US Axalta expects most auto production shortfalls to be made up in H2 2021

Author: Adam Yanelli

2021/04/27

HOUSTON (ICIS)--Executives at US-based auto paint producer Axalta Coating Systems are anticipating strong demand from the auto industry in the second half of the year on expectations that most of the lost production due to the global microchip shortage will be made up by the end of the year.

In comments made during a conference call to discuss Q1 2021 earnings, Axalta executives said that analysts estimate production of as many as 1.4m lightweight vehicles were lost in the first quarter, and another 1m is expected to be lost in the second quarter.

“Our expectation is that many will be made up in H2, but some will be pushed out to 2022,” Axalta CEO Robert Bryant said, adding that the easing of mobility restrictions coupled with the ongoing vaccination progress will produce a solid recovery over the course of 2021 as vehicle traffic returns to more normal levels.

“The industry forecast calls for about 1m vehicles to be delayed from the second quarter to the second half of the year, and partly into 2022 due to the shortages,” executives said.

The company said headwinds from supply-chain constraints related to the winter storm and to logistical issues from shipping to trucking are expected to persist through most of the second quarter.

RESTOCKING SUPPLY CHAINS
The company said restocking and rebuilding supply chains should contribute to volume growth in its industrial segment over the rest of the year.

“I think in pretty much across all of the industrial markets that we serve, inventory levels are really lean,” Bryant said. “Part of that is the way people have been running, but I think it has much more to do with some of the supply chain issues that are out in the marketplace.”

Bryant said the tight supply of raw materials, mostly monomers, resins and isocyanates, had the biggest impact on its industrial business segment.

“That segment of the market, much more so than light vehicles, or refinish, or commercial vehicle or decorative coatings, industrial is really the area where raw material shortages have had the biggest impact,” the CEO said.

PASS-THROUGH COSTS
Executives said they are confident in their ability to pass through the higher raw material costs.

“We expect to fully cover raw material inflation costs during the course of the year, primarily via price pass-throughs,” executives said.

In the mobility segment, Bryant said roughly 25% of Axalta’s business is covered by indexing, with the remainder under contracts that allow them to discuss pricing.

“So, we have generally been able to successfully over time pass through inflation costs,” Bryant said.

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