Automotive chemicals: chip supply shortage affects demand

According to recent news from ICIS, the global chip shortage is threatening the automotive industry, which is just beginning to recover, and the global demand for automotive chemicals. Data show that as the automotive industry rebounds, especially in China, semiconductor chip manufacturers are unable to meet the growth in chip demand in 2021. Not only that, but the increase in sales of computers and electronic equipment during the COVID-19 pandemic has also boosted demand for chips.

Car sales rebound

Car sales in China, the world’s largest auto market, have rebounded strongly from their lows during the massive lockdown of the new crown epidemic. After the sharp decline in February and March 2020, car sales in the Chinese market have exceeded 2019 levels every month. However, China's auto sales in most months of 2020 will still be lower than the level of 2016~2018. According to the latest published data, in the third and fourth quarters of 2020, the EU and the United States also saw a strong rebound in car sales, but there was a decline in November. Market participants said that overall, car sales have rebounded significantly.

Chip supply shortage forces car production cuts

Car production has been interrupted due to a shortage of chips. According to the British "Financial Times" recently, German Audi CEO Markus Duesmann said that due to chip shortages, the company has slowed down car production and has temporarily laid off 10,000 employees. For the same reason, Audi expects to reduce production by up to 10,000 vehicles in the first quarter of 2021. However, if chip supply resumes later this year, the annual output is not expected to be affected.

An Audi spokesperson said: "In view of the rapid recovery of the automotive market, the shortage of chip supply has caused significant disruption to global automakers. We are currently studying a series of countermeasures and alternatives to reduce the impact of chip supply bottlenecks. , Thereby minimizing the number of affected cars. The improvement of car production will largely depend on the semiconductor industry."

In December last year, Audi’s parent company Volkswagen announced plans to reduce vehicle production in China, North America and Europe in the first quarter of 2021, and blamed this on private ownership of chip supply. It is reported that Volkswagen's auto production in the first quarter of 2021 will be reduced by 100,000 vehicles. Nissan and Honda are also affected by production cuts. A Volkswagen spokesperson said: "The shortage of chip supply will affect the first quarter of 2021 and possibly the second quarter of automobile production. The easing of the supply situation depends largely on the semiconductor industry. We expect from 2021 Starting from the second quarter, the shortage of chips will be eased."

The demand for automotive chemicals is affected

The demand for chemicals and polymers closely related to the automotive industry may be threatened by obstacles to the industry’s recovery. According to data from ICIS Analytics, nylon, polyurethane and polycarbonate are the most dependent polymers in the automotive industry. Among them, the consumption of nylon in the automotive industry accounts for up to 30% of its total consumption. Polyurethane accounts for 20%, and polycarbonate accounts for about 15%.

Calculated by consumption, polypropylene, polyurethane, polyamide, polyvinyl chloride and acrylonitrile-butadiene-styrene copolymer (ABS) are the most consumed polymers in the automotive industry. Among them, polypropylene accounted for 35% of total polymer consumption in the global automotive industry in 2019, polyurethane accounted for 19%, polyamide accounted for 11%, polyvinyl chloride accounted for 9%, and ABS accounted for 8%. Other chemicals that are heavily used in the automotive industry include base oils and lubricants, styrene butadiene rubber (SBR), polybutadiene rubber (PBR), ethylene propylene diene rubber (EPDM), and chemicals used in paints and coatings. The butadiene (BD) market is already under pressure due to the impact of the automotive industry’s production cuts due to the shortage of chip supply. Many derivatives of butadiene are used in the automotive industry.

Nel Weddle, Senior Editor of Olefin Business of Axioms, said: "The European butadiene market is already facing downward pressure because the Asian butadiene market is weak, supported by ample supply and new capacity. Therefore, any additional demand pressure is bad news for the global market.