UPDATE 1-Sasol starts production at China chemical plant

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JOHANNESBURG May 28 (Reuters) - Africa's top chemicals group Sasol (SOLJ.J) said on Wednesday it had started commercial production at a new 60,000 tonnes a year alcohols plant in China.

"We are positioning this plant to become a key supplier to the fast growing Chinese alcohol market," said Hannes Botha, Managing Director of Sasol's chemical unit, Olefins & Surfactants (O&S). The plant is located in Lianyangang, China.

The South African group, which is the world's biggest maker of motor oil from coal, also said it would idle 50 percent or some 65,000 metric tonnes a year of oxo-alcohol capacity at its Augusta plant in Italy for an indefinite period.

This was part of an ongoing restructuring effort, it said.

Botha said part of the reduced capacity in Augusta will be replaced by alcohols produced at other plants in Sasol's network, cutting both fixed and variable costs at Augusta.

Sasol's shares fell 2.07 percent to 472.99 rand as the oil price lost steam, underperforming a 1.04 percent decline in the blue chip Top-40 index .JTOPI.

Sasol's chemicals unit is a big global supplier of alcohols with a total capacity in excess of 600,000 tonnes a year, with plants in Europe, the U.S., South Africa and China.

Sasol said last September it had opened an office in Shanghai to market its diverse range of chemical solvents.

Last June, Sasol said it had started a restructuring of its chemical unit, which it had failed to sell, by closing offices in Germany, and plants in Italy and the U.S., to cut costs.

Sasol abandoned plans to sell the chemicals unit because the offers it received were too low. It hopes to restructure the unit with a view to a future sale. (Reporting by James Macharia and Gugulakhe Lourie; editing by Rory Channing)