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Exports, production cuts help drive PE, PP resin price increases

Exports, production cuts help drive PE, PP resin price increasesGetty Images/iStockphotoNorth American prices for polyethylene and polypropylene resins both saw somewhat surprising increases in September.PE resin prices moved up an average of 3 cents per pound for the second consecutive month in September. Regional PE prices had been flat in July after dropping 3 cents in June. Counting the September increase, regional PE prices now are up a net of 9 cents in 2023.Market watchers said higher exports of PE from North America tightened domestic supplies of the material and allowed the September hike to take hold, even though PE demand in the region hasn't been strong this year."Exports are driving the narrative," market analyst Mike Burns said. He added that North American PE makers "need exports now."Market analyst David Barry believes the main driver of recent PE price increases has been export demand."PE suppliers have really upped their export game this year, and we're seeing that reflected in U.S. trade data," he said in an email to Plastics News. "Some segments of the domestic market seem to be doing a little better, but overall domestic demand is still not robust."Barry, with PetroChem Wire in Houston, also said third-party export sales "have definitely slowed down since the mid-summer frenzy, and a lot of buyers are anticipating a downward price correction for PE in the fourth quarter."Market analyst Esteban Sagel, principal of Chemical & Polymer Market Consultants in Houston, said in an email that higher oil prices make U.S. PE exports very competitive. Global PE markets tend to follow oil prices, although producers in North America and the Middle East use lower-priced natural gas as a feedstock.As recently as the mid-2000s, exports made up only about 20 percent of North American PE sales. Since that point, increased access to shale gas and oil feedstocks have allowed producers to add large amounts of capacity with an eye on the export market. Exports now account for more than 40 percent of North American PE sales.West Texas Intermediate oil prices were near $71 per barrel in late July, but rose to near $94 in late September after some global oil suppliers cut production. Prices have declined since that point, but still were near $83 in early trading Oct. 5.According to industry data, U.S. and Canadian high density PE sales into the domestic market were down almost 7 percent through August, but exports of HDPE from the region were up more than 27 percent in that same period. Overall HDPE sales in the region were up more than 2 percent, with production of the material up almost 6 percent.Production issues at plants operated by Chevron Phillips Chemical Co. in Texas and by Nova Chemicals in Ontario also have affected PE supplies in the region. Both firms have put force majeure supply limits in place at those locations.Regional PE makers now are seeking increases of 3 cents per pound for October. Market sources were split on the chances of those hikes being successful. "October's increase is a tough sell after September's increase barely got over the finish line," one source said.A reversal for PPRegional PP resin prices reversed course in September, increasing by an average of 4.5 cents per pound after declining 0.5 cents in August. PN had reported the August decrease as a full cent, but is correcting that number and showing a 5-cent increase on this week's chart to put the total change for August-September as a 4-cent increase.Combined with previous increases and decreases, North American PP prices now are up a net of 8 cents per pound in 2023.Pricing moves for PP again matched changes in price for polymer grade propylene (PGP) feedstock. PGP supplies tightened in September as a result of production outages at some propane dehydrogenation (PDH) units. Those include challenges at units operated in Texas by Shell Chemical and BASF/TotalEnergies."Monomer inventories are below average … [and] propylene prices are expected to stay elevated for the next month or two," Barry said. "Some [PP] processors are talking about bringing in PP imports as a hedge against further monomer volatility. There's certainly enough [PP] resin overseas, but the price is not all that attractive at the moment."Sagel added that oil also has played a role in PP and propylene market pricing. "The floor of propylene in the U.S. is tightly related to international propylene prices," he said. "With oil moving higher, propylene in Asia is moving higher as well. This drives up propylene in Asia, which helps pull propylene [and PP] higher in the U.S. as well.""Higher costs, together with plant closures, strong export growth to Latin America and an attempt by producers to stem the decline in margins, are together helping drive [PP] prices higher," Sagel added.North American PP supplies will be affected by Braskem America's recent decision to stop production on a resin line in Marcus Hook, Pa. Officials said that step is being taken "to ensure the long-term resilience of [the firm] amid continuing global economic uncertainty and a trough in the chemical industry business cycle."The shuttered Marcus Hook line has annual production capacity of about 450 million pounds. Braskem operates a second line at the site with the same amount of annual capacity. That line will remain in operation.* source : https://www.plasticsnews.com/resin-pricing/pe-pp-resin-prices-climb-driven-exports-production-shutdowns?ref=art-recirc

