TOPIC PAGE: Automotive - impact on chemicals

Author: Morgan Condon

2020/06/19

The automotive industry has an important relationship with the chemicals sector while remaining an instrumental force on the global economy as an employment-intensive sector.

In a fast-changing world, automotive manufacturing is susceptible to unique challenges. While vehicle manufacturers are impacted by material prices, trends impacting the market ripple upstream.

LATEST NEWS

Spain automotive rescue package ‘very positive’ for chems, certain optimism returns
By Jonathan Lopez 17-Jun-20 14:12 LONDON (ICIS)--Spain’s rescue package for the automotive industry surpassing €1.0bn was higher than expected and has “created a lot of confidence” that the downturn this year, set to hit chemicals hard, may not be as severe as initially expected, the CEO of the country’s chemicals trade group FEIQUE told ICIS.

Europe SBR June contracts roll over on BD stability; spot prices stable-to-firm
By Melissa Hurley 18-Jun-20 19:04 LONDON (ICIS)--European styrene butadiene rubber (SBR) June contracts have rolled over on the back of stable upstream butadiene (BD) costs.

US PolyOne expects Q2 sales to fall 20% led by automotive
By Stefan Baumgarten 16-Jun-20 15:52 HOUSTON (ICIS)--PolyOne expects a 20% year-on-year decline in second-quarter sales as the coronavirus pandemic slashed demand for its products, Robert Patterson, CEO of the US-based international polymer materials company said in an update on Tuesday.

(Scroll to the bottom for more news)

The industry consumes significant volumes of plastics, resins, rubber, and paints. Despite the slowdown of recent years, auto production is still identified as a growth area for many as the focus on sustainability and opportunities to lightweight vehicles increase.


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CURRENT MARKET DYNAMICS
Even ahead of the coronavirus pandemic, the global economy was already expected to slow down, acting as a drag on the market, which in turn was hampering growth in the chemicals sector.

Bearish dynamics have since been exacerbated by the spread of the coronavirus, which has had a large impact on on the automotive industry.

Quarantine measures to prevent the spread of infection across the world left global automotive production stalling.

With lockdown regulations slowly lifting, manufacturing is returning in some places, but output numbers for the year will be significantly weaker.

Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

2020 VISION
With travel restrictions in place in many countries, weaker economic sentiment, and forecast record unemployment levels in some parts of the world, passenger vehicle sales are expected to remain well below peak levels.

When lockdowns are fully lifted, the automotive industry will be left facing some serious challenges which could diminish any resurgence in demand.

Economic forecasters consistently project a sharp downturn in global GDP this year.

With less money coming in, households and companies will funnel capital towards essential products, which for many is unlikely to include a new vehicle.

In turn, the health of the global economy could also be impacted by the global automotive sector.

According to the International Organization of Motor Vehicle Manufacturers (OICA), if automotive manufacturing where a country, it would be the sixth largest economy.

This symbiosis means that the form the world’s economic recovery will take is likely to be shaped by what is happening in the automotive sector.

ON THE HORIZON
This year would have been an interesting year for the automotive sector anyway, with a myriad of factors shaping the industry.

The push towards sustainability is a prominent issue concerning vehicle production and consumption.

A shift in demand towards electric vehicles does not cap the market for the entire chemicals sector, with some end-markets even identifying the automotive industry as a growth area for them.

While heat-resistant plastics will not be needed to house cooler electric engines, the increased need for fuel efficiency will drive demand for composite materials used in light-weighting vehicles.

Legislation is continuously evolving for the sector at different rates around the world presenting unique production challenges, with regulative issues surpassing environmental concerns.

As vehicles become more modern, so too do concerns about digitalisation of cars, which again provides an opportunity for those in the chemicals sector.

This means that data protection will become a concern of the sector, alongside sustainability and safety regulations.

TRENDS DRIVING THE FUTURE
Beyond the obvious headwinds facing the market, there are less immediate and more conceptual factors influencing the industry.

The prospect of car sharing and automated vehicles may seem far off, but these possible eventualities that manufacturers must prepare for now.

The automotive sector is at the forefront of research and development (R&D) spending, and much of the technology developed in this sector may be applied in other industries.

This was evidenced when the Mercedes Formula One team worked on a initiative with University College London to build respirators to assist coronavirus patients.

REGIONAL BREAKDOWN

US
Even before most North American automotive plants were idled amid efforts to protect the employees from coronavirus, the industry was facing a slowdown.

