The big four Liquid Petroleum Gas (LPG) wholesalers in the country are weighing options of trucking gas to their tanks rather than rely on new player EML Energy, which has taken over the Sunrise terminal in Cape Town and raised surcharges, which had to be passed on to the consumer.
The four prominent LPG wholesalers are Afrox, Easigas, Total Gas and Afrox.
Following the exit of Vitagas as a supplier of LPG from the Sunrise Facility, EML Energy has now begun using the Sunrise Energy Facility to import product and supply to the market players.
This is as it emerges that the price per kilo of LPG has been unilaterally hiked by at least R4 in the Western Cape after Avedia and Sunrise had a falling out over use of the Sunrise terminal earlier this year.
EML Energy's general manager, Hasa Baloyi, confirmed with Business Report a surcharge had been levied, saying the surcharge related to payments required by the South African Revenue Services.
However, the wholesalers are concerned that the new pricing is beyond what is dictated by the Department of Mineral Resources and Energy (DMRE) through the National Energy Regulator of South Africa (Nersa).
Even though the surcharge is above and beyond the maximum refinery gate price for LPG, as is regulated by the Department of Mineral Resources and Energy, major gas suppliers have resorted to paying the fee and, in many instances, are passing the cost on to customers.
A wholesaler representative, who did not want to be named because of market sensitivity, said, “It is true that it is cheaper to truck product into the Western Cape from Sasol or Richards Bay. It is a very attractive option we are looking at individually. I cannot speak for other companies, but the surcharges we have to pay and pass on to the consumer are killing the market."
In correspondence with their clients, the wholesalers have earlier warned that the maximum Refinery Gate price had increased by R1.71 per kilo excluding value added tax (VAT) while the surcharge had decreased from R4.57 to R3.85 effective at the beginning of September.
Another wholesaler warned their clientele that the maximum refinery gate price had decreased by R1.22 excluding VAT while the surcharge had increased from R1.27 to R4.57 from the beginning of August.
"Our supplier in the Western Cape has informed us of a further increase in the cost of imported product, making it necessary for us to review your existing supply surcharge and to align with the cost of product from the Sunrise terminal,“ a wholesaler informed their client.
"Effective from September 6th, the supply surcharge will be reduced to R3.50 per kilo excluding VAT. Kindly note that deliveries accepted by you from that date until further notice will be deemed to be accepted in terms including the surcharge as advised above. We will continue to monitor the situation closely and shall advise accordingly of any changes to this surcharge," one wholesaler wrote to a client.
Following enquiries yesterday, some wholesalers confirmed concerns that the current issue was pricing that did not appear to be in sync with the DMRE import parity pricing model.
"This has resulted in some of us wholesalers purchasing LPG from EML now having to pass on surcharges to the end users in the market. There are issues with that as the prices now appear unregulated and we may be seen to be engaging in anti-competitive behaviour. We really are looking at our options," a wholesaler said.
EML Energy, is bringing gas into the Sunrise Energy LPG terminal in Saldanha Bay after Vita Gas – a subsidiary of resources trading giant Vitol – suddenly pulled out of a supply agreement, causing temporary supply shortages in the market.