Global IBAP hits three-month high in August as raw material costs rise

LONDON (ICIS)–The global ICIS Basket of Automotive Petrochemicals (IBAP) hit a three month high August, suggesting that raw material costs for automotive production from petrochemicals are rising, ICIS analysis showed on Thursday.

The Global IBAP rose by a limited 0.48%, with a minor decrease in the Asia IBAP counterbalancing rises in the US and Europe to some extent.

Although the strongest rise was seen in the US IBAP, a rising Europe IBAP was contrary to market expectations, which had been broadly negative moving in to what is typically the holiday period in August. 

The increase in the European IBAP came amid more positive than expected macroeconomic data in the wake of the UKs vote to leave the EU, and continued strong offtake from the automotive industry in Europe in August.

Nevertheless, much of the Europe IBAP rise was driven by exchange rate movements in US dollar terms. The Europe IBAP did increase in euro terms, but by only €0.36/tonne of total vehicle weight.

Rises in the European IBAP were largely driven by increases in the cost of isocyanates and polyols – the feedstocks for polyurethanes (PU). Price rises of isocyanates and polyols were the result of local tightness in those markets. Polypropylene (PP) and polycarbonate (PC) price rise also contributed to the increase in the Europe IBAP.

The US IBAP increases were largely driven by building block petrochemical cost rises.

Falls in the Asia IBAP were predominantly the result of falls in PP prices. Asia remains the region with the lowest automotive petrochemical raw material cost basis, with the gap with the other key regions of the US and Europe increasing. The US remains the region with the highest automotive petrochemical raw material cost basis.

The automotive industry is a major global consumer of petrochemicals which contributes more than a third of the raw material costs of an average vehicle. ICIS tracks the movement of petrochemical raw material costs in auto production both globally and regionally with the weighted ICIS Basket of Automotive Petrochemicals (IBAP).

ICIS produces a monthly Global Automotive report covering the major automotive chemicals markets, the auto-industry, the IBAPs and macroeconomic trends. For more information on the report and details on how to subscribe, please click here