Key maker of auto resin may be out at least 3 months
DETROIT (Reuters) -- The owners of the German chemical plant where an explosion led to the shortage of a key automotive resin material said it will be at least three months before it can return to normal production.
Evonik Industries AG said on Tuesday that it will take at least three months and perhaps not until the start of next winter before its damaged chemical plant in Marl, Germany, can resume full production of CDT, a key base material for resins used in auto production and in other industries.
"There is quite a lot of damage" at the plant in Germany, said Gregor Hetzke, head of the company's performance polymers unit. "We are expecting it will take three to six months to get it back online."
Evonik is the leading maker of cyclododecatriene, or CDT, which is a base material used to make a nylon resin called PA-12 used as a coating on the fuel and braking systems of most passenger cars worldwide, auto suppliers said.
A shortage of PA-12 threatens global auto production and suppliers may not have enough of the resin within a few weeks, global auto supplier TI Automotive CEO Bill Kozyra told customers in a letter last Friday.
Automakers, including General Motors Co and Ford Motor Co, said they are monitoring the situation, but no production has been cut so far. Neither of the top two U.S. automakers forecast whether production would have to be cut just as the U.S. spring selling season hits high gear.
Ford CEO Alan Mulally, speaking to reporters in Los Angeles on Tuesday, said the company does not yet know if the resin shortage will cut into its global production.
"We are evaluating it right now. But it is a significant development to the industry," said Mulally.
Toyota Motor Corp. officials in the United States said the company is monitoring the situation and so far has not had any cutbacks in North America.
Volkswagen AG said the company worldwide has not had production curbs. Daimler AG's Mercedes-Benz said it does not expect any production cutbacks and is in contact with its suppliers.
Evonik's comments came on the same day major automakers and auto suppliers met in suburban Detroit to discuss ways to keep auto production up during the acute shortage of PA-12.
Evonik told Reuters in Berlin that it is looking into alternative materials that can be used as a resin in those automotive systems without the component CDT.
Two workers were killed in a March 31 explosion that shut down CDT production at the Evonik plant.
"It is now clear that a significant portion of the global production capacity of PA-12 has been compromised," said a statement issued on Tuesday by the organizer of the automaker-suppliers meeting, the Automotive Industry Action Group.
"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," the AIAG statement said.
The AIAG is expected to call for several more meetings in the next few weeks on the issue, according to an agenda for the Tuesday meeting.
On Monday, French specialty chemical group Akema said it did not expect its production of PA-12 to return to normal for several weeks. Akema also said it is working with its customers to see if other polyamides, PA-11 and PA-10, would work as substitutes.
IHS Global analyst Tim Urquhart said in a report on Tuesday that Akema and Evonik together account for half the global production capacity of PA-12.
Urquhart said the auto industry has proven resourceful in overcoming supply chain problems as shown during last year's earthquake in Japan and floods in Thailand.
However, in the same report, Michael Robinet, director of IHS Automotive Consulting, said that, if there were any easy alternatives to PA-12, they would already be in use.
Dave Andrea, vice president of auto supplier group Original Equipment Suppliers Association, said most passenger vehicles around the world use PA-12 to coat fuel lines and it plays a pivotal role in keeping the fuel system closed, which keeps polluting vapors from being released.
Andrea said it is likely that automakers will not be able to assess the impact to vehicle output right away due in part to the complexity of the supply chain.
"I don't know that we will know for a week or so" how the shortage of PA-12 will impact auto output, Andrea said.
Andrea also said that, because fuel linings on vehicles are an environmental issue, a stringent validation process must be completed before any untested substitute to PA-12 is used.
Automakers and suppliers discussed alternatives to PA-12 on Tuesday during their closed-door sessions in suburban Detroit.
But Andrea said alternatives that have not undergone rigorous testing cannot be used. To do so would risk legal and warranty costs as these cars get on the road.
On Tuesday, chemical maker DuPont spokeswoman Carole Davies said the auto industry could consider polyphthalamide PPA products as a potential replacement for PA-12.
"We're working very closely with our customers to understand the issue and where we have materials that can help," Davies said of DuPont.
"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."
While Evonik moves to mitigate the impact of the explosion at its plant in Germany, executives in Shanghai announced plans to build a resins plant in Asia.
Completion of that project remains years away, though, so it will not help automakers and suppliers who are working to deal with an expected shortage of nylon 12 materials used to make plastic auto parts.
"In the not-so-distant future we will decide on a location," said Dahai Yu, a member of the executive board of Evonik. "We are still dedicated to opening the plant in 2014."
2011 was a record year for Evonik, with 14.5 billion euros ($18.9 billion) in sales globally. Some 3.1 billion euros ($4 billion) came from the company's plastics business and Asia comprised 20 percent of the company's overall sales.
Evonik aims to expand its business in Asia, with a goal of reaching 4 billion euros ($5.23 billion) in sales in the region by 2015, expanding Asia's share to 30 percent of global sales.
"We concluded a strategy project recently," Yu said, "and we want to double our sales in Asia."
To do this, Evonik is promising to invest 2 billion euros ($2.61 billion) in the region from 2010 to 2015. This will include hiring 2,000 employees over the next few years, the development of the nylon 12 plant and the expansion of the company's Shanghai research and development center.
"The supply chain has become increasingly important," said Yu. "We want to increase our sales by local production to 60 percent by 2015."
Plastics News, an affiliate of Automotive News, contributed to this report.Contact Automotive News