Europe PP consumption for automotive set to be gloomy for 2020

LONDON (ICIS)–The European transportation sector accounted for about 1.1m tonnes of polypropylene (PP) used for manufacturing of cars and car parts, trucks and other vehicles, according to preliminary estimates by ICIS Analytics, using the ICIS Supply & Demand Database.

The automotive sector has been notoriously poor, and events in 2020 have led to expectations of further weakening.

Negative growth for PP demand in this sector was already expected in 2020, well before the spread of the pandemic.

In the EU, the contraction of passenger car sales was expected to generate a drop in PP consumption by at least 20,000 tonnes year on year in 2020.

On top of this, recent closures linked to the coronavirus outbreak have affected the vast majority of car plants in the region, which total almost a hundred units in western and central and east Europe.

Based on the total number of planned closing days as available at the end of March, production stops will lead to a further 45,000 tonnes of PP demand loss, or 4.3% of the PP volume consumed by the sector in 2019.

But this is a conservative and preliminary estimate, as restarts may be postponed and the resumption of significant operating rates at car plants may be long delayed.

Durable sectors in general will be most impacted by the current economic threats, especially with a growing risk of job losses that will much affect consumer spending.

Transportation accounts for about 11% of PP consumption in Europe.

PACKAGING STRONG
Other key sectors have been showing positive trends in the first quarter 2020, such as film and sheet and rigid packaging, linked to food packaging and medical supplies.

April demand for this sector is already looking strong, and is expected to continue in the coming weeks, as long as markets can continue, dependent as they are on logistics and other conditions that may change rapidly in the coming weeks.

Automotive will continue to be weak for the rest of the year.

German auto parts maker Continental said that it expects a decline of 2-5% in 2020 as the impacts of the coronavirus outbreak on supply chains and demand are likely to pressure vehicle sales.

The US credit rating agency Moody’s revised its predictions for global automotive sales to a drop of 2.5%, from a decline of 0.9%, amid the coronavirus outbreak.

In the wider economic context, the eurozone’s March PMI index, measuring both services and manufacturing industries, suggested the region’s economy is contracting quickly, with the headline figure plunging to an unprecedented 31.4 points in March, down from 51.6 points in February.

Any number below 50 indicates contraction.

As more cities and entire countries go into lockdown mode, much economic activity is being severely curtailed or even grinding to a halt.

ICIS analysts are constantly updating these inputs and revising supply and demand yearly outlooks by country in the ICIS Supply and Demand database.

Short-term dynamics and implications on prices are fully discussed in the ICIS Price Forecast reports, a monthly service also covering polyethylene, styrene, benzene and methanol for Europe, Asia and North America.

Europe PP consumption by sector 2019

Front page picture: Volkswagen factory in Zwickau; archive image 
Source: Uwe Meinhold/EPA-EFE/Shutterstock 

Focus article by Linda Naylor 

Additional reporting by Will Beacham, and Fabrizio Galie, and Zachary Moore 

For a look at the ICIS PP forecasting report, please contact contact Toni Fuecker on Toni.Fuecker@icis.com