Some high-end specialty chemicals for automotive enjoy good demand even with low vehicle inventory
Auto dealers faced limited vehicle inventories in 2021 and the reduced availability in showrooms and new car lots translated into more effort to upsell the latest SUVs and sedan models with add-ons, like some specialty chemicals for performance and durability.
As for those high-end specialty plastics used for electric vehicles, production there has not seen any setback and demand has continued to rise, a producer said.
True Car, which tracks U.S. vehicle sales, has projected that the number of vehicles sold in October 2021 fell 20% compared with last year.
Automotive consumes multiple plastics like polypropylene, PVC and dozens others. Specialty petrochemicals also come in the form of coatings, pigments and additives.
The shorter supply compared with a strong vehicle demand in 2021 has helped the pull for some products at Eastman Chemical, once a subsidiary serving film and camera company Kodak and now a specialty chemical products supplier for uses including automotive.
“The performance films business has actually done really well through the third quarter because companies , the dealers, the auto dealers are out there trying to upgrade the value they were getting on each car,” said Mark Costa, CEO, on Oct. 29, during the company’s third quarter earnings discussion, according to a transcript of the call by Motley Fool.
This means dealers were selling paint protection films, window films, as “a nice adder to the few cars that they have to sell,” he added.
“As they have more cars to sell or produce more cars, you're going to see that pickup in sales happen pretty quickly,” he said.
“Clearly, end market demand is quite strong. What we're assuming is that the auto production situation remains pretty challenged as it has been in the back half of this year as we go into next year,” Costa said.
Plastics for EVs
Celanese produces several high-performance specialty polymers for the automotive industry.
“If we look at the third quarter, auto builds were down pretty significantly globally, like 12% down from the prior quarter. And certainly that had some impact on us,” said Lori Ryerkerk, CEO at Celanese, according to a transcript of the third quarter earnings call by Motley Fool.
“What I would say is though it had less impact on us, as just given the nature of where we are. If we really look at our third quarter volumes, they were down into auto, only about 1%,” she said.
Electric vehicles “are actually up about 35% year-on-year in terms of builds, and we expect that to continue into next year,” she said.
“We have so much more exposure now to electric vehicles, so think about lithium-ion battery separator film which has grown 40% year-on-year,” she added.
Celanese faced supply issues during July-September. “We did run pretty full in Q3, but we did lose about 8,000 tonnes of production in Q3 due to the unavailability of raw material, be that resin or glass fiber or flame retardants,” she said.
Record vehicle transaction prices
Total new vehicle sales will reach 1.05 million units in October 2021, down 20% on-year and 3% on month when adjusted for the same number of selling days, said on Oct. 27 California-based Truecar Inc
October's seasonally adjusted annualized rate for total light vehicle sales is an estimated 13 million, a 20% on-year decrease.
According to TrueCar projections, U.S. retail deliveries of new cars and light trucks (excluding fleet sales) were about 945,027 units, down 20% from a year ago and also 3% lower when compared with September 2021.
The average transaction price in October was projected to increase 8% on-year and 1% on-month.
“After eight months of consistent declines we are finally starting to see signs of a slight improvement in new vehicle inventory," said Nick Woolard, lead industry analyst at TrueCar.
"Overall inventory remains tight and with demand holding strong we are set to see another month of record new vehicle transaction prices," he said.
In April 2020, during the most restrictive periods of the Covid-related lockdown, demand for chemicals that go into the automotive industry looked uncertain.
By Renzo Pipoli