23 September 2013 00:00 [Source: ICB]
October is shaping up to be the best month of the year for petrochemical makers that supply raw materials to the US automotive industry, sources said on 10 September.
US auto production is expected to reach 16m units this year
Overall, demand was up by 10-15% from July to August, and sources said they expect it to be up another 10% in September.
This is welcome news for many petchem makers. When some saw demand slack off in July, they worried that it was part of a bigger downturn in US auto sales.
“We knew that demand was going to dip in July as the automakers switched over plants to the new models,” one source said. “But we weren’t sure how strong they were going to come back.”
HOW LONG FOR THE BOOM?
Many economists and market analysts started warning in June that the US could not sustain its near-record auto sales forever. Many still theorize that pent-up demand from the 2008 recession is what is driving auto sales to an expected 16m units this year. But they caution that once that demand runs its course, sales of cars and light trucks will crash rather than decline gradually.
“We don’t see the long-term market fundamentals – good job growth, rising wages, high consumer confidence – to sustain this market,” one Detroit source said.
Some Detroit insiders are also worried that the biggest factor that is driving all-important pickup truck sales now is contractors gearing up for a recovering housing market.
“No one is fully convinced that housing is on its way back,” said one source that provides PC to the US housing market.
But many of those concerns have been put to rest now that automakers have signalled to suppliers that October will be a banner month for the industry. US automakers are expected to introduce more than 20 new models over the next few months.
Viewed more broadly, forecasts at the start of the year put US auto production for 2013 at about 15m units – up about 500,000 from 2012’s total production of 14.5m cars and light trucks.
But as auto sales began to take off in the second quarter, forecasts have slowly risen. The current consensus is for US automakers to produce about 16m vehicles in 2013.
However, when US automakers reported August sales, both GM and Chrysler said they were now producing vehicles above the 16m-unit mark. This has caused some forecasters to raise expectations to 16.3m units for 2013.
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