Price volatility in the plastics industry has been extreme over the past year, owing to the impact of Covid-19 on the supply of input chemicals, such as alcohol. Moreover, the subsequent lockdown, as well as load-shedding, interruptions in water supply, price hikes over the past few months, and escalating import and operational costs, have also resulted in interrupted and unreliable supply of raw materials.
Pipe and hose supplier Astore Keymak MD Pranesh Maniraj tells Engineering News that the price of polyvinyl chloride (PVC) has increased by more than 60% since the outbreak of the pandemic in March last year.
“Alcohol, for example, which is a significant component in the manufacture of polymer resin and plastiser, went up in price significantly on the back of increased demand for sanitiser production,” he explains.
The price volatility has had a direct impact on Astore Keymak’s plastic pipes and hoses business unit, about 40% of which depends on revenue from the mining industry. The agriculture sector – which grew last year while the construction sector continued to shrink and the mining sector stumbled – has buoyed Astore Keymak pipes and tubes sales throughout the pandemic. Maniraj adds that the performance of the mining sector improved towards the end of last year.
“We have contracts that we are locked into for several years, and yet our input prices have escalated far beyond the expected increases allowed by the contracts,” he explains.
To complicate matters further, petroleum products manufacturer Sasol implemented a force majeure in January, and indefinitely delayed the lifting thereof in February. The force majeure was upheld owing to further downtime required for ongoing repair work at Sasol’s vinyl chloride monomer (VCM) unit.
“The force majeure will remain in effect until we have resumed stable, safe and full operational rates and our inventory has strengthened to allow resumption of normal supplies,” Sasol base chemicals polymers marketing and sales head Gerome Marrian said in a statement issued in February.
Moreover, a number of PVC plants in the US and the Far East also declared a force majeure at about the same time, as a result of maintenance issues at various plants. Consequently, production across the full chlor-vinyls value chain has been severely affected.
In a statement issued in February by industry body Southern African Plastic Pipe Manufacturer’s Association CEO Jan Venter, he noted that PVC prices for exports from the US hit a 33-year high in December and January, which was mirrored in terms of product exported from Asia and Europe.
“[While] demand is currently high for construction projects taking place in Europe and Asia, the material is in extremely short supply around the world. “This significant supply-demand imbalance has caused international prices for PVC to rise in all regions,” Venter said.
“Our local plastic pipe manufacturers are at the mercy of extenuating circumstances that are beyond their control and are doing their best to keep their plants operational,” he commented, adding that, although Sasol had given the commitment that “they are working on resolving the issue”, there was no indication on when the industry could expect Sasol’s VCM operations to resume, or when supply availability and raw material prices would return to normal levels.
“In over two decades of working in this industry, I have never seen such extreme price increases,” Maniraj states.
In March, Engineering News reported that South African Vinyls Association CEO Adri Spangenberg called on government to support private businesses by reducing import tariffs, encouraging local procurement and ensuring that the cost of doing business was not exacerbated by factors such as load-shedding or other utility failures.
Despite this, load-shedding continued unabated earlier this month.
“Our country needs to reconsider the strategic plan for PVC, which needs to be communicated to the rest of the industry and role-players. In this regard, it is absolutely vital for our raw material suppliers to ensure that they invest in making the necessary upgrades to their plants to avoid out-of-stock situations and price hikes,” she explained.
Price and Quality
Astore Keymak branch manager and compression fittings product manager Aldrin Velan says economic pressures on clients and price increases are causing much of the market to settle for inferior products at lower prices. These inferior products – which are cheaper in the short term – may lead to failures, which can be much more expensive in the long term.
He says many of these have been flooding the market over the past few years.
Maniraj says it is important for clients to ensure that they purchase quality products from reputable suppliers such as Astore Keymak, which guarantee the quality of the products that they produce.
“We do not compromise on the quality of our products that we put into the market. If we introduce a product into the market, it is because we have done our homework, and we have made sure that it has met the relevant requirements and specifications for the industry that we are targeting,” he explains.
Maniraj says South African users should ensure that genuine products are being used, and not counterfeits.
Astore Keymak, a member of the Hudaco group of companies, is SANS 1086:2015 accredited and ISO 9001:2015 accredited to ensure quality.