South African plastic giants manipulated by price controls

Polypropylene giant Sasol in South Africa and plastics giant Safripol were accused of "manipulating the price of polypropylene." Sasol company uses its market superiority position, carries on the pricing based on the import parity, its domestic price is 30% higher than its export price. At the same time, the competition commissioner accused Sasol and Safripol of forging alliances and gaining direct or indirect manipulation of the polypropylene market price.

Hugo.com learned from the report of the South African media "Mail Guardian" on May 17th that the South African plastics giant Sasol and the Competition Commission have entered a heated debate. The Competition Commission accused South Africa’s two large plastics manufacturers of forming coalitions to manipulate the price of polypropylene.

The competition commissioner accused Sasol of the court hearing on the 13th of this month. The chemical giant was accused of producing propylene and polypropylene at the lowest cost in the world. Propylene and polypropylene were important raw materials for plastics, but their domestic sales prices were more than 30% of their export prices. In addition to price discrimination, Sasol was also accused of “manipulating the price of polypropylene”.

Sasol mainly produces propylene, which is a raw material for the production of polypropylene. Polypropylene is widely used in the manufacture of plastic products such as plastic buckets, brooms, etc. It can even be used to make auto parts such as door handles and bumpers.

According to the competition commissioner, Sasol kept its company's competitiveness by increasing the price of polypropylene. At the same time, the company deliberately restricted the amount of supply to gain an advantage in the way that the artificial market was scarce. Sasol responded that the allegations were purely nonsense.

It is reported that at present, South Africa's main manufacturers of propylene are Sasol and South African oil refining and supply companies, and the company producing polypropylene only Sasol company and plastic manufacturing company Safripol two companies.

Sasol and Safripol's polypropylene are sold primarily in South Africa, and their downstream buyers are generally plastics producers. The amount of polypropylene produced by these two companies has exceeded the actual demand in the South African market.

Since 2004, plastics demand in South Africa has stabilized. Sasol and Safripol began exporting large quantities of polypropylene abroad.

The Competition Commissioner stated that Sasol, taking advantage of its market position, carries out domestic pricing of its products on the basis of import parity. Its domestic price is 30% higher than the export price. Even if the export price is lower than its domestic price, Sasol still Great profit from export products.

The Competition Commissioner stated that the domestic pricing of Sasol Polypropylene is not symmetric with the actual economic value, and its price is much higher than the manufacturing cost of the product. According to Sasol's internal documents, the company "produces polypropylene at the lowest cost in the world."

Sasol stated that in the past three years, 11% of the polypropylene consumed in the South African market was imported from abroad.

At present, chemical giants ExxonMobil and Saudi Basic Industries have set up large warehouses and infrastructure facilities in South Africa, and have started supplying products to South African customers. Other smaller importers have also entered the South African market.

The Competition Commission accused Sabic and Safripol of reaching an alliance with the company to directly or indirectly manipulate the polypropylene market. The prices of similar products of the two companies are almost the same.

The Competition Commission requested the court to decide that Sasol and Safripol pay a fine of 10% of their annual turnover.

Hugo.com has learned that the growing middle class in South Africa is pushing the development of the plastic packaging market in this region. Frost & Sullivan Company stated in a newly released report that the total sales of this market in 2009 reached 1.01 billion U.S. dollars, and it is expected to increase to 1.14 billion U.S. dollars by 2016. The packaging market referred to in this report covers the packaging of food and beverages, industry, household products, and other types (such as pharmaceuticals).