For fuel- and brake-line parts to be made to specification, the resin must flow. Yet resin availability has been a huge problem in the automotive industry because of an industrial accident at a Evonik Industries AG chemical factory in Marl, Germany. Credit Suisse reports that if European automakers don’t come up with alternatives quickly, production will be disrupted.
US automakers have one month of resin
While U.S. automakers are left with a dangerously low amount of resin – enough for about one month of production, or as many as three if resources are pooled – European automakers have almost no nylon 12 resin left, notes Credit Suisse analyst Christ Ceraso. The March 31 explosion at Evonik Industries AG may have cut global capacity to make the resin nylon 12 by as much as half.
“European users will be the canary in the coal mine for this problem,” Ceraso wrote in a report on the impact of the Evonik disaster. “Industrial customers there are much more likely to keep comparatively thinner inventories and don’t have the benefit of large amounts of materials in transit. This means that the most immediate supply disruptions are likely to surface in Europe.”
The substitution game
In order to avoid extended production disruptions, major automakers like General Motors Co., Volkswagen AG, Toyota Motor Corp. and Ford Motor Co. are seeking ways to find and test other substances that can do the job of nylon 12. It is unclear at this time whether engineering teams have made much progress in locating a sufficient alternative.
Nylon 12 depends upon the chemical compound Cyclododecatriene, aka CDT. Evonik is the world’s primary manufacturer of CDT, supplying France’s Arkema SA, one of the world’s major nylon 12 suppliers, noted Ceraso. Switzerland’s Ems-Chemie Holding AG and Japan’s Ube Industries Ltd. are the other major global suppliers.
As Europe goes
Ceraso noted that other nations will feel something similar to the lack of production Europe will experience, just to a lesser degree.
“We expect that the client base impacted most by the lost production will be primarily European-based customers, followed to a slightly lesser extent by North American and South American customers,” Ceraso said.
As yet, no reports of canceled or slowed production have been filed on account of the resin catastrophe. BMW has gone so far as to say that it “can rule out a supply risk at the moment,” in the words of BMW spokesman Frank Wienstroth.
“The investigations have not been terminated yet,” he said.
Most vulnerable to slowdown
Various reports indicate that automakers BMW and Daimler are particularly susceptible to production slowdowns due to the resin crisis. The reason for this note LMC Automotive analyst Joe Langley, is that the production system of those automakers is build-to-order. Small resin inventories may cause trouble for Hyundai Motor Co. and Kia Motors Corp., its affiliate.
“The best indicator will be when it starts being immediate shortages over in Europe, just because of the proximity,” Langley said. “The U.S. will probably lag by a few weeks or so.”