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US Automakers Agree Action Plan for Resin Shortage; Key Evonik Plant Out of Action for at Least Three Months

Published: 4/18/2012
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The US automotive industry met in Detroit yesterday to agree a co-ordinated response to the potential supply shortage of a key resin material used in automotive production.



IHS Global Insight Perspective

 

Significance

The US OEMs have met in Detroit to discuss their response to the block on the production of cyclododecatriene, or CDT, which is an vital ingredient in the manufacture of resin that it uses in essential automotive components. Evonik has said that the it will be at least three months before the plant that makes the chemical will be back in action following an explosion at the end of March.

Implications

The implications of the shortfall in global production of CDT are still being digested but the major meeting in Detroit yesterday between the OEMs and suppliers showed that the industry is doing its best to respond to the problem and is taking a cohesive approach to the issue.

Outlook

However, while the OEMs and suppliers maybe taking a co-operative approach to dealing with the crisis, the statement released after the meeting would indicate that their options in tackling the crisis may be somewhat limited. As such, the potential for significant disruption to the global automotive production network cannot be ruled at this stage.

The US carmakers and a suppliers met in Detroit yesterday to discuss their response to the potential global shortage in the PA-12 (nylon 12) resin which is an essential component in the manufacture of key fuel and brake line components. The crisis has come about because of an explosion and subsequent fire at Evonik's chemical manufacturing facility in Marl, Germany, which killed two employees while injuring others, and disrupted the manufacture of cyclododecatriene, (CDT), which is a key ingredient in the manufacture of Nylon 12. The industry is facing a global shortage of Nylon 12 as a result of incident as Evonik is the world's leading supplier of CDT. The US carmakers and key suppliers met in Detroit yesterday under the umbrella of the Automotive Industry Action Group (AIGP). Following the meeting, the AIGP released the following statement:

"It is now clear that a significant portion of the global production capacity of PA-12 (nylon 12) has been compromised. In the automotive industry, PA-12 is used pervasively in coatings and connector applications for fuel handling and braking systems. These are highly engineered products produced via very complex manufacturing processes.

Our objectives at today's summit were threefold:

1)Help the industry understand and quantify the current state of global PA-12 inventories and production capacities.

2)Collaboratively brainstorm options to strategically extend current PA-12 capacities and/or identify alternative materials or designs to offset projected capacity shortfalls.

3)Identify/recruit the necessary industry resources required to technically vet, test and approve such options"

The AIGP also said it would host follow-up meetings over the next few weeks to further discuss limited PA-12 availability in order to mitigate the impact of shortfalls on both component and vehicle production. So far, there has been little in the way of response to the resin manufacturing crisis from the European or Asian OEMs, but there is little doubt that the shortage of CDT, and thus PA-12 has the potential to be a serious issue which could limit global automotive production.

For its part, Evonik has said that it will be three months at the earliest before production of CDT is resumed at its Marl plant, and the company could not rule out the delay being extended until the winter months. A Reuters report showed the level of uncertainty which is affecting the global OEMs as a result of the crisis. Speaking to reporters on Tuesday (17 April), Ford CEO Alan Mulally said his company was still digesting the implications of the shortage, but he also did not underplay the potential seriousness of the situation. He said, "We are evaluating it right now. But it is a significant development to the industry." Reuters also reported that a Toyota spokesperson in the US said the company is monitoring the situation and so far has not had any cutbacks in North America. The VW group said the company worldwide has not had production curbs. Daimler's Mercedes-Benz said it does not expect any production cutbacks and is in contact with its suppliers. Evonik is also looking at alternative materials that can be used as automotive industry quality resins for the fuel and brake line components in question that do not use CDT.

Outlook and Implications

The impression is that this is very much a rapidly developing situation and the full implications of the stoppage of CDT production has yet to be properly understood. However, the rapid response of the US industry suggests that problem is serious and has no easy or quick fix. As IHS Automotive's Michael Robinet highlighted yesterday, if suitable alternative materials already existed, they would already be in widespread use and there would no discussion of a crisis. How easy it will be to find an alternative resin that does not use CDT is open to some conjecture. Given the component testing and approval processes employed by the OEMs and Tier 1 suppliers, it is unlikely to be the work of a moment to find or develop an substitutable alternative material. While DuPont is known to have some materials in its product roster that have the potential to act replace PA-12, these materials will still need to be subject to a development and proving process. Reuters quoted DuPont spokesperson Carole Davies as saying the automotive industry could consider polyphthalamide (PPA) products as a potential replacement. Davies said, "We're working very closely with our customers to understand the issue and where we have materials that can help. There are a number of solutions that automakers are looking at. There are other materials that some automakers use, some don't. It's just a matter of finding alternatives that work, getting them qualified and, hopefully, they'll be enough at the end of the day to get everyone through it."

It is understood that the mood at the AIGP meeting on Tuesday was extremely serious and there was significant concern over the potential for production disruptions in the component industry, with obvious knock-on effects for the OEMs. One issue faced by the industry is that the material is not just used exclusively by the automotive sector. This means other important manufacturing industries will be equally concerned about a potential PA-12 shortage and will also be looking to protect their interests by conserving or securing supplies, or by also attempting to secure suitable alternatives.

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