Sasol Shares Dive as JPMorgan Downgrade Cites Macro Headwinds

Sasol Limited shares (JSE:SOL) are in freefall today, down 9% into the afternoon session, erasing much of the year-to-date gains and leaving the stock just 0.37% higher through 2026. The sharp decline followed a downgrade by JPMorgan, which cut its rating on the South African energy and chemicals giant to Underweight from Neutral, citing an increasingly unfavorable macroeconomic backdrop.

JPMorgan analyst Alex Comer slashed the price target to ZAR 94 from ZAR 107, pointing to significant downside risks in oil prices despite recent geopolitical-driven bounces. The firm also flagged the strengthening South African rand as a key concern, noting that currency appreciation could materially impact Sasol's revenue generation, given the company's substantial exposure to foreign currency earnings. The combination of weakening oil fundamentals and rand strength presents a challenging operating environment for the Johannesburg-based company.

This latest downgrade adds to a growing chorus of bearish sentiment from major financial institutions. Morgan Stanley downgraded Sasol to Equal Weight from Overweight in September 2025, expressing doubts about the company's ability to generate meaningful free cash flow in the near term amid persistent economic headwinds.

Earlier, in June 2025, Bank of America Securities cut its rating from Buy to Neutral, slashing the price target by 47% from ZAR 197 to ZAR 105. That downgrade reflected a 23% reduction in EBITDA forecasts for fiscal years 2025 through 2027, driven by slower-than-expected recovery in chemical spreads and declining production volumes.

Operational challenges have compounded Sasol's woes. In March 2025, the company reported a 9% drop in production volumes at its critical Secunda facility for the quarter ending March, forcing management to lower full-year production guidance. That announcement triggered an 8.2% share price decline, the steepest single-day drop since January 2025. The production shortfall stemmed from multiple factors, including extraction of low-quality coal, reduced natural gas volumes from Mozambique, and inadequate feedstock supply.

Credit rating agency Moody's added to the negative narrative in May 2025, revising Sasol's outlook from stable to negative while affirming its Ba1 rating. Moody's cited deteriorating operating performance linked to weak demand in the chemicals market and depressed oil prices. The agency projected Sasol's adjusted leverage would climb to 3.0x in 2025 and 2026, up from 2.2x in 2024, raising concerns about the company's balance sheet resilience.

The chemicals segment, a core pillar of Sasol's business model, has faced particularly acute pressure. A sharp downturn in global chemicals pricing has squeezed margins, while demand recovery has proven slower than anticipated. This has occurred against a backdrop of broader macroeconomic uncertainty, with oil price fundamentals showing vulnerability despite temporary geopolitical spikes.

Markets are now pricing in a more cautious outlook for Sasol, with the stock having surrendered most of its early-year gains. The convergence of analyst downgrades, operational setbacks, and unfavorable macro conditions suggests the path forward remains fraught with challenges. For investors, the key question centers on whether management can stabilize production, navigate the chemicals market downturn, and mitigate currency headwinds sufficiently to restore confidence. Until tangible evidence of operational improvement and margin recovery emerges, sentiment could remain subdued.