Low refining capacity raises cost for plastic manufacturers

Heavy dependence on exports of refined crude oil products, due to lack of refining capacity, has continued to affect plastic manufacturers who rely on derivatives from crude oil refining, some operators have complained.

According to the General Manager of Pentagon Plastic Industries Ltd (PPIL), Shyam Barakale, sourcing feedstock or plastic raw materials is “our biggest challenge as we do not have any local substitutes and have to import over 90 per cent of our requirement.

“We have to invest a lot in raw material sourcing and this involves sourcing foreign exchange which makes us vulnerable to volatile exchange rates, adding to production costs and often results in delays”

Apart from feedstock, plastic producers in Nigeria have to deal with challenges including inadequate power supply from the grid.

“If regular and consistent electrical power can be sourced from the grid, we can easily concentrate on our core activity, which is plastic manufacturing rather than investing in building and maintaining power plants,” said Barakale.

The company relies on Clarke Energy, a multinational specialist in distributed power generation solutions, to mitigate the impact of inconsistent supply.

“With Clarke Energy, we have a partnership that goes back to 2014. The company carried out a technical study and recommended the deployment of the Jenbacher gas power plant. It has been serving us well since 2015,” says Barakale.

Barakale said that if regular and consistent electrical power can be sourced from the grid, “we can concentrate on our core activity which is plastic manufacturing rather than investing in building and maintaining a power plant.”

“PPIL and Clarke Energy have a robust relationship over the years which has led to more productive service delivery,” said Barakale.

More specifically, the leadership of both companies enjoys an excellent relationship, which has helped to facilitate a seamless scheduled 30,000hours overhaul maintenance on their 1.8MW single module Jenbacher gas engine last year since its commissioning, says Yiannis Tsantilas, the MD of Clarke Energy.

“The gas generating set has given us significant cost savings and increased our production efficiency,” said Barakale.
PPIL operates two state-of-the-art manufacturing facilities producing over 200 different types of plastic products and generating over $28million in revenue.

The first factory located in Lagos State caters to the houseware and furniture segments using the latest international technology and equipment.

The second located in Ogun state, inaugurated in early 2020, caters to the rapidly growing market demand of the rigid packaging segment using Husky and Sacmi machines.

According to Barakale, the Nigerian market presents many opportunities for plastic manufacturers with its large population and strategic location to serve other markets in Africa.

PPIL ships its products through its distributors to several African countries including Benin, Chad, Cameroon, Burkina Faso, even as far as Sudan, and this export market represents 20 percent of the company’s distribution network.

Barakale said that PPIL in its 19 years of operation has contributed to the growth of the economy including employing about 500 Nigerians and its export of quality plastics contributes to foreign exchange earnings for the country.