US light-vehicle sales will not likely return to pre-coronavirus levels until the second half of 2023, according to Haig Stoddard, senior industry analyst for Wards Intelligence.

US light vehicle sales are set to be 4m units lower in 2020 and and 1.5m units lower in 2021 compared with the pre-coronavirus outlook, according to Wards.

In the US, production was halted after a United Auto Workers (UAW) union employee at a plant in Warren, Michigan, contracted the virus.

US automakers firmed restart dates for 18 May as Michigan announced phased reopening plans following coronavirus-related shutdowns.

EUROPE

Some vehicle manufacturers are making a slow return to production lines as quarantine restrictions begin to ease throughout Europe.

Although work is restarting, it is unlikely that output will rival pre-pandemic levels as demand is unlikely to make a sufficient recovery in the near term.

This will weigh heavily on the industry for 2020 and companies have already started reacting to lagging demand, with Nissan permanently closing its plant in Spain and cutting overall production 20%.

Some vehicle manufacturers are making a slow return to production lines as quarantine restrictions begin to ease throughout Europe.

Although work will begin, it is unlikely that output will rival pre-pandemic levels, as demand is unlikely to make a sufficient recovery in the near term.

This will weigh heavily on the industry for 2020 and companies have already started reacting to lagging demand, with Nissan permanently closing its plant in Spain and cutting production 20%.

ASIA
China took poll position as the key market for the automotive sector long before the pandemic.

Much production stalled in the first quarter but production has made a cautious return in the second quarter.

As Europe and the US may take significant time to recover productivity following lockdown, China is likely to remain important to the sector.

As global trade becomes more regionalised, and China in a better position than most for economic recovery, native demand may be crucial in providing support for the sector.

LATEST NEWS

BASF on track to build EV battery production sites in Finland and Germany
By Morgan Condon 15-Jun-20 11:54 LONDON (ICIS)--BASF has started construction of its battery materials plant in Harjavalta, Finland, the German major announced on Monday.

DOMO Chemicals to close biaxally orientated PA line on global nylon oversupply
By Morgan Condon 12-Jun-20 13:41 LONDON (ICIS)--DOMO Chemicals will close its third line of biaxally oriented phthalic anhydride (PA) production at its site in Leuna, Germany due to global overcapacity the German-headquartered producer announced on Friday.

Europe capro, nylon faces tough conditions on weak auto demand outlook
By Marta Fern 10-Jun-20 15:31 LONDON (ICIS)--Europe caprolactam (capro), nylon 6 and nylon 6,6 markets will continue to face challenging trading conditions in the coming months, as key derivative automotive demand will remain weak.

German auto production, sales remain weak through May
By Stefan Baumgarten 05-Jun-20 16:43 LONDON (ICIS)--Germany’s auto industry remained weak throughout May - with production down 66% year on year and new car registrations 50% lower, according to the latest data on Friday.

Automotive, houseware segments weakest links in Malaysia PP market
By Leanne Tan 05-Jun-20 05:09 SINGAPORE (ICIS)--Downstream demand from the automotive and houseware segments is currently among the weakest in Malaysia’s polypropylene (PP) market.

Weak auto sector and slow recovery potential likely to weigh on Europe PC Q3 sentiment
By Heidi Finch 04-Jun-20 16:29 LONDON (ICIS)--The coronavirus-weakened automotive sector and slow recovery potential is likely to weigh on sentiment for Q3 Europe moulding grade polycarbonate (PC), despite higher bisphenol A (BPA) feedstock costs.

UK May car sales collapse by 89% to 1952 levels as lockdown devastates industry
By Will Beacham 04-Jun-20 12:39 BARCELONA (ICIS)--UK new car sales collapsed by 89% year on year in May to levels not seen since 1952 as the coronavirus shutdowns and closure of most automotive production devastated the country’s market.

INSIGHT: Electrification in automotive industry could generate recovery
By Morgan Condon 03-Jun-20 16:10 LONDON (ICIS)--The European automotive industry is unlikely to restart smoothly despite the continued rollback of lockdown restrictions, which could lead to demand in many chemicals markets seizing up.

Brazil industrial activity plunges 27%, durable goods down 80% in April
By Renato Frimm 03-Jun-20 16:13 HOUSTON (ICIS)--Brazil industrial activity in April plunged 27.2% year on year, the state statistical agency said on Wednesday.

Asia’s spot demand for EPDM to remain subdued amid weak global auto industry
By Helen Yan 03-Jun-20 09:15 SINGAPORE (ICIS)--Spot demand for ethylene propylene diene monomer (EPDM) in Asia is likely to remain subdued as the automotive plants were still mostly running at reduced rates despite the reopening of economies in several countries.

