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Automotive Polymers – Thinking Outside the Polyolefin Box

4th Automotive Plastic & Advanced Composites Summit

16-17 May 2019, Munich

Nigel Davis and Toni Fuecker

ICIS

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➢A quick review of the polymers in a car

➢Nylon – A return to profitability, but demand outlook uncertain

➢ABS – Will it continue to replace metal?

➢Other polymers – Some thoughts

• Polyurethanes

• Elastomers

Agenda

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A quick review of the polymers in cars

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A quick review of the polymers in cars

Source: Plastics Europe

PE10%

PP29%

PVC4%

ABS/SAN/ASA5%

PA12%

Other engineering14%

PUR17%

Other plastics9%

Plastic use in automotives, Europe, 2012

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A quick review of the polymers in cars

Source: ACC

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Plastic and composite use in N American light vehicles

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A quick review of the polymers in cars

High plastic requirement in electric vehicles (Evs)

➢Lower weight increases range and decreases charge time

➢Lower body weight allows more battery weight/range

➢New components (e.g. battery housing)

➢Heat resistant key in combustion – not so in EV Source: EPA

Source: BMW

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A quick review of the polymers in cars

Not likely to be significant until 2030 onwards

Source: ICIS Analytics

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Passenger car stock by vehicle type, China

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Passenger car stock by vehicle type, West Europe

Gasoline Diesel HEV Others Other

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A quick review of the polymers in cars

But which plastics will be in vehicles of the future?

Source: ICIS Analytics

➢EVs are a game changer internally

• Complete re-design of vehicle engine systems

➢Longer term, autonomous vehicles could have more of an impact

Characteristic of EV Polymer Implication

Lower weight extends range More polymers, less metal

Less heat generation Heat resistance less key eg nylon loser

Characteristic of Autonomous Vehicles

Polymer Implication

Lower accident rate/ Lower safety standards?

Lower metals, more polymers, but no bumpers, etc eg ABS loser

Higher leisure time More entertainment systems on board eg ABS winner?

Fewer cars sold Volumes down?

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Nylon

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Nylon

What is Nylon?

➢Nylon or polyamide is an engineering plastic with high-heat resistance

➢Two main commercial forms – 6 and 6,6

➢ ICIS provides prices for nylon globally

➢ ICIS also has supply-demand data for global polyamide resins and fibres

➢Price forecast for intermediates caprolactam and adipic acid to launch 2019

Asia Europe US

Textile 5

Industrial 1 8 6

Chips 1

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Nylon

Heat-resistance vs polyolefins

Source: Precision Punch & Plastics

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Nylon

Nylon in the vehicle

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Nylon

Global nylon production

North East Asia

Europe

North America

Others

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Global polyamide resin capacity by region

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Global polyamide resin capacity by producer

Source: ICIS supply and demand database

Polyamide resins = Nylon 6 and 6,6

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Nylon

Global nylon profitability

Source: ICIS supply and demand database

➢Historically, global operating rates weak thanks to North America

➢More recently, increased Chinese supply has again weakened operating rates

➢Future recovery

➢Europe operating rate healthy

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Global operating rates - Polyamide resins

World NE Asia N America Europe

Polyamide resins = Nylon 6 and 6,6

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Nylon

Global nylon profitability

Source: Spread - ICIS pricing , Ops rate - ICIS Supply & Demand Database

➢Spreads (and margins) have dipped with new Asian supply

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European nylon spread vs global ops rate

Average annual spread PA6-capro Global op rate (RHS)

Polyamide resins = Nylon 6 and 6,6

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Nylon

Global nylon profitability

Source: ICIS supply and demand database

➢Future depends on rate of capacity growth

➢We think limited after 2020

➢BUT also depends on demand

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Global capacity growth

N America Europe NE Asia Others

Polyamide resins = Nylon 6 and 6,6Others = Asia and Pacific, South and Central America, Africa, Middle East and former USSR

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Nylon

Future demand

➢CAGR 2018-2025E 3.4% globally

➢Driven by NE Asia 4.3% CAGR

➢Others (mostly emerging markets) growing 4.5% CAGR but from very small base

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Demand by region - Polyamide resins

North America Europe Northeast Asia Asia and Pacific Others

Source: ICIS Supply & Demand Database

Polyamide resins = Nylon 6 and 6,6Others = Asia and Pacific, South and Central America, Africa, Middle East and former USSR

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Nylon

Future demand

➢Electric vehicles do not have the heat problems of combustion engines

➢Can have cheaper polymers housing the engine

➢BUT combustion engine vehicles will continue to grow in NE Asia until 2035/2040

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ABS

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ABS

What is Acrylonitrile-butadiene-styrene (ABS)?

