Plastics lose market share to lightweight steel in US sutos

US plastics Dec15Plastics consumption in US autos is going down, not up.  Steelmakers and glass manufacturers have recaptured ground lost in the years to 2009, and are capturing new sales as auto standards demand lighter-weight cars.  And yet, if you had asked polymer suppliers about future demand in the US auto market a few years ago, they would have all been very optimistic:

  • In 2009, President Obama mandated a major increase in the Corporate Average Fuel Economy (CAFE) standard from the current 25 miles/gallon to 35.5 mpg by 2016
  • 2 years later, a further increase was announced, with the aim of reaching 54.5 mpg by 2025

These major improvements in fuel efficiency would inevitably require the manufacture of much lighter-weight cars.  And in turn, it was widely assumed that plastics demand would be further boosted, adding to the impressive volume gains of the previous decade:

  • Taking 2009 = 100, polycarbonate volume had doubled from 50 in 1996; polyethylene volume had risen from 68;
  • PVC had risen from only 60, and polypropylene from only 61

As a result, the total percentage of plastics in the average car had risen from 8.4% to 9.7% between 2004 – 2009 – whilst the percentage of regular steel had fallen from 40.8% to 38%; glass’s share had fallen from 2.6% to 2.2%.  It seemed success was assured.

The above chart, based on new American Chemistry Council research, highlights the major reversal that has since taken place.  The metal and glass makers didn’t just roll over as expected.  They fought back.  They spent time with their auto manufacturer customers, understanding what they really needed to meet the new standards.  And then they researched and developed new products to meet these needs, to a fast-track timescale:

  • As a result, the percentage of high and medium strength steel rose from 13.3% in 2009 to 16.2% in 2014; iron rose from 5.2% to 6.8%, aluminium rose from 8.2% to 10%; and glass recovered to 2.4%.
  • 2015′s percentages will be even higher, with the launch of the aluminium version of Ford’s flagship F-150 truck further boosting volume
  • Meanwhile, of the polymers, only polypropylene has seen volume gains; polyurethane has held 2009 levels – and all the rest have lost volume

To say this is disappointing is an understatement.  Even worse is the fact that the shift back to inorganic materials seems to be accelerating.  As my blogging colleague John Richardson noted in an excellent analysis this week:

  • Major research is underway in this area, with 60k possible compounds having already been screened for their potential properties – and another 40k are in the process of being tested
  • Major work is also underway with 3D printing, following the example of the aerospace industry

Where is the plastics industry effort to counter these gains?  Companies have had the cash to spend on employing more sales and technical staff, thanks to the windfall profits generated by oil’s temporary price rise versus natural gas.  Why wasn’t it spent?

The good news is that it is not too late.  The major impact from the new fuel economy standards is still to come.  And technologies such as 3D printing are already becoming available to make the promise of new production methods into reality, as I noted last month.

But companies need to start today.  The longer they delay, the more advantage they will concede to competitors from outside the industry, and the bigger the mountain they will have to climb.

 

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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