U.S. auto sales, housing see some recovery; railroad, truck volumes still trail 2019; bioplastic research gets DOE grant; Vestolit weighs down Orbia's revenue

News Briefs

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U.S. July vehicle sales to see third on-month rise in July 

U.S. new vehicle sales will reach nearly 1.2 million units in July 2020, an 18% on-year decline but the third on-month increase since April, said on July 27 ALG, part of auto price information provider True Car Inc.

Excluding fleet sales, ALG projects U.S. new cars and light trucks retail deliveries will reach just under 1.1 million units, a 15% on-year decrease ¬when adjusted for the same number of selling days.

Despite Covid-19 cases rising in some of the biggest markets such as areas of Texas, Florida and California that forced step backs in re-openings, sales didn’t “drop as low as they did in the spring” said Eric Lyman, chief analyst for ALG.

“There’s finally some positive signs for automakers on the fleet side of the house,” Lyman added.

“Fleet sales were down nearly 70% year-over-year last month, while this month (July) we’re projecting the decline will slow to 40%, with a 17% uptick month over month,” added Lyman.

“Mainstream brands are steadily increasing,” said Nick Woolard, analyst at TrueCar.

Consumers appear to be showing budgetary discipline in reaction to the Covid-19. They have yet to return to the luxury markets, ALG added.

The automotive market is a key consumer of over a dozen chemicals, notably polypropylene.

Housing starts picked up in June but still impacted

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,19 million, 17% above the revised May estimate of 1.01 million, according to U.S. Census Bureau data released on July 17.

The results were 4% below the June 2019 rate of 1.24 million, it added.

Single-family housing starts in June were at a rate of 0.8 million, or 17% above the revised May figure of 0.7 million, the data showed.

Construction materials for insulation, tubing and fixtures weigh heavily on plastic demand.

North American rail traffic down 16% in late July from 2019

North American rail volume for the week ending July 25 on a dozen reporting U.S., Canadian and Mexican railroads was 307,496 carloads, a 16% on-year decline, the Association of American Railroads said on July 29.

North American rail volume for the first 30 weeks of 2020 was 18.7 million carloads and intermodal units, a 12% on-year decline.

Total U.S. carloads for the week ending July 25 were 215,171, an 18% on-year decline.

Canadian railroads reported 72,440 carloads for the week, down nearly 14% on-year. Mexican railroads reported 19,885 carloads for the week, down 7.8% also from the same week last year.

Carloads move commodities like resin pellets and other chemical products.

Nine out of 10 carload commodity groups posted a decrease compared with the same week in 2019.

U.S. railroads reported a cumulative volume of 6.3 million carloads for the first 30 weeks of 2020, down 16% from the previous year.

Railcars move most chemical commodities, including plastic resins.

U.S. trucking volume sees some improvement but still trails 2019

Trucking figures as of June showed an on-month improvement but overall still trail 2019, the American Trucking Associations (ATA) said in a preliminary report on July 21.

The seasonally adjusted index For-Hire Truck Tonnage Index for June 2020 by the ATA showed a 1.3% on-year drop. It was the third straight month with an on-year decline, but the smallest in the period.

The June on-month gain made it the single best month since January 2013. However, it was not enough to put tonnage back to the pre-pandemic levels.

Trucking represents nearly 73% of tonnage carried by all modes of U.S. domestic freight, including manufactured and retail goods, ATA said.

Trucking moves mostly finished goods, most of which have chemical components.

Truck freight helps move petrochemical commodities from warehouses to ports, or mostly short distances. It may also move specialty chemical intermediates.

U.S. DOE gives grant to help biodegradable plastic research

Biodegradable plastic developer Danimer Scientific secured along with seven other organizations a total grant of $5.7 million to be shared between all of them from the U.S. Department of Energy to help advance research, the company said on July 28.

“Of the eight recipients, Danimer Scientific is the sole organization focused on the manufacture of biodegradable plastics,” it added.

The funds may speed up the commercialization of polyhydroxyalkanoate (PHA), verified through studies at the University of Georgia as a potential biodegradable alternative to petrochemical plastic, Danimer said.

Danimer Scientific works closely with the National Renewable Energy Laboratory in Colorado and Pacific Northwest National Laboratory in Washington State, it added.

Danimer Scientific will use the funds to produce ”combinations of PHA with different chain lengths, enabling the creation of new biodegradable plastics for a greater range of applications,” it said.

Mexico’s Orbia sees income plunge as Vestolit does poorly

Mexico’s Orbia Advance Corp. saw its net income plunge 63% in the second quarter in part due to lower revenue amid poor performance of the Vestolit polymers unit it intended to divest before the Covid-19 spread canceled those plans.

“Revenues totaled $1.4 billion, down $427 million, or 23%, mainly driven by lower sales in the Vestolit (polymer solutions), Wavin (building and infrastructure) and Netafim (agriculture) businesses,” it said.

“Vestolit revenues were $427 million, down 27%. The decline was primarily due to a significant reduction in both volumes and pricing for PVC products driven by Covid-19,” it added.

“Significantly lower oil prices led to higher global competitive pressures, contributing to the weaker PVC pricing environment,” it added.

The “EBITDA (earnings before interest, taxes, depreciation and amortization) for Vestolit was $64 million, down 43%,” it said.

PVC is used for tubing. Significant demand is derived from construction.

Orbia's consolidated net income in the second quarter was $42 million, compared with $113 million a year earlier. 

Orbia said on May 29 it was going to wait for the "right environment" as it announced a pause on efforts to divest the Vestolit unit that it had announced months earlier, shortly before the spread of the Covid-19 pandemic.

Orbia had $7 billion in sales revenue in all of 2019, according to its website. The company has operations in 41 countries across the globe. It was formerly known as Mexichem. It changed its name in Sept. 2019.

U.S. May crude oil output decline largest in over four decades

Crude oil production fell in the United States in May 2020 about two million barrels per day (bpd), the largest monthly decrease since at least January 1980, the U.S. Energy Information Administration said on Aug. 4.

Crude oil production in May was 10 million bpd, nearly 17% lower than 12 million bpd in April. It was nearly 18% lower than 12.2 million bpd in May 2019.

The change came amid massive demand destruction due to Covid-19 that had briefly placed prices into negative territory in April.

By Petrochemical Update