Suppliers race against clock to avoid resin shortage

Dustin Walsh covers auto suppliers for Crain's Detroit Business, an affiliate of Automotive News

Hundreds of representatives from the auto industry are gathering today in suburban Detroit to secure alternative sources of a key resin and head off a potentially devastating shortage.

The specter of the resin shortage comes as the auto industry climbs back after the economic downturn and as some companies are emerging from the effects of last year's earthquake and tsunami in Japan and flooding in Thailand.

Supplies of the resin -- known as PA-12 and used to make fuel tanks, brake components and seat fabrics -- are tightening after a March 31 explosion at an Evonik Industries AG plant in Germany that killed two employees.

Evonik and French competitor Arkema SA account for about half of the world's supply of PA-12, according to research firm IHS Automotive.

"It is now clear that a significant portion of the global production capacity of PA-12 (nylon 12) has been compromised," the Automotive Industry Action Group, an industry trade association, said in a statement.

The supply of PA-12 was tightening even before the Evonik accident because the resin also is used in solar panel production, IHS said.

Robust demand for the resin has pushed prices higher, and many suppliers and automakers have been searching for alternative materials, according to IHS.

Suppliers typically carry two weeks of PA-12 inventory, according to media reports. It has been 17 days since the Evonik explosion.

"We do not yet have an indication on how drastic the reductions in nylon 12 (PA-12) shipments will be but it is likely to be serious," Paul Blanchard of IHS Chemicals said in a note today.

Blanchard noted that many suppliers have issued force majeure clauses, allowing them to use alternative materials in the event of a disaster.

William Kozyra, chairman of supplier TI Automotive Ltd., warned of severe shortages in a letter last week to Ford, General Motors, Toyota and Volkswagen, according to a Bloomberg report.

Kozyra organized today's meeting of industry executives, lawyers and supply chain heads.

Automakers and suppliers are in contact with alternative makers of PA-12, including Arkema, Ube Industries Ltd. of Japan and Ems-Chemie Holding AG of Switzerland.

DuPont Automotive is also working on alternatives to PA-12 for the industry, a spokesman said.

But Michael Robinet, managing director of Northville-based IHS Automotive, said in a statement: "If there were easy substitutes, they would have been thought of already."

For now, automakers have no plans to idle plants or cut production forecasts.

"The material provided by Evonik is in our North American supply chain, but until we complete an assessment with our suppliers, the impact is unknown," said Mike Goss, a Toyota spokesman. "At this time, there is no need to adjust production, and we will continue to work closely with our suppliers to ensure ongoing production."

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