Advertisement

If you have an ACS member number, please enter it here so we can link this account to your membership. (optional)

ACS values your privacy. By submitting your information, you are gaining access to C&EN and subscribing to our weekly newsletter. We use the information you provide to make your reading experience better, and we will never sell your data to third party members.

ENJOY UNLIMITED ACCES TO C&EN
 

Economy

Covid-19

Coronavirus starts to weigh on industry

Auto manufacturing is the first sector to halt demand for chemicals

by Melody M. Bomgardner
April 1, 2020 | A version of this story appeared in Volume 98, Issue 13

This photo shows a Johnson Matthey catalyst used for diesel vehicles.
Credit: Johnson Matthey
Johnson Matthey has temporarily stopped manufacturing auto catalysts, like this one used in diesel vehicles.

Manufacturers around the world are slowing or halting operations, both to prevent workers from coming into contact with the novel coronavirus and to respond to reduced demand from consumers and businesses under lockdown.

That’s not good for the chemical industry. Although chemical production is deemed critical in the fight against the pandemic, firms see a significant slowdown in business ahead. Some have already closed plants; others are delaying major spending in a bid to preserve cash.

Automakers kicked off the first wave of demand cancellation, with several companies in the US and Europe suspending production in mid-March. Some, like General Motors and Ford, are retooling to make ventilators.

The moves have rippled up the supply chain, affecting chemical and materials makers such as Goodyear Tire and Rubber, which has suspended manufacturing at chemical and tire plants in Brazil, Canada, Chile, Colombia, Mexico, and the US until further notice.

Support nonprofit science journalism
C&EN has made this story and all of its coverage of the coronavirus epidemic freely available during the outbreak to keep the public informed. To support us:
Donate Join Subscribe

Umicore will temporarily shut down most assembly lines outside of Asia that make catalysts for vehicle emission control systems. In contrast, the company says demand for catalysts, as well as battery materials, is picking up again in Asia. Umicore will continue to run its recycling operations in Hoboken, Belgium.

Johnson Matthey, another auto catalyst maker, has temporarily closed plants around the world, even as it sees demand begin to recover in China. The company says it expects an earnings impact from the pandemic of around $62 million. Matthey plants that make catalysts for other industries continue to run.

Auto manufacturing is a major outlet for chemical production. According to the American Chemistry Council (ACC), a trade group, more than $3,000 worth of chemicals is used in every vehicle.

But slowdowns in other sectors are also hitting chemical firms. Methanex, for example, is idling its methanol plant in Trinidad and one of its plants in Chile. The firm forecasts demand for methanol, a raw material for antifreeze, high-octane fuel, and many common chemicals, will be low in the second quarter.

In addition, Methanex says it will delay a planned $500 million in spending on a methanol expansion project in Geismar, Louisiana, for up to 18 months. “We are taking proactive steps today during these unprecedented times to further strengthen our balance sheet,” CEO John Floren says in a statement.

Umicore, Eastman Chemical, Cabot, and construction chemical supplier GCP Applied Technologies are also among the firms telling investors they will cut back on capital expenditures this year. Other companies are likely to announce cash-preserving strategies when they release first-quarter earnings in the coming weeks.

It’s not yet possible to estimate the overall impact of the coronavirus on the chemical industry, though slowdown in durable goods production will likely extend well beyond cars. The appliance maker Whirlpool, for example, has reduced capacity at facilities in the US and Brazil and suspended operations in Italy and India.

Things are moving so fast—it’s unparalleled in pace.
T. Kevin Swift, chief economist, American Chemistry Council

ACC’s chief economist, T. Kevin Swift, expects demand for chemicals will fall further in April. “Things are moving so fast—it’s unparalleled in pace,” he says. Normally, changes in economic conditions take months to develop, but now they are happening in days, Swift says. He anticipates production could return to normal in the second half of this year, but economic growth won’t return until 2021.

The virus is also having an impact on chemical makers’ expansion projects. On March 18, Shell Chemical suspended work at its Beaver County, Pennsylvania, petrochemical complex—one of the largest construction projects in the US. The company says it will consider a phased ramp-up once mitigation measures are in place.

LyondellBasell says it will slow construction of its two-site propylene oxide and t-butyl alcohol project in Channelview and Pasadena, Texas. The firm says it will work with contractors and suppliers on a revised timeline for completion.

Article:

This article has been sent to the following recipient:

0 /1 FREE ARTICLES LEFT THIS MONTH Remaining
Chemistry matters. Join us to get the news you need.