Chip shortage threatens global auto sector, demand for chemicals and polymers

Author: Will Beacham

2021/01/18

BARCELONA (ICIS)--A global shortage of computer chips is threatening the nascent recovery of automotive production, as well as demand for automotive chemicals around the world.

Semiconductor chip manufacturers have struggled to meet demand growth in the fourth quarter of 2020 and into 2021 as the automotive sector rebounded, especially in China. Increased sales of computers and electronic devices through the pandemic have also boosted demand.

Auto production is already disrupted by the shortage of chips. Germany’s Audi has slowed production and has furloughed 10,000 employees, according to an interview quoting company CEO Markus Duesmann in the UK Financial Times on 17 January (paywall).

The company expects to produce up to 10,000 fewer vehicles in the first quarter of 2021 as a result of the shortage. However, production for the full year is not expected to be affected if the supply of chips recovers later in the year.

An Audi spokesperson said: "The limited supply situation with semiconductors in light of the rapid recovery of the car markets is resulting in significant disruptions for car manufacturers all over the world. We are currently looking at a range of countermeasures and alternatives designed to mitigate the impact of the supply bottleneck and, in turn, minimize the number of vehicles affected. Any improvement largely depends on the semiconductor industry."

Parent group Volkswagen in December blamed a “massive semiconductor supply bottleneck” for their plan to reduce production in the first quarter of 2021 at sites in China, North America and Europe.

It will produce 100,000 fewer cars in the first quarter of 2021, while Nissan and Honda are also being affected by production cuts, according to the Financial Times report.

A Volkswagen spokesperson said: "There will be effects on production volumes in the first and possibly also second quarter 2021...The relaxation of the supply situation depends largely on the semiconductor industry. We expect a relaxation from the second quarter of 2021."

Nissan and Honda were not immediately available to comment.

AUTO CHEMICALS THREATENED
Demand for chemicals and polymers which are heavily exposed to automotive could be threatened by any obstacle to a recovery in the sector.

According to ICIS Analytics, nylons, polyurethanes and polycarbonates are among the polymers most exposed to the automotive sector.

Measured by total consumption, polypropylene (PP), polyurethanes, polyamides and acrylonitrile butadiene styrene (ABS) are the polymers most heavily consumed by the automotive sector.


Other chemicals heavily exposed to automotive include base oils and lubricants, styrene butadiene rubber (SBR), polybutadiene rubber (PBR), ethylene propylene diene monomer (EPDM) plus chemicals for paints and coatings.

Butadiene (BD) markets are already under pressure, and many derivatives serve the automotive sector.

Source: ICIS Supply & Demand database

Nel Weddle, ICIS senior editor, olefins, said: "Europe BD is already under downwards pressure as BD in Asia is soft on the back of ample supply and new capacities so any additional pressure on demand will be bad news for global markets."

CHINA AUTOS ACCELERATE
Vehicle sales in China – the world’s largest market – have bounced back strongly from pandemic lockdowns. After collapsing in February and March 2020, sales have risen above 2019 levels each month since then. However, 2020 China vehicles sales remained below 2016-18 levels most months.

EU and US vehicle sales also bounced back strongly through the third and fourth quarters of, though with a dip in November – the latest month with published figures.

Update: Adds commentary from German automotive majors Audi, Volkswagen in paragraphs five and eight.

Front page picture source: imageBROKER/Shutterstock 

Focus article by Will Beacham