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.
Therefore, weak 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.
Currently, PA6, 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 performance.
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.