PRECARIOUS PVC POSITION Sava calls for reduced import tariffs, more local procurement and more reliable service delivery from utilities
There is very strong demand for polyvinyl chloride (PVC) in South Africa and the rest of Africa, owing to major water, gas and telecommunication infrastructure projects planned across the continent, but low supply and high prices are hindering industry sustainability, says South African Vinyls Association (Sava) CEO Adri Spangenberg.
She explains that the PVC market inAfrica had a projected growth rate of 7% to 8% prior to the Covid-19 outbreak. This growth rate is attributed to planned infrastructure projects, which rely heavily on PVC for pipes and cables. New hospitals also require equipment and installations made from PVC.
“While there is no question about the potential and demand for PVC, recent unexpected events – locally and internationally – had various unintended consequences that have left our local industry in a considerably weaker, more precarious situation,” Spangenberg says.
On February 16, major petroleum company Sasol notified customers that the lifting of the force majeure, announced on January 25, had been indefinitely delayed, owing to ongoing repair work at its vinyl chloride monomer (VCM) unit. Several other PVC production plants in the US and Asia have also declared force majeure on supply in the past few months as a result of maintenance issues. Consequently, production across the full chlor-vinyl value chain has been severely affected.
The outbreak of the Covid-19 pandemic and the consequent lockdowns, as well as loadshedding, 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.
Spangenberg says South African manufacturers of vinyl products have been “very hard hit and are in a battle for survival”.
She explains that local manufacturers have been at the mercy of extenuating circumstances outside of their control and are doing their best to keep their plants operational. Moreover, converters have been severely impacted on by price escalations.
“These increases were passed on to the end-market, which may have created the perception that manufacturers were inflating prices.”
Although Sasol has given local manufacturers the assurance that it is working on resolving the VCM/PVC supply issue, no indication has yet been given as to when operations will resume or when supply availability and raw material prices will return to normal levels.
“We are at a defining moment in our industry. South Africa should remain invested in manufacturing all the way along supply chain – from raw materials to finished goods – otherwise we risk becoming a trader importing country with zero base to grow jobs, products and exports,” Spangenberg urges.