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11-17-2014

Significant Investments in African Plastics Processing Operations

According to a recently published study by industry consultants, Applied Market Information Ltd (AMI Consulting), there is now massive investment going on in plastics processing operations in Africa driving double digit growth in polymer demand. However, Africa is a complex market with market conditions vastly different in the well-developed North and South African markets compared with most other Sub-Saharan countries. Nigeria, Egypt and South Africa currently account for nearly half of polymer demand in the continent and for nearly all polymer production for the region. Despite significant investments in new capacity in these three countries, Africa remains a net importer for all resins and is expected to remain so for the foreseeable future.

Distribution of polymer demand in Africa in 2014 (figure: AMI)

Commodity plastics dominate the market with polyolefins accounting for about 60% of demand. This is partly because of the limited amount of manufacturing for automotive, domestic appliances and other technical products in the region. The largest volume is accounted for by polypropylene resins with the material being widely used for raffia production for bags and sacks. However, PET resin has been one of the fastest growing markets where the growing use of PET bottles for drinks is replacing LDPE pouches which have traditionally been used.

This attractive growth in demand for plastic products has attracted abundant foreign investment, especially from China and India which is expected to carry on in the future. In addition, there is some offshoring by European companies, especially in North Africa. The development of duty free zones is also encouraging investment in plastics processing operations.

However, lack of sufficient local polymer production is the biggest challenge faced by the African plastics processing industry with most companies reliant on resin imports, mainly sourced from the Middle East or Asia. Exchange rate fluctuations of local currencies against the dollar add further uncertainty to the market, making it harder to compete against cheaper Chinese imports of finished goods.

In its report, AMI forecasts 8 % per year average increases in Africa over the next five years, with diverse levels of annual growth varying from 5 % in South Africa to up to 15 % in parts of West Africa.

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