• Fuel taxes and duties:   Government imposes a levy as well as an excise duty on liquid fuel sales in South Africa.  Fuel levies have been adjusted each year, but the excise levy has been constant for many years.  Government revenues from these taxes are published monthly.
  • Fuel taxes significantly lower:  Revenues from fuel taxes have declined significantly through the COVID-19 lockdown and June revenues were 70% lower than a year ago.  July revenues improved and were 25% below revenues in July 2019.  Revenues from excise duties declined by similar amounts.
  • Readthrough to fuel volumes:  Adjusting the tax revenues by the official fuel levies (R3.77/l for petrol and R3.63/l for diesel) suggests that fuel sales volumes were at a trough in May/June, improving in June/July (there appears to be a short lag between revenues and volumes).  Last reported tax revenues suggest that South African volumes in June/July were still 28% below the volumes sold a year ago.
  • Natref still not at optimum:  Sasol uses Natref as the swing producer in periods when markets are weak, and it is unlikely that the refinery is operating near full capacity at this stage.  There is also little demand for jet fuel and Natref’s jet fuel is likely blended into diesel and paraffin.
  • Diesel cracks impacting Natref:  We also note a significant decline in diesel crack spreads in recent weeks and Natref, which produces more diesel and jet fuel (compared to petrol), should be operating well below breakeven in the current environment.
  • Astron also not operating:  We also note that the Astron refinery in Cape Town has been shut since a safety incident occurred on the 2nd of July.  There is no indication when the refinery will restart.  While the Engen refinery in Durban was shut at the end of March, operations resumed late in May.
  • Sasol fuel sales guidance:  Sasol guided to liquid fuel sales of 54-55mn bbl in FY21, which is 2.5-4.4% higher than volumes achieved in FY20 but 8%-10% below the volumes achieved in FY18.  We will continue to track volumes to assess Sasol’s guidance.
  • Share price: We maintain our neutral rating on Sasol.