Chemicals: opportunities beyond 2010
8 February 2010
South Africa's chemicals industry remained fairly robust in 2009, thanks mainly to significant investments in infrastructure leading up to the 2010 Fifa World Cup.
International consultancy Frost & Sullivan said on Friday that a total of R11.92-billion had been spent in South Africa on stadium construction alone.
"Suppliers of construction chemicals have benefited from this spending," it said in a statement.
Government spending leading up to the World Cup had buffered South Africa's economy from the demand concerns facing the global chemicals market, Frost & Sullivan chemicals programme manager Mani James said.
"The construction sector performed well through the recession and was growing at just over 10% last year.
"However, demand from other end-user groups, including the agriculture, mining and consumer sectors, is still under pressure," James said.
He said the last few months leading up to the World Cup would see the final drive in South Africa's infrastructure preparations.
"As this activity subsides in the second half of 2010, the economy is expected to slow, and this will be the major challenge facing local industries."
However, transportation, water works and electricity infrastructural projects continuing over the next two to three years would provide opportunities.
"The local automotive industry is also expected to return to a growth cycle for the first time in three years, albeit at a slow rate," James said.
"This will present opportunities for automotive suppliers including platinum producers, plastics manufacturers and all associated consumable materials suppliers."
He said palladium had also become pegged as a valuable investment opportunity as an affordable substitute for platinum in automobile production.
"This might present opportunities for chemicals companies to target the expected growth amongst palladium miners. Our advice would be for chemical manufacturers to target their production strategies towards the construction industries and palladium mining."
He said these manufacturers should also prepare for the risks of a strong inflationary environment, and high labour union costs, adding that there was a need for the local industry to become more globally competitive to boost export profiles and the associated production.
"However, the strength of the rand could make this difficult," he said.
Sapa
