HOUSTON (ICIS)--More US consumers are moving out of the city and into the suburbs, which is creating profound changes in buying habits that are increasing demand for appliances, automobiles and other durable goods, the chief financial officer of Dow said on Thursday.
These are important end markets for Dow's polyurethanes business, which is part of the company's Industrial Intermediates and Infrastructure segment. Third-quarter volumes in the segment were down by just 3% year on year. Quarter on quarter, they rose by 23%.
Dow noted strength across furniture, bedding, appliances, construction and automobiles.
Some of the increase is due to companies restocking, said Howard Ungerleider, chief financial officer. He made his comments in an interview with ICIS.
Several manufacturers that make appliances and other durable goods suspended production during the height of the pandemic in the second quarter. Automobile production in Europe and North America fell close to zero.
In particularly, there is a significant backlog in appliances, Dow said during an earnings conference call.
But Ungerleider expects that another reason behind the rise in durable volumes is higher demand from end-consumers.
"We're nesting a lot more," he said. People are spending more time at home, washing more clothes and cleaning more dishes.
Appliances can run for only so many cycles before they give out and need replacing, he said.
But increasingly, consumers are not just buying replacement appliances. They are buying new ones as they move out of the cities and into larger homes in the suburbs, Ungerleider said.
This shift from the cities to the suburbs could become a long-term trend, Ungerleider said. If so, it would mark a break from the pre-pandemic trend of people favouring city life and abandoning the suburbs.
"They were talking about the death of the suburbs," Ungerleider said. "It seems that pandemic has temporarily shifted that. We'll see how sticky that is post-pandemic."
If the trend holds, it could cause a rise in sales of durable goods such as appliances, bedding and furniture, he said.
Appliances use polyurethanes for insulation. Bedding and couches uses flexible polyurethane foam for mattresses and cushions.
In addition, city-dwelling consumers who once relied on taxis and ride-sharing to get around will need to buy automobiles once they move to the suburbs, Ungerleider said.
The automobile market is still some ways off to returning to levels before the pandemic.
However, any recovery will have a significant effect on polyurethanes and other chemicals. The automobile sector is also an important end market for styrene butadiene rubber (SBR) as well as coatings and several polymers, such as nylon, polypropylene (PP), polycarbonate (PC) and acrylonitrile butadiene styrene (ABS).
If people continue to move to the suburbs, it could cause a rise in house construction. Residential construction is an important end market for polyvinyl chloride (PVC) and titanium dioxide (TiO2), a white pigment used in paints.
Houses also use rigid polyurethane foam for insulation.
For the recovery as a whole, Dow cautioned that it would be uneven.
Polyurethanes are made with polyols and isocyanates such as methylene diphenyl diisocycanate (MDI) and toluene diisocyanate (TDI).
Interview article by Al Greenwood
Click here to view the ICIS Coronavirus, oil price crash - impact on chemicals topic page.
Click here to view the Automotive - impact on chemicals topic page.