Afrox tightens grip on LPG market

An Afrox tanker. Afrox has increased its LPG imports because of reduced output from South African refineries. File picture: Supplied

An Afrox tanker. Afrox has increased its LPG imports because of reduced output from South African refineries. File picture: Supplied

Published Sep 12, 2016

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Johannesburg - Industrial gases and welding products firm African Oxygen (Afrox) is tightening its grip on the liquefied petroleum gas (LPG) market in southern Africa after the group sealed several supply contracts worth more than R1 billion in the past few days.

Read also: Afrox inks R1.1bn LPG deals

Afrox said it was eyeing growth opportunities in sectors such as hospitality, health-care and automotive. Afrox and Petredec use Bidvest Tank Terminals’ Richards Bay import facility for LPG imports.

The company said it had concluded a 10-year agreement to supply LPG to a major distributor in Maseru, Lesotho. The contract with Gordons Enterprise was worth R1bn and would secure a new LPG filling site in the Maseru industrial development zone, thus providing a significant increase in storage, to supply the increased demand in the area.

Afrox spokesman Simon Miller said on Friday that the company was expanding its LPG footprint in South Africa and the rest of southern Africa. He said the company had increased its LPG imports because of reduced output from South African refineries.

“Local refineries are unreliable,” Miller said. LPG is a by-product of the oil refining process.

Afrox, a subsidiary of German multinational industrial gases and engineering group, Linde Group, has previously cited as a problem severe supply constraints from local refineries during the peak winter demand period.

Shutdowns

LPG output from refineries drops when refineries underplanned or had unplanned shutdowns. LPG demand spikes in winter as households and businesses turn to gas for space heating and cooking.

In its results for the six months to June 30, Afrox said its LPG revenue decreased by 1.2 percent to R852 million, due to product shortages as a result of unplanned refinery shutdowns during the first four months of the year.

The group signed an import agreement with Petredec, one of the largest global LPG traders in May.

On Friday, Afrox also announced a five-year agreement to supply LPG to a distributor partner in Mthatha, in the Eastern Cape. The contract, worth R100m, would enable volume availability of LPG to rise by approximately 100 percent in the area, Afrox said.

Afrox managing director, Schalk Venter, said Afrox’s “supply-on-demand” contract with Petredec had enabled the company to seal the deals. “Since May (this year) we have imported 30 percent of our LPG needs via Petredec and (Bidvest Tank Terminals) in Richards Bay and this security of supply will be an engine for growth in the LPG market for Afrox,” he said.

Afrox earlier last week announced a raft of other new multimillion-rand contracts. These included a R45m liquefied petroleum gas supply agreement, with an unnamed poultry producer.

Success story

“We are proud to be the supplier of choice to one of South Africa’s success story businesses,” Venter said. “Not only did we retain their business in the face of fierce competition, but we have grown it and extended the contract.”

The group has also signed a R59m agreement to supply a Northern Cape concentrated solar power project with pressure storage vessels, nitrogen and LPG.

Afrox shares on the JSE were down 2.93 percent on Friday to close at R19.90 a share.

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