Polymers and metals may compete for some automotive applications but the motor industry has been a strong driver of demand for both plastics and a range of metals over the past two years. And the good news is that the support will continue — volume growth bolstering steel, environmental legislation boosting polymers, while re-tooling and new power systems lift demand for some minor metals.
Automotive manufacturing is one of the largest end-user markets for metals, consuming them for a whole gamut of structural and technical applications. It also makes up 8.6pc of European plastics demand, according to manufacturers’ association Plastics Europe.
European automotive industry association ACEA’s monthly new car registration statistics have shown a year-on-year increase in each of the past 28 months and a 9.3pc jump in total 2015 registrations compared with 2014. That includes a record year for the UK industry, where 2.63mn new cars were registered, beating the previous high of 2.58mn in 2003.
That growth will likely continue, albeit at a slower rate. ACEA expects an increase of around 2pc to roughly 14mn units in 2016. Overall European new registrations of 13,739,921 in 2015 remained well below the peak of almost 16mn in 2007, but GDP is growing and unemployment shrinking to a 4-year low in the euro area in November 2015 is a recipe for increased discretionary spending.
The US broke a 15-year old record in 2015, selling 17.47mn cars. Growth there is expected to continue solidly. Merrill Lynch forecasts increased new car sales over the next three years to a peak of 20mn in 2018, as the growing US economy allows consumers to flock to new models coming onto the market. The National Automobile Dealers Association (NADA) has a less optimistic view, predicting a record year in 2016 but a decline thereafter as used car prices fall on increased supply. But it still expects new car sales to remain at or above 16.8mn units per year until 2019, comfortably above the average of the past ten years.
Passenger car sales in China grew by 7.3pc year on year to 21mn in 2015 according to local industry association CAAM, although the growth rate has dipped from 15.7pc in 2013 and 9.9pc in 2014. Sales in the third quarter were lower than the same period last year, but a tax cut on vehicles with engine capacity below 1.6 litres helped to drive a strong fourth quarter. The slowing of economic growth in China is a concern but the level of motorisation — 91 cars per 1,000 people in China compared with 564 per 1,000 in the EU, according to ACEA figures — leaves plenty of room for growth to support sales.
Along with higher sales numbers, stricter emissions guidelines are encouraging manufacturers to use more plastic materials in cars to make them lighter and more fuel efficient. Material distribution varies between models, but industry consultant FKA estimates that between 250kg and 360kg of plastic are used in a conventional vehicle, of which over 20pc are polyolefins. The proportion of plastics in cars is likely to increase over time as environmental legislation governing carbon dioxide emissions becomes increasingly stringent.
The combination of sales numbers and light-weighting has led several large European polymer manufacturers to invest in automotive plastics. Total bought German automotive plastic compounder Polyblend in 2015, as well as building two new polypropylene compounding lines of its own at its Carling petrochemical site — an investment which it described as complementary to its focus on the automotive industry.
Increased plastic use in cars will inevitably push out metals, but they still comprise by far the largest proportion of each new car by weight. US specialty metals supplier ATI is increasingly targeting the automotive sector, alongside aerospace, as the major growth market for its alloy products.
Automotive tooling, where the manufacturing schedule for new tools runs six months ahead of the manufacture of new car models is a major consuming sector for tungsten, whose prices dropped to 10-year lows in 2015, so tungsten miners are eyeing growth in car sales and new model launches with hope.
Automotive market growth is also expected to boost electronics and power systems, and in particular batteries for hybrid and electric vehicles. Cobalt, which is used in both lithium-ion batteries and nickel metal hydride batteries deployed in energy-efficient vehicles is set to be a major beneficiary of this growth. A combination of growing battery demand and closures at higher-cost cobalt producers already seen in early 2016 could tip the cobalt market, which was expected to be finely balanced towards slight oversupply in 2016 into a deficit.
Reporting quarterly results this week, leading global manufacturers of tantalum-based capacitors AVX and Kemet, also pointed to the automotive sector as an area that will support their product sales in the long-term. Unlike consumer electronics that are switching to smaller portable devices with fewer capacitors that are increasingly tantalum-free, the high capacitance that solid tantalum offers remains a selling point for capacitors in critical applications, which include automotive electronics. Against a downturn in consumer electronics, the automotive sector remained a strong end market for tantalum in 2015.