INTERVIEW: US construction outlook far more positive than automotive - Huntsman CEO
By Joseph Chang 02-Jun-20 23:56 NEW YORK (ICIS)--The US building and construction market is recovering and proving far more resilient than the automotive sector, the CEO of Huntsman Corp said on Tuesday.

Moody's assigns B1 rating to new US Axalta debt
By Juhi Varma 01-Jun-20 23:44 HOUSTON (ICIS)--Moody’s assigned a B1 rating to the unsecured debt that two subsidiaries of Axalta Coating Systems plan to issue, the US ratings agency said on Monday.

European MEG spot market breaks downward price spiral
By Melissa Hurley 01-Jun-20 15:48 LONDON (ICIS)--The European monoethylene glycol (MEG) market hit a turning point as May drew to a close, after rising feedstock costs bolstered sellers and reignited buying interest.

US May MEG contracts assessed flat to lower
By Antoinette Smith 29-May-20 23:01 HOUSTON (ICIS)--US May monoethylene glycol (MEG) pricing was assessed flat to lower, on steady demand from polyethylene terephthalate (PET) packaging as well as for export, amid sufficient supply.

US automaker General Motors to increase production rates; Ford temporarily pauses two lines
By Adam Yanelli 29-May-20 22:37 HOUSTON (ICIS)--North American automaker General Motors Co will increase production rates at multiple plants in the US and Canada on Monday, one week after restarting plants that had been idled because of the coronavirus since mid-March.

Japan April industrial production falls led by motor vehicles
By Pearl Bantillo 29-May-20 06:53 SINGAPORE (ICIS)--Japan’s industrial production in April declined, led by motor vehicles, with further contraction expected in May as the world’s third-biggest economy is in the throes of a pandemic-induced recession.

India’s antidumping probe into NBR imports to have limited impact
By Helen Yan 28-May-20 09:38 SINGAPORE (ICIS)--The impact of anti-dumping investigations into acrylonitrile butadiene rubber (NBR) imports into India will be limited as overall demand has shrunk due to the fallout from the coronavirus pandemic.

Companies still committed to switching from fossil fuels - Deloitte
By Juhi Varma 27-May-20 21:35 HOUSTON (ICIS)--Industry and energy executives remain committed to using less fossil fuel despite coronavirus-related setbacks, indicates a study by Deloitte released on Wednesday.

Slow automotive recovery to maintain weak conditions for US SBR in H2
By Amanda Hay 27-May-20 21:01 HOUSTON (ICIS)--US styrene butadiene rubber (SBR) markets appear set for a sluggish second half of the year as recovery from coronavirus begins at a slow pace.

Asia PBT demand in the doldrums amid auto weakness
By Clive Ong 27-May-20 08:17 SINGAPORE (ICIS)--Asia’s polybutylene terephthalate (PBT) resin demand remained lacklustre, with limited improvement expected in the near term.

Demand for US nylon likely to improve, but long supply could weigh on market
By Adam Yanelli 26-May-20 23:00 HOUSTON (ICIS)--US demand for nylon is likely to improve amid efforts to restart the economy following coronavirus mitigation policies, but long supply and existing inventory could keep a ceiling on prices.

European nylon 6, nylon 6,6 May contract prices fall on low automotive demand
By Marta Fern 26-May-20 20:29 LONDON (ICIS)--European nylon 6 and nylon 6,6 contract prices finalised at decreases for May, driven by low demand and despite the increase in the May feedstock benzene price.

Europe ABS May contract prices fall double digits on weak automotive, feedstocks
By Stephanie Wix 25-May-20 17:01 LONDON (ICIS)--European acrylonitrile-butadiene-styrene (ABS) May contract prices have fallen €50-60/tonne driven by the €13/tonne decrease for feedstock styrene, ongoing automobile weak demand, and the €200/tonne decrease for secondary feedstock butadiene (BD).

Stalled automotive sector puts hopes on China, decrease in air travel
By Morgan Condon 25-May-20 11:04 LONDON (ICIS)--The pandemic has left the automotive industry on cinder blocks, thwarting any expectation of recovery from an already-slower 2019.

US antifreeze-grade MEG prices rise amid bumpy restart to auto production
By Antoinette Smith 22-May-20 23:00 HOUSTON (ICIS)--US auto production restarted this week, lifting antifreeze-grade monoethylene glycol (MEG) prices, but obstacles remain on the road ahead.

