Resins shortfall to give DuPont a boost from automakers
DETROIT (Bloomberg) -- DuPont, the most valuable U.S. chemicals producer, expects additional demand from automakers seeking to work around a shortage of resin used to make braking and fuel parts, its CEO said.
DuPont, a maker of chemicals used in auto manufacturing, has capacity to provide additional polymers called Zytel, Delrin and Hytrel to the industry, CEO Ellen Kullman told reporters Thursday on a conference call.
Automakers including General Motors, Toyota and Ford and their suppliers are seeking other options for a resin called PA-12 after a March 31 explosion at chemical maker Evonik Industries.
The blast at Evonik's Marl, Germany, factory that made Cyclododecatriene, also called CDT, halved the global source of PA-12.
"It does look like we'll get some upside" from the shortage of PA-12, Kullman said. The auto industry is "an area where our volumes are down versus last year but sequentially improving, so we do have some capacity. It's really difficult for us to size it now because each application is different."
Koch Industries's Invista, the maker of Stainmaster carpet, also produces CDT and has "limited excess capacity" to make more of the material, Jodie Stutzman, a spokeswoman for the Wichita, Kansas-based unit, said in a phone interview. "We have a number of customers that we are committed to supplying and we will honor those commitments first," she said. "We'll work to squeeze any capacity we can" from Invista's plant in Victoria, Texas.
The explosion at Evonik's plant poses "real and substantial risk" to vehicle production, Jeff Schuster, senior vice president of forecasting at LMC Automotive, said Thursday in an e-mailed statement. "Automotive manufacturers may begin to slow the pace of build that has been in overdrive in recent months," said Schuster, who is based in Troy, Michigan. "More intensive production management in relation to product mix and inventory is expected to be a means to cope with the looming shortage."
Japan's automakers may avoid "large-scale" disruptions to production as suppliers prepare alternative parts in response to a global resin shortage, Takashi Moriwaki, an analyst at Deutsche Bank AG, wrote Thursday in a research note.
Suppliers recognized that PA-12 was produced by few companies and are carrying several months' supply, Moriwaki said. Partsmakers could supply parts with alternative materials as soon as June and plan to propose options to automakers within the next week, he wrote, citing telephone interviews with companies he didn't identify.
"Although we cannot discount the risk of production stoppages because the shortage of only one component is enough to compromise auto production, our interviews suggest little likelihood of large-scale shutdowns to Japan's auto production," Moriwaki wrote. More than 200 executives from automakers including GM, Toyota, Ford and Volkswagen AG and their suppliers met April 17 at a summit near Detroit to find alternative materials and parts and avoid losing vehicle output. The companies are unlikely to find other options immediately because of their pre-production vetting processes, researcher IHS Automotive said this week.
DuPont's polymers are "well known" and used in "a wide variety" of applications, Kullman said on the call. Some automakers may need to have engineers test and review the materials before using them as substitutes, the executive said. The length of the testing process "depends on whether they know the polymer or not," she said. "If they've already done the testing but chose PA-12, then they can go back and utilize ours directly."
TI Automotive warned its customers in an April 12 letter of severe shortages interrupting production "in the next few weeks." The Auburn Hills, Michigan-based company supplies brake and fuel lines, as well as fuel tanks and pumps, to all major automakers, including GM, Ford, Toyota and Volkswagen, according to its Web site.
Evonik has begun repairs at the Marl factory, which the company aims to rebuild "before winter," Ruben Thiel, a spokesman for the closely held Essen, Germany-based firm, said April 16 in an e-mail. Other makers of PA-12 are France's Arkema SA, Switzerland's Ems-Chemie Holding AG and Japan's Ube Industries Ltd.
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