The automobile industry is an important downstream sector of the chemical industry. The sluggish downstream automotive market may dampen the demand on chemicals.
In the first
half of 2019, the car sales around the world continue to decline due to the US-China
trade frictions, Brexit and other political and economic factors. Data in June
showed that major auto markets in the world showed a decrease compared with the
same period last year.
demand from the automotive sector continues to weigh on the chemical market.
At present, many
chemical products have experienced the negative effects due to the downturn
auto market, including the styrene-acrylonitrile copolymer (SAN), polypropylene
(PP), glycol ether, adipic acid, the methyl methacrylate (MMA) and poly methyl
methacrylate (PMMA), toluene diisocyanate (TDI), base oil, butyl glycol (BDO),
the epoxy resin and titanium dioxide, etc.
It is also reported
that the European polyamide (PA) market has also been heavily affected by the
weak automotive market. According to the latest data released by Eurostat at
the end of July, European PA exports fell sharply in May, down by 51.3% year on
year due to the continued weak global demand for automobiles.
PA66 and caprolactam markets have also been hit, and there will be no
improvement in market buying interest in the short term.
The auto market
has severely affected the financial performance of chemical companies. BASF,
the world's largest chemical company, and Brenntag, the world's largest
chemical distributor, have issued full-year profit warnings ahead of the
second-quarter earnings season.
BASF's warning highlighted the automotive sector in particular, with analysts estimating its exposure to automotive sector at about 20 per cent of sales.
PPG, the coatings
group in the United States, reported an 8% year-on-year fall in demand for
automotive coatings in the second quarter, with significant weakness in China
and Europe. PPG expects auto demand to remain weak in the third quarter and expects
more volatility in China, which will have an impact on the company's
Market analysts say
that the stagnating auto industry may not be improved in the
second half and more chemical companies are expected to issue profit warnings.