Sasol plastic prices "too high" says Lebi

Usabco purchasing director Julius Lebi testified before the Competition Tribunal on Wednesday (15 May).

He said that Sasol Chemical Industries‚ a wholly-owned subsidiary of Sasol and a division of the chemical cluster‚ "suddenly" increased its prices of polypropylene by 17% in a single month in January 2002‚ which had a detrimental effect on Usabco's business.

Subsequent increases in 2004 and 2006 also affected its ability to expand and compete with the growing number of cheaper imports.

Usabco employs about 650 people‚ with its manufacturing facility based in Cape Town. The Addis brand sells food boxes‚ bins, buckets, brooms and mops.

Sasol Chemical Industries is charged with contravening Section 8(a) of the Competition Act‚ which states that it is prohibited for a dominant firm to charge an excessive price to the detriment of consumers.

Excessive prices

The commission alleges that the Sasol's unit charged excessive prices for propylene and polypropylene and as a result earned returns well in excess of 100% between 2004 and 2007. It was able to achieve this by artificially creating shortages for the domestic market by exporting half of its annual production of propylene.

Sasol Chemical Industries denies the charges‚ saying polypropylene production takes place around the globe and imports restrain its prices in the domestic market.

Lebi testified as a factual witness for the commission‚ saying that Usabco had not imported any propylene between 2003 and 2011 as Sasol had been able to meet the lowest prices his company could obtain. Usabco's market share had remained static.

"Compared with other plasticware producers in SA‚ we are holding our own. There has been an increase in imports into the country. We could put in bigger capacity (to counter imports) if we could get better prices (for polypropylene)," Lebi claimed.

International price comparisons

Lebi said the company regularly cross-checked world prices against the prices Sasol Chemical Industries charged it‚ and if other producers were offering better prices it took it up with Sasol. The sudden increases in 2002‚ again in 2004 and 2006 had a significant effect on its business. The detailed analysis and effect of the prices Usabco paid were however discussed in closed sessions after the company claimed its figures were confidential.

Lebi testified that Usabco purchased polypropylene from Safripol‚ a South African plastics manufacturer‚ at a time when Sasol Chemical Industries could not provide it with product. He said Safripol was more expensive than Sasol Chemical Industries.

Another customer of Sasol Chemical Industries, SA Leisure, testified to its satisfaction with the prices it obtained from the company.

SA Leisure chief executive Miriam Jacob said that the company had threatened to use imports in an effort to drive down the local prices and had been successful in doing so.

"The difference between Sasol Chemical Industries' price and the import price had been between 1% and 2%. Sasol Chemical Industries lowered its price to meet the imported price‚" she said.

"We have a good relationship with Sasol. It is a mutually beneficial relationship‚" she said.

Jacob said SA Leisure had imported plastic in the past‚ but the last time it had done so was in 2010.

The hearing continues.

Source: Business Day via I-Net Bridge