Europe May SBR contracts hit fresh lows on upstream losses
By Melissa Hurley 21-May-20 12:30 LONDON (ICIS)--European styrene butadiene rubber (SBR) contract prices for May have slumped by various triple-digit decreases depending on starting point and account, to new historic lows.

INSIGHT: US MEG production remains high amid lower demand, falling margins
By Antoinette Smith 20-May-20 15:37 HOUSTON (ICIS)--US ethane-based monoethylene glycol (MEG) margins have fallen by nearly 30% in less than three months, while margins globally have improved significantly, but this has yet to cause a reduction in domestic production rates.

US BDO to see demand slowly return after auto restart
By Antoinette Smith 20-May-20 14:40 HOUSTON (ICIS)--Typical demand levels for butanediol (BDO) will be slow to return even as the key US downstream automobile sector restarts production.

Demand for US nylon improves amid efforts to restart economy
By Adam Yanelli 19-May-20 23:00 HOUSTON (ICIS)--Demand for US nylon 6,6 is likely to improve now that North American automakers have restarted idled plants that were shuttered because of the coronavirus, but with lengthy supply chains and existing inventory, it remains unclear how quickly the market will recover.

India's ailing auto industry needs long-term reforms for revival
By Priya Jestin 18-May-20 04:11 MUMBAI (ICIS)--While the Indian government’s recent move to infuse liquidity into the economy through a $266bn fiscal stimulus package could help the domestic auto industry, the sector will require long-term reforms to revive it, said industry experts.

Early May SBR contracts fall significantly on upstream BD losses and tyre demand woes
By Melissa Hurley 16-May-20 01:04 LONDON (ICIS)--Early European styrene butadiene rubber (SBR) contracts have been agreed at significant decreases month on month, due to large losses seen this month in the upstream butadiene contract price.

INSIGHT: Pandemic woes to drive down Europe PP demand in 2020
By Fabrizio Galie 14-May-20 11:00 Vergiate, ITALY (ICIS)--Lockdowns, production stoppages and demand falls are all likely to weigh on Europe polypropylene (PP) consumption this year, despite resilience for some packaging and pharmaceutical end markets.

China’s spot interest for SBR may pick up as car sales rise
By Helen Yan 14-May-20 07:13 SINGAPORE (ICIS)--China’s styrene butadiene rubber (SBR) market may see an increase in spot interest following the latest April car sales data, which showed a reversal in the year-on-year downtrend for the first time in 21 months.

US PC demand to improve as North American automakers restart idled plants
By Adam Yanelli 13-May-20 23:04 HOUSTON (ICIS)--Demand for US polycarbonate (PC) is set to improve now that North American automakers are restarting idled plants that were shuttered because of the coronavirus.

EU passenger car sales fall 76% in April
By Tom Brown 19-May-20 11:28 LONDON (ICIS)--EU passenger car sales fell 76.3% year on year in April, the sharpest fall since records began, as the automotive industry suffered the lockdowns across the 27-country bloc, the European Automobile Manufacturers’ Association (ACEA) said on Tuesday.

US nylon market participants eye restart of N American auto production
By Adam Yanelli 13-May-20 00:31 HOUSTON (ICIS)--US nylon demand is likely to improve as North American auto production is set to restart after most plants were idled because of concerns over the spread of the coronavirus (Covid-19).

China's April vehicle sales up 43.5% month on month
By Fanny Zhang 12-May-20 08:45 SINGAPORE (ICIS)--China’s vehicle sales in April reached 2.07m units, an increase of 4.4% year on year and 43.5% month on month, according to data from China Association of Automobile Manufacturers (CAAM).

US April new auto sales fall amid coronavirus impacts
By Tracy Dang 11-May-20 21:00 HOUSTON (ICIS)--US sales of new light vehicles in April fell by nearly 25% month on month and was down by nearly 48% year on year, according to seasonally adjusted annual rates (SAAR) from the US Bureau of Economic Analysis (BEA).

Restart of auto production bullish for US antifreeze-grade MEG
By Antoinette Smith 08-May-20 23:23 HOUSTON (ICIS)--US automakers have set restart dates for 18 May, which will significantly improve demand for US antifreeze-grade monoethylene glycol (MEG).

Michigan reopening prompts firm dates for Big 3 automaker restarts
By Amanda Hay 08-May-20 16:49 HOUSTON (ICIS)--US automakers firmed restart dates for 18 May as Michigan announced phased reopening plans following coronavirus-related shutdowns.

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