➢ABS is an engineering plastic with high impact resistance

➢ ICIS provides prices for ABS globally

➢ ICIS also has supply-demand data for global ABS

➢Price forecast for Europe and Asia to launch 2019

Asia Europe US

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Global ABS production

Source: ICIS supply and demand database

ABS

North East Asia

South and SE Asia

Europe

North America

Others

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Global ABS resin capacity by region

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Global ABS resin capacity by producer

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World consumption of ABS by end-use sector, 2018 World consumption of ABS by region, 2018

Source: ICIS supply and demand database

ABS

Automotive14%

Construction5%

Electricals67%

Consumer6%

Packaging1% Other

7%North America

8%

Europe10%

Northeast Asia69%

Asia and Pacific10%

Others3%

Where is ABS consumed?

Source: ICIS Analytics

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Northeast Asian consumption of ABS, 2018 European consumption of ABS, 2018

Source: ICIS Analytics

ABS

Differences between Asian and European consumption

Automotive24%

Construction6%

Electricals40%

Consumer10%

Packaging3%

Other17%

Automotive11%

Construction2%

Electricals77%

Consumer4%

Packaging1%

Other5%

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Source: China National Bureau of Statistics

CAGR 2000-2017 Growth 2017

Refrigerator 12.6% 0.8%

Washing Machine 10.9% -1.6%

TV 9.1% 1.0%

Air conditioners 15.3% 24.5%

Source: China National Bureau of Statistics

ABS

Chinese electrical industry has been biggest driver

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Yearly production of electricals in China

Refrigerator Washing Machine TV Air conditioners

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ABS

Automotive is a key application

➢Second largest application – 14% of world consumption

➢10% of NE Asia, 24% of Europe

➢Highest growth application

% CAGR Globally 2010-2016 2016-2017 2017-2018 2018-2025

Automotive 5.7 8.0 9.3 4.8

Electricals 2.3 5.7 5.1 3.9

Total 2.7 5.5 5.4 3.9

Source: ICIS Analytics

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ABS

Automotive is a key application

➢China is the largest car manufacturer globally (36% market share in global car sales)

➢Made in China 2025 policy and environmental regulations continue to increase the volume of plastics in Chinese manufactured cars

Source: ICIS Analytics

% CAGR by regionABS for auto

2010-2016 2016-2017 2017-2018 2018-2025

Northeast Asia 8.1 9.5 13.2 5.6

North America 5.3 6.5 5.9 4.1

Europe 3.3 6.1 3.3 2.7

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Source: ICIS supply and demand database

ABS

Healthy demand growth has improved operating rates

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Global supply and demand of ABS

Capacity Production Consumption Operating rate (RHS)

CAGR 2010-2018

CAGR 2018-2025

Capacity 3.2% 2.4%

Demand 3.3% 3.4%

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ABS

Future demand

➢Positives of EV

• More plastics

• Re-design of engine systems

➢Positives of autonomous vehicles

• Re-design of all systems

• More entertainment systems

➢Negatives of autonomous vehicles

• Impact resistance externally less crucial

• Autonomous vehicles could mean fewer cars sold

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Other polymers – Some thoughts

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Polyurethanes

What are polyurethanes?

➢A polyurethane is a resin formed by the reaction of a diisocyanate with a polyol

➢Used in automotive for flexible foam seats, headrests etc, and rigid foam for insulation in body

➢ ICIS provides prices for isocyanates and polyols globally

➢ ICIS also has supply and demand data for global TDI, MDI, polyether polyols

Asia Europe US Middle East

Isocyanates (TDI, MDI) 11 3 10 6

Polyols 6 1 6 4

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Source: ICIS supply and demand database

Polyurethanes

A shortage of raw material PO could present issues for polyols production

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Global supply and demand of PO

Capacity Production Consumption Operating Rate (RHS)

➢Propylene oxide (PO) very tight globally

➢New plants expected, but many are using untested China technology – will it be reliable and on time?

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Elastomers

What are elastomers?

➢Elastomers, or rubbers, are a synthetic polymer with elastic properties

➢Key component of tyres but also used for sealants, belts, hoses, body and panel components

➢ ICIS provides prices for elastomers globally

➢ ICIS has supply-demand data for global SBR, BR, EPDM, butyl, nitrile, PCR, PIR, SBL, etc

➢Price forecast for Europe and Asia butadiene and SBR, as well as Asian BR, to launch 2019

Asia Europe US China

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Elastomers

Pricing has been volatile, tracking butadiene, but we expect more stability now

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Asia elastomers price forecast

BD Asia SBR Asia PBR Asia

Forecast BD Asia Forecast SBR Asia Forecast BR Asia

Source: ICIS pricing and analytics

➢Several things have changed since 2017

• China tyre demand slowing as expansion policies ended

• High yield for natural rubber from 2018

• More BD supply from mega-refineries

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Other polymers

What other polymers does ICIS cover?

➢ ICIS also covers many other polymers involved in autos production

• European and Asian benchmarks for polyolefins

• Coverage of engineering plastics like PBT and SAN

• Upstream coverage of refining markets and gasoline supply-demand

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Conclusion

Polymers will continue to have a share in automotive production

➢New trends like electric vehicles and autonomous vehicles may change polymer demand

➢BUT evolution rather than revolution

➢ ICIS provides information for a wide array of polymers which go into automotive and can helpyou navigate changing demand patterns

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