Sasol battles production declines and changing chemicals landscape

Sasol Secunda Facility Benfield units Phase 1 and 2. The sole purpose of the Benfield is to remove CO₂ from the Feedgas from Synthol. The Benfield circulation Regen column releases the CO₂ and steam into the atmosphere. Each Benfield has a Feedgas flow rate of 400 000Nm3/hr, of which 12% is CO₂. So about 48,000Nm³/h CO₂ into the atmosphere per column per hour, seven days a week, 365 days per year. There are 4 Benfield Regen columns on the Sasol Secunda facility. Source: Wikimedia Commons

Secunda Operations, a cornerstone of Sasol’s production capacity, recorded an 11% quarter-on-quarter decline – total production dropped to 1,627kt compared to 1,820kt in Q4 2023/24.

Fuels production within this segment fell by 8%, declining from 892kt to 823kt over the same period.

This is one of the steepest quarterly declines in the last five years and contributing to a historic loss in the stock market.

New report shows depth of Sasol Secunda distress

Lindsey Schutters  28 Oct 2024

“The decrease in production volumes at Secunda was largely due to planned maintenance shutdowns,” Sasol stated in its quarterly production metrics report.

Sasol says it is sacrificing short term output to focus on asset integrity and long-term operational reliability.

Mixed chemicals bag

Chemicals Africa recorded a 10% increase in advanced materials volumes, rising to 33kt compared to 30kt.

“This growth underscores the strength of our market demand and operational efficiencies in Africa,” Sasol highlighted.

Sales volumes were however down 9% compared to the previous quarter and 5% lower than Q1 FY24, mainly due to challenges at Secunda and export vessel scheduling movements.

Chemicals America saw a contrasting picture, with advanced materials volumes declining by 10%.

Total volumes dropped from 10kt in the previous quarter to 9kt in Q1 2024/25, but revenue was up 12% from a year before on the back of higher prices for base chemicals.

Similarly, Chemicals Eurasia experienced an 11% decrease, with production dipping from 9 kt to 8 kt, but a 5% revenue increase towed upwards on high value products.

Keep up with trends

The declines in Chemicals America and Eurasia align with broader trends in regional demand fluctuations and operational adjustments, though they represent the largest drops in these segments since 2020.

Deloitte sounded the alarm in the global market in its 2023 The future of materials report:

The ability of companies to reexamine existing products and design new products in response to sustainability and consumer preferences may help determine their future success. Companies should evaluate the entire supply chains of each of their products, from feedstock to part to product.

Sasol’s slow turn to sustainable practices seems to be at the root of the decline in global markets.

Cautious optimism

While production challenges weighed heavily on the quarter’s metrics, Sasol is optimistic for the remainder of the year.

“We are implementing targeted strategies to address production inefficiencies and enhance supply chain resilience,” the company noted.

The Q1 results offer a sobering reflection on the pressures faced by Sasol but also hint at opportunities for recovery.

“"We have made good progress on our transition agenda, highlighting our commitment to become sustainable into the future, as well as supporting South Africa's energy transition,” Sasol concluded.