US petchems gearing up for October surge in auto production

30 August 2013 17:31  [Source: ICIS news]

HOUSTON (ICIS)--US petrochemical makers who supply materials such as acrylonitrile (ACN), acrylonitrile-butadiene-styrene (ABS) and polycarbonate (PC) to the auto industry are gearing up for what is expected to be the biggest auto production month of the year.

"We're seeing strong orders for September," one petchem source said on Friday. "Also from a demand perspective, October is being positioned as the largest vehicle build month for North America, so expect to see a strong next couple of months."

Other sources noted that US auto plants slowed a bit and demand slacked off in July as they switched over for the introduction of more than 20 new models over the next three months. To speed the model changes and ramp up production, however, US auto plants cut short their traditional month-long summer shutdown, added shifts and hired more workers.

Demand has ramped back up as automakers start to increase production. That could put some upward pricing pressure on petrochemicals, sources said. Others said the auto industry has done a good job of communicating with suppliers and, as such, suppliers, including petrochemical makers, are ready to meet the increased demand from the auto industry.

The positive forecast for demand through at least October is welcomed news for petrochemical makers who supply the raw materials that go into plastic parts, body panels and interior trim for the auto industry. There has been some concern among automakers and their suppliers that the current sales pace cannot continue for much longer. Economists and auto forecasters have noted that what's driving auto sales higher now is pent-up demand from the 2008 recession. Once that demand is satisfied, some forecasters are worried that auto sales will fall off sharply rather than gradually. Many worry that the US economy lacks the economic fundamentals - solid job growth, low unemployment and high consumer confidence - to support auto sales into 2014.

"It's something we're always keeping our eye on," said one source in Detroit. "Sure, it's great producing 16m units a year, but we know that can't last forever."

The US auto industry is expected to produce 16m cars and light trucks this year, up 10% from 14.5m units a year ago and the industry's best year since 2007. 

Author: Mark Yost

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