editor 2023-11-05

Researchers develop new biodegradable plastic with PE properties

How can plastics be designed so they retain their desirable properties but at the same time can be more effectively recycled? This and other questions concerning the eco-friendliness of plastics are the focus of chemist Stefan Mecking and his research group at the University of Konstanz.In their latest paper in the international edition of Angewandte Chemie, the team presents a new polyes正在上传...ter which exhibits material properties that are attractive for industry while being environmentally friendly.Plastics are made of long chains of one or several chemical basic modules, so-called monomers. Plastics distinguished by high crystallinity and water repellency, therefore mechanically highly resilient and stable, are widely used.A well-known example is high density polyethylene (HDPE), whose basic modules consist of non-polar hydrocarbon molecules.What may on the one side be advantageous properties for applications can also have adverse effects: It is very energy intensive and inefficient to recycle such plastics and recover the basic modules. Also, if such plastics leak into the environment, the degradation process is extremely long.To overcome this supposed incompatibility between the stability and biodegradability of plastics, Mecking and his team insert chemical “breaking points” in their materials. They already showed that this greatly improves the recyclability of polyethylene-like plastics. However, good biodegradability is not automatically guaranteed.“Plastics often gain high resilience because they are ordered in densely packed crystalline structures,” Mecking explained. “Crystallinity in combination with water repellency usually strongly decelerates the biodegradation process, as it impairs the microorganisms’ access to the breaking points.” However, this does not apply to the researchers’ new plastic.The new plastic, polyester-2,18, consists of two basic modules: a short diol unit with two carbon atoms and a dicarboxylic acid with 18 carbon atoms. Both modules can be easily obtained from sustainable sources.For example, the starting material for the dicarboxylic acid, which is the plastic’s main component, comes from a renewable source. The polyester’s properties resemble those of HDPE: due to its crystalline structure, for example, it exhibits both mechanical stability and temperature resistance.At the same time, first experiments for recyclability showed that under comparatively mild conditions, this material’s basic modules can be recovered.The new plastic also has another, quite unexpected property: in spite of its high crystallinity it is biodegradable, as lab experiments with natural enzymes and tests at an industrial composting plant showed.Within a few days, in a lab experiment the polyester was degraded by enzymes. The composting plant’s microorganisms required about two months, so this plastic even meets ISO-composting standards.“We too were amazed by this rapid degradation,” stated Mecking. “Of course we cannot transfer the results of the composting plant one-to-one into any conceivable environmental condition. But they do confirm that this material is indeed biodegradable and indicate that it is much less persistent than plastics like HDPE, if it should unintentionally be released into the environment.”Both the recyclability of this polyester and its biodegradability under variable environmental conditions are now to be studied further. Mecking sees possible applications for this new material, such as in 3D-printing or in the production of packing foils.In addition, there are further areas of interest, in which it is desirable to combine crystallinity with recyclability and the degradation of abraded particles or similar loss of material.source : https://www.adsalecprj.com/en/news_show-79634.htmledit : handler

Editor 2023-07-21

Nestlé USA sustainability official: Packaging is a resource, not waste

Nestlé USA sustainability official: Packaging is a resource, not wasteNational Harbor, Md. — As one of the most well-known consumer products companies in the world, Nestlé SA is working to change the perception of the packaging, including plastics, that protects and delivers its products."Unfortunately, a lot of times, consumers perceive the package that they are holding as waste. So we are transitioning and changing the mindset of thinking of that packaging as going from waste to going to a resource," said Nicole Camilleri, packaging sustainability manager for Nestlé USA."We want that package to be circular and protect that resource similar to how we protect water or our forests," she said at the recent Plastics Recycling Conference in National Harbor.Nestlé has at least one product in 97 percent of consumer homes, so it has the potential to create widespread change, she said."Because packaging plays such a significant role here, Nestlé's vision truly is that none of our packaging, including plastics, ends up in landfill or as litter. Packaging is the first moment that a consumer has with our product when they see it on a store shelf and they pick it up and feel our packaging," Camilleri said. "It's also the last moment they have with our product. Once they are done consuming our product, they are holding the package itself."To help elevate the importance of rescuing used packaging from disposal, Nestlé has committed to making 100 percent of its packaging either recyclable or reusable by 2025, she said. The company also has committed to reduce the use of virgin plastic by one-third by 2025, including business growth.In early 2020, the company committed to investing up to 2 billion Swiss francs ($2.08 billion) to shift from virgin plastics to food-grade recycled plastics. Nestlé, at the time, pledged to source up to 2 million metric tons of food-grade recycled plastics and allocated money to pay a premium for those materials through 2025."So we have a lot of resources across our entire company working on these really important ambitions. We have structured ourselves into three different pillars. First and foremost, to develop the packaging of the future, this is where our R&D community, our technical, manufacturing, the procurement teams come together to ensure that every package we put out in the market is designed appropriately for circularity," Camilleri said."Secondly, to help shape a waste-free future. This is really critical, and this is where our advocacy work and our coalition work comes in. So that we are ensuring that every package we put out to the market has the appropriate infrastructure so we have access, we have collection, sortation and reprocessing as well as end markets," she said."And, finally, driving new behavior and understanding with our consumers," Camilleri told the crowd, including education and empowerment to recycle. "Because at the end of the day, it's the consumers who makes the choice to put the packaging into the recycling bin."For me, all three of these things need to work in harmony. Because if one of them is broken, that chain in circularity is also broken," Camilleri said.source : https://www.plasticsnews.com/news/nestle-sustainability-official-packaging-not-wasteedit : handler

