Shares of South African chemical company Sasol (SSL 1.97%) were down 11.7% as of 1:30 p.m. EDT today. While the stock price has been on a roller coaster even on days where there was no news, today's move comes after the company announced it was suspending operations at one of its refineries.
With fuel demand dropping sharply in South Africa and across the globe, companies that supply fuel have been struggling to adjust their production rates. Today, Sasol announced that it was suspending operations of its Natref crude oil refinery, which produces about 100,000 barrels per day. Oil major Total has a minority stake in the facility.
Sasol noted in its release that it has also reduced production of synthetic fuel (a gasoline-type fuel made from coal) by about 25%, but that most of its chemical production and synthetic chemical production is still up and running. Management even noted that it is seeing an increase in chemical demand, especially alcohols for sanitation products.
This is one of those things that doesn't sound great but is something that management had to do. Continuing to produce fuel into an already oversupplied market not only creates losses now but also pushes any chance of recovery further down the road as it continues to feed the oversupply problem.
For Sasol, it's been a rough go lately. The company made some very expensive bets on building chemical manufacturing facilities in the U.S., and debt piled up as a result. With global demand slipping, the company is looking for ways to refinance and pay some of that debt down.
At this point, any bit of news could send the company's stock moving by double-digit percentages. So trying to time an investment is an exercise in futility. There are a lot of things that Sasol needs to sort out financially before anyone buys shares.