppliers still dominate the local market, resulting in imports of polymers not having a severe impact on the sector.
On the other hand, local plastics converters and fabricators are at greater risk, owing to the import of semifinished and finished plastic goods. “The downstream sector could face significant losses if it is unable to compete with cheaper imports, especially in highly commoditised consumer applications,” she says.
Further, the plastics industry has to contend with the problems associated with the strong rand and the slow recovery of South Africa’s export markets, especially in the Southern African region.
Meanwhile, the consulting firm reports that there has been a significant drive to establish sustainable practices within the sector, not only in South Africa but also globally. The industry is assessing the available options for a strategy to reduce the amount of waste that it generates, as well as to increase the recycling of polymers, Maele says.
Further, Frost & Sullivan says that skills are a key restraint in the local plastics sector, in common with other manufacturing sectors. She adds that there are initiatives by the indus- try, such as by the Plastics Federation of South Africa, to drive skills development and training within the sector.
Maele notes that government has identified the chemicals and manufacturing sectors as having the potential to significantly contribute to South Africa’s development aims. “To achieve its growth objectives, better implementation of skills development initiatives for the overall chemicals sector is required.”
Meanwhile, chemicals giant Sasol Polymers has added new capacity to produce polyethylene. The polymers manufacturer has increased its production capacity to about 220 000 t/y, up from the previous 180 000 t/y. Sasol Polymers produces various grades of linear-low and low-density polyethylene, which is mainly used in the packaging industry.