Editor 2022-05-16

Chip shortages expected to hit global auto sales for much of 2022

Chip shortages expected to hit global auto sales for much of 2022Automotive industry outlookThe global microchip shortage that crimped new-vehicle output last year will continue to pinch volumes in 2022. Even as production schedules improve, automotive inventory is expected to remain tight for much of the coming year after plunging in 2021 to the lowest level since the Great Recession.U.S. light-vehicle sales are expected to rise slightly in 2022 but remain well below pre-pandemic levels. Once inventory and production normalize, forecasters expect pent-up demand to propel the industry for the next few years."It's not greatly different than we saw out of the Great Recession and how many years that carried us," Tyson Jominy, vice president of data and analytics at J.D. Power, told Automotive News. "I think [demand] is stronger by several magnitudes than what we saw even back in 2010 through '13."Analysts with IHS Markit expect U.S. sales will rise to nearly 15.5 million vehicles in 2022, while Edmunds estimates a more modest 15.2 million. That compares with a projected total of about 15 million in 2021. Most automakers plan to report final results for last year during the first week of January.With most vehicles selling as they arrive at the dealership, if not before, the actual number will depend largely on how many vehicles automakers can build."Throughout most of '22, we do expect to see sort of a one-in, one-out-type basis," Jominy said. "Anything produced in at least the first three quarters is going to go directly to customers, and that will set the sales pace."In mid-December, dealer Will Churchill had sold out of Cadillacs at his store in Fort Worth, Texas. He expected more vehicles to arrive before the end of the month, but most of them were already reserved for customers. Every Escalade headed to the dealership over the next 90 days was spoken for, he said."Right now, we are in a situation where we are selling everything the manufacturer will give us," said Churchill, an owner of Frank Kent Motor Co. "We hope to have a greater volume in 2022 than 2021 strictly because we should get more cars."Charlie Gilchrist, president of Gilchrist Automotive in Texas, a large market, expects a 10 percent bump in new-vehicle sales this year for his 11-store group. In the weeks before Christmas, Gilchrist was anxiously awaiting deliveries to supplement the 65 vehicles he had on the ground at his largest Ford store, Southwest Ford.He had been expecting to sell 200 in December, which was already 30 vehicles fewer than a year earlier."If those don't hit, then obviously we're not going to make those numbers," he said in mid-December. "I think everybody's in the same boat right now. With the demand as it is, you can sell the vehicles as soon as you can get them."Production optimismToyota Motor North America has a rosier outlook than the forecasting firms.Jack Hollis, senior vice president of automotive operations, said he expected light-vehicle sales "in the mid-16 million range.""In terms of the semiconductor supply, we expect challenges to continue through the first quarter of [2022], but supply is improving every day," he said. "As for inventory, we will see a steady increase all year. However, we do not believe we will see 100,000 vehicles on the ground in 2022."Toyota and Lexus began December — historically one of their biggest sales months of the year — with 116,638 vehicles either at dealerships or in port awaiting shipment.That represented an 18-day supply of light trucks and a 20-day supply of cars, and about a third what they had in stock a year earlier.Randall Reed, CEO of eight-store World Class Automotive Group in Texas, which has Ford and Lincoln franchises, expects more inventory in the spring but not pre-crisis amounts."We'll never get back to the levels of inventory that we used to stock, and I'm happy about that," Reed said. "I'd much rather have a lower day supply and keep the demand high and the rebates low. It's good for the manufacturer, and it's good for us."Automakers may be adapting to limited chip supplies, said Mark Fulthorpe, executive director of global light-vehicle production forecasting at IHS Markit. Production has begun to stabilize globally in recent months, and automakers have been experiencing less unscheduled downtime, he said."There's a new normal probably emerging there, which has the more limited supply of semiconductors built into OEM planning in a way that was probably not possible earlier in the year," Fulthorpe said during a Dec. 16 presentation to reporters and IHS customers.Used pricing boomIn December, prices of used vehicles sold by franchised dealerships were expected to surpass $30,000 for the first time ever, according to J.D. Power. Through the middle of the month, the average used-vehicle price surged to $30,316, up about one third from $22,875 in December 2019. The vast majority of the jump was because of higher vehicle values, with only 7 percent a result of changes in segment mix.The average transaction price for new vehicles rose to $44,427 as of mid-December, up 17 percent from a year earlier, J.D. Power said.Larry P. Vellequette and Michael Martinez of Automotive News contributed to this report.source : https://www.plasticsnews.com/news/computer-chip-shortages-expected-hit-global-auto-sales-much-2022edit : handler

