http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.29Change: -0.09
R/$ = 11.70Change: -0.05
Au 1207.85 $/ozChange: 1.57
Pt 1174.50 $/ozChange: -1.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Jul 04, 2008

Weaker rand, strong demand offers sound start-up platform for chemicals-cellulose expansion

Back
 
 
 
 
 
 
Engineering|Africa|Environment|PROJECT|Resources|Sappi|Waste|Water|Africa|Energy|Product|Environmental|Power|Waste|Water
Engineering|Africa|Environment|PROJECT|Resources|Sappi|Waste|Water|Africa|Energy||Environmental|Power|Waste|Water
engineering|africa-company|environment|project|resources|sappi|waste-company|water-company|africa|energy|product|environmental|power|waste|water
© Reuse this The $460-million expansion of the Sappi Saiccor chemical-cellulose facility, in KwaZulu-Natal, was over 90% complete, and once ramped-up to its full nameplate production of 800 000 t/y would entrench the group's position as the world's pre-eminent manufacturer of dissolving pulp. It would also further enhance Sappi's ranking as one of the world's lowest-cost producers, Southern Africa CEO Jan Labuschagne tells Engineering News in an interview.



The plant, which is situated 50-km south of Durban, currently has the capacity to produce 600 000 t/y of elemental chlorine-free chemical cellulose, the bulk of which is exported to countries in Europe, the Americas and Asia.

The biggest single consuming industry remains the garment trade, where chemical-cellulose is being employed increasingly to give fabrics a silky shimmer and feel, not only for use in high fashion items, but also in day-to-day garments.

However, the product is also used as an input in the food, pharmaceuticals, chemicals and plastics industries in applications as diverse as headache tablets, through to the handle on a screwdriver.

Labuschagne says that the expansion, dubbed ‘Amakhulu', also represents a ‘step change' for the industry, given that most of Saiccor's competitors, such as Rayonier, are still producing at rate of between 300 000 t/y and 500 000 t/y.

But the facility's cost advantage does not come exclusively from these economies of scale. Its access to the low-cost, renewable fibre resources of KwaZulu-Natal, which is a fast-growing timber region, is also a material benefit.

Sappi is also convinced that the demand trajectory, underpinned by robust garment-sector growth in Asia, will be more than adequate to absorb the additional output it plans to place into the market.

"The market is still very tight," Labuschagne reveals, adding that Sappi is inundated with requests from customers for additional tonnages.

This said, rising interest rates and slowing consumer demand worldwide could have a short-term impact. There has already been a softening in the viscose market, which has precipitated a fall in spot prices from around $1 500/t to around $1 000/t. But current price levels are still well above historical trends.

"We think that the markets were running too hot, and actually see the recent decline as positive for the long-term health of the market," Labuschagne asserts, noting that the investment decision was based on far more modest trend prices.

Sappi is still forecasting average yearly growth of four per cent, and Labuschagne discloses that the group has already secured offtake orders for more than 80% of the expanded production.

The timing of the ramp-up also offers something of a ‘sweet spot', particularly given the rand's recent weakening against the dollar.

"This will substantially shorten the pay-back period," Labuschagne confirms, revealing that, at current exchange rates and pulp prices, there could be a 25% to 30% reduction when compared to the payback period initially budgeted.

Commissioning is due to begin late in the current quarter and the facility is expected to be running at full capacity from the middle of the Sappi's next financial year. And, while the actual expansion is for 300 000 t/y, Sappi has decided to close 75 000 t/y of existing high-cost capacity.

The project should also improve Saiccor's environmental impact through the reduction of air emissions, improved waste-water quality and increased energy efficiency.

In fact, the project will result in the production of an additional 40 MW of electric power, which in South Africa's current power-constrained environment is a significant advantage.

A key challenge, though, is the rise in some of Saiccor's own inputs, particularly some of its chemicals inputs.

Sulphur prices, for instance, have surged tenfold over the last 18 months, while caustic-soda prices have gone up by about 50% over the last six months. But these prices have been offset by strong increases in pulp price, which underpins the chemical-cellulose price.

"Therefore, the financial model for the project is more robust today than it was when we completed the feasibility study," Labuschagne enthuses.

Edited by: Martin Zhuwakinyu
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Electricity News
Updated 4 hours ago Scheduled blackouts are unlikely to happen on Friday and the weekend, Eskom said. "Our aspiration is not to have loadshedding today and the weekend," spokesperson Khulu Phasiwe said.
Updated 5 hours ago Private equity will play a key role in developing Africa given the massive needs for capital on the continent, says Blackstone Group, which is focusing on infrastructure projects involving power generation and transmission. CEO Steve Schwarzman said he would continue...
Eskom CEO Tshediso Matona
Updated 6 hours ago South Africa's cash-strapped power utility Eskom may sell some of its assets to raise capital as it scrambles to light up Africa's most advanced economy, the company's chief executive said on Thursday. Eskom, which provides virtually all of South Africa's power,...
More
 
 
Latest News
Updated 9 minutes ago The Department of Human Settlements was awaiting the conclusion of a land acquisition strategy to identify, earmark and allocate available State-owned land for housing purposes. Human Settlements Minister Lindiwe Sisulu said only two-million hectares of the...
Updated 20 minutes ago British oil company BP expects to invest around $12-billion with its partners as part of a finalised West Nile Delta concession deal to develop 5 trillion cubic feet of gas resources and 55-million barrels of condensates. The supply deal will help Egypt as it tackles...
Updated 2 hours 54 minutes ago A second full electric vehicle has entered the South African market, following the local debut of the Nissan Leaf in 2013. The BMW i3 BEV sells for R525 000, while the derivative with a range extender, the i3 REx, sells for R595 000.
More
 
 
Recent Research Reports
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
 
 
 
 
 
This Week's Magazine
The World Bank, the European Union, the African Development Bank (AfDB) and the government of Sweden have agreed to provide Zimbabwe and Zambia with $294-million for the repair of structural deformations on the Kariba dam wall and avert the possible collapse of the...
Global Electricity Initiative executive chairperson Philippe Joubert
Executive chairperson of the Global Electricity Initiative (GEI) Philippe Joubert says energy utilities globally, together with the business community more generally, have come to terms with the science of climate change, particularly as extreme weather events begin...
JAMES TEMPLETON Emira’s operational performance is the best it has been in a long time
JSE-listed Emira Property Fund reported distribution growth per participatory interest (PI) of 9% for the six months ended December 31, 2014.
JOAN MACNAUGHTON Many countries were also struggling to balance the energy trilemma of energy security, energy equity and environmental sustainability
Sub-Saharan Africa is still faced with the challenge of providing citizens access to electricity and an additional $450-billion will need to be invested to ensure that people in urban areas have access to electricity by 2040.
ABE THELA Cuban engineering skills are not recognised by the Engineering Council of South Africa
Consulting Engineers South Africa (Cesa) last month said it was dismayed that the Department of Water and Sanitation (DWS) was seconding 35 Cuban engineers on a two-year contract to share their expertise with South African engineers in the water sector.
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96