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Carmaking collapse cuts commodities consumption


Chances are when you've visited a car dealership shopping for a new vehicle, you were focused on the overall fit, finish and performance. Not immediately evident were the more than 30 key materials and commodities that went into making it.


The US federal government is apparently poised to help troubled US carmakers with a $13.4 billion infusion, but it remains to be seen if such assistance can stall the destruction of demand for the major materials and commodities that go into the typical ... light vehicle.


Aside from the usual steel-panel exterior, items often going unnoticed might be the injection-molded polypropylene used to make many dashboard knobs; or diecast aluminum and magnesium -- vital to under-the-hood components like radiators, engine blocks and the power train.


You will admire the tires, but probably not the butadiene used in the making of rubber for the road. Copper wiring is hardly visible, often shroud in other tube-shaped polymers. Seat cushions are typically made of polyurethane foam, and the dashboard is mostly polyvinyl chloride -- probably most responsible for creating that distinctive new car smell.


The problem lately is that consumers in the North American market are hardly even sniffing around for new cars. Sales are down sharply and the production forecasts are dismal. The automotive sector's problems are destined to substantially weaken demand for many of the materials and commodities noted above.


In this special report, Platts begins to quantify the impact on the materials that tend to hitch their wagons to vehicle production. Known and respected widely for its benchmark price assessments, Platts is also uniquely positioned to assess the "demand destruction" of many of the commodities it covers during such troubling economic times.


On the automotive front, Platts also has a formidable force riding shotgun -- the forecasting experts at JD Power and Associates, which like Platts, is a division of the McGraw-Hill Companies.


For starters, the following focuses only on the North American market fallout. Much of the story is told with the tables and graphs. Other special reports like this may follow. Let us know what you think.


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More than 4 billion lbs of metal, 400 million lb of resin to vanish


The US federal government is apparently poised to help troubled US carmakers with a $13.4 billion infusion, but it remains to be seen if such assistance can stall the destruction of demand for the major materials and commodities that go into the typical North American light vehicle.


From 2008-2009, nearly 4 billion fewer pounds of all metals -- most of that steel -- and some 409 million pounds less of resins and composites will be required, based on Platts estimates using the latest JD Power and Associates North American production forecast and data from the American Chemistry Council.


Of the ten key materials -- by weight -- needed to produce the typical light vehicle, five are metals (carbon steel, iron castings, aluminum, stainless steel and copper); two are major resins (polypropylene and polyurethane); and the other three are fluids/lubricants, rubber, and glass.


The full breakdown is based on a 2007 report by Thomas Kevin Swift, PhD and chief economist at the American Chemistry Council, which examined 2006 light-vehicle weights and component materials. The total weight was about 4,040 lbs, with a light vehicle defined as either a car, light truck, van or SUV.


Sources agreed that the average light-vehicle weight is probably a bit less currently and trending down -- as SUVs and larger autos are no longer favored given the volatile pricing nature of gasoline. But for the purposes of this article, 2006 serves as the base year.


Carbon steel still accounted for the heaviest share of such a vehicle, at about 52% or 2,122 lbs of total weight. After that, there was a big drop off to iron castings (331 lbs, or 8.2%), aluminum (323 lbs, or 8%), fluid/lubricants (211 lbs, or 5.2%), rubber (174 lbs, or 4.3%), stainless steel (107 lbs, or 2.6%), glass (105 lbs, or 2.6%), polypropylene (81 lbs, or 2%), copper/brass (61 lbs, or 1.5%), and polyurethanes (59 lbs, or 1.5%).


With such 2006 vehicle-material shares as a basis, Platts then considered JD Power and Associates' latest light vehicle production forecast for North America. Like Platts, JD Power is a division of the McGraw-Hill Companies.


As of November 2008, JD Power was forecasting production of 11.44 million units in 2009, a 9.6% decline from its estimated 12.66 million units produced for 2008. What's more, from 2007 to 2008, JD Power was estimating that light-vehicle production fell by 15.7% to 12.66 million this year from 15.02 million light vehicle made in 2007. Output in 2006 was 15.24 million units, meaning that production will be off about 25% from 2006-2009, if JD Power's 11.44 million unit forecast holds.


[Ed. Note: This Platts Special Report was written by Benjamin Morse, senior editor, petrochemicals, and Joe Innace, managing editor, steel. Contributing editors from Platts Metals included: Karen McBeth, Jacqueline Roche, Nick Jonson, and Meghann McDonell. Contributing editors from Platts Petrochemicals included: Ihsan Rahim and Angie Joe.]


Created: December 18, 2008


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