The price of liquid petroleum gas is set to increase by at least R4 to R4.50/kg this winter as chronic industry challenges, including vessels not being able to access terminals due to bad weather and the shortage of trucks to haul the product overland become insufficient to provide the 15,000kg monthly winter peak requirements.
THE PRICE of liquid petroleum gas (LPG) is set to increase by at least R4 to R4.50/kg this winter as chronic industry challenges, including vessels not being able to access terminals due to bad weather and the shortage of trucks to haul the product overland become insufficient to provide the 15,000kg monthly winter peak requirements.
In the wake of a wrangle between major suppliers Vita Energy and Sunrise Energy, which will likely take a big chunk of product off the market, industry insiders who declined to be named said there was not sufficient supply. They said what was available from other players, including Avedia Energy, would not be enough to stock up supplies.
“The gas now has to be taken by truck from Saldanha Bay to either Richards Bay or Gqeberha. The runs to and from are longer, and it can take up to three or more days for the trucks to make the journey, adding considerably to the cost. You are looking at about an R4 to R4.50/kg increase and that is if you can get the product, there is not enough to go round,” said a trader, who spoke on condition of anonymity.
He said with the trucks running an average on one trip a week, only about 25,000kg could be secured where double that was required.
The LPG supply constraints were exacerbated on Thursday when Vita Gas, an importer and wholesaler of LPG in South Africa, which has Vital as one of its shareholders, announced that it would no longer contest Sunrise Energy’s actions to terminate Vita Gas’ contract for the long-term use of Sunrise Energy’s LPG import terminal in Saldanha Bay, and that it had informed Sunrise Energy of this.
Vita Gas said in a statement it appreciated that, for local distributors, its decision was likely to lead to some short-term supply issues and, therefore, subject to Sunrise Energy’s prior agreement, it was willing to continue to supply LPG via the terminal “for a period of time”, while the matter awaited adjudication by the Competition Tribunal next month.
The dispute is principally over a contract between the parties in which Sunrise said it was charging Vita far less than was viable for its operations.
Sources said the Vita contract did not give Sunrise enough cash-flow to pay its debt, hence it was considered for business rescue in December and had obtained a recommendation from the Competition Commission that the Vita contract amounted to uncompetitive behaviour as it excluded any other users on Sunrise’s Saldanha Bay pipeline.
The current storage capacity of the terminal is 5,500MT, with the storage being in the form of pressurised, mounded bullets. A throughput capacity of up to 17,000MT per month can be achieved.
Insiders said the ball was dropped by the regulatory authorities, including the Department of Mineral Resources and Energy (DMRE), Transnet National Ports Authority and energy regulators in preventing any entity from cornering the market as the Vita and Sunrise dispute had indicated the call for more efficient regulation of the industry.
He said it required bold action from the regulators, especially the DMRE.
Another source said the market was currently without product, that though there was a vessel delivering cargo on Monday in Gqeberha, it would not be enough.
“It is a chronic problem, Sunrise facilities are sitting on the seas. Every winter vessels can’t dock at Saldanha Bay to pump product for the wholesalers who rent storage at the terminal. Once what is there is depleted, there will not be more.
“There are few fuel-tanker trucks available. Re-routing trucks to Richard’s Bay can take up to four days. The consumer will have to pay extra in additional tariffs for the logistics. The market is simply out of product,” the source said.
Passing on of the price increase would be automatic, as LPG prices to consumers are not regulated by the Energy Regulator of South Africa (Nersa), which has a mandate on pipelines and storage facilities.
It can also cap the price at which entities, including Sasol and others may charge to municipalities, but not to the end-user.
“There is zero supply locally. Wholesalers are trying to keep their most favoured clientele like the poultry industry, hospitals and others afloat. It will only stabilise when vessels are able to dock, but with the ongoing rain it is hard to tell,” he said.
– BUSINESS REPORT