Editor 2022-02-22

SK Capital buys majority stake in materials maker Techmer PM

SK Capital buys majority stake in materials maker Techmer PMSK Capital has made another plastics-related move, this time acquiring a majority stake in materials firm Techmer PM LLC for an undisclosed price.Clinton, Tenn.-based Techmer makes engineered compounds and color and additive concentrates for plastics and fibers. SK Capital is a New York-based investment firm.SK is buying the majority stake from Techmer CEO and Chairman John Manuck, along with business partners Rehrig Pacific and Tokyo Ink. Manuck, who founded Techmer in 1981, will retain a significant ownership stake.In a July 20 phone interview, Manuck said that the deal with SK will allow Techmer to continue to grow, especially in international markets."It's been a long run," he said. "A lot of people have spent their entire careers with us and I want us to be able to grow. If we can't do that, it's been an empty promise."Techmer serves customers across global markets, including agriculture, automotive, aerospace, building and construction, consumer products, medical and rigid packaging, as well as many OEMs. The firm works with leading brand owners as well as organizations such as Oak Ridge National Laboratory and NASA.SK manages a portfolio of companies focused on specialty materials, chemicals and pharmaceuticals. The firm now has made four plastics-related investments in recent years, including the purchase of the Performance Products & Solutions unit of PolyOne Corp. for $775 million in late 2019. That Avon Lake, Ohio-based business, a major PVC compounder, now operates as Geon Performance Solutions. PolyOne is now called Avient.Changes in the plastics industry over the years also made the deal needed, according to Manuck, who began his career in 1969 at a resin plant operated by Monsanto Inc. in Massachusetts."I was a guy with a hardhat," he said. "Then in the '70s and '80s, plastics were like software — you grew in double digits in a good year and by single digits in a recession."As the industry matured in the 1990s, Manuck said, consolidation took place, putting more emphasis on major brands made by global companies that needed global production."They need that performance from a supplier, and we realized we couldn't do that in the next year or two without help," he added."It's all about the future — that's why we did [the deal with SK]," Manuck said. "We had received a lot of offers over the years. This was the right timing with the right partner."Techmer's management team, including Manuck and President Ryan Howley, will remain in place. Howley said July 20 that "the whole idea" behind the deal with SK is "a global growth strategy.""We want to grow in other parts of the world," Howley said. "It's difficult to do that without capital." Techmer currently operates six plants in the U.S. and one in Mexico, which opened in late 2017."We'll use the Techmer name and grow with that," Howley added.In a July 20 phone interview, SK Managing Director Jon Borell said that the investment in Techmer "is very consistent with our overall strategy of investing in market-leading businesses and providing them with the resources they need to grow.""We saw that opportunity in John Manuck and Techmer," he added.SK Managing Director Mario Toukan added July 20 that his firm "views Techmer as a leader" in masterbatch concentrate production and technology."We focused on their know-how and ability to provide solutions to their customers," he said. "We can help them build a toolkit to grow with OEMs and their overall customer base."Looking ahead, Borell added that Techmer could grow either organically or by acquisition. Techmer and SK began talking about a potential deal in mid-2018. The closing of the deal was delayed by the COVID-19 pandemic."COVID delayed things by a few months," Howley said. SK officials had visited Techmer sites before the pandemic hit, he added, but "we had to take a breath and make sure that the economy was OK."SK's Borell added that the two firms were in "advanced discussions" earlier this year, but Techmer "wanted to make sure their employees and business were taken care of, which was the right thing to do."Techmer has performed well during the pandemic, Howley said. Although the firm's automotive business is down, he added that its top-selling material now is a polypropylene-based concentrate used to improve filtration in medical masks.Techmer's U.S. plants are in Clinton; Rancho Dominguez, Calif.; Wichita, Kan.; Dalton, Ga.; New Castle, Del.; and Batavia, Ill. Its Mexican plant is in Querétaro. The firm employs more than 600 worldwide.Since 2014, Techmer has been named to the Plastics News Best Places to Work list five times, most recently in 2020. The firm is one of North America's 30 largest compounders and concentrate makers, according to Plastics News data.SK's portfolio of businesses has annual sales of about $9 billion and employs more than 10,000 globally. In addition to Geon, SK's plastics-related holdings include nylon 6/6 resin maker and compounder Ascend Performance Materials of Houston and additives supplier SI group of Schenectady, N.Y.Kirkland & Ellis LLP acted as legal counsel to SK Capital on the Techmer deal. Committed debt financing was provided by Cerberus Business Finance LLC. Pillsbury Winthrop Shaw LLP acted as legal counsel to Techmer PM.source: https://www.plasticsnews.com/news/sk-capital-buys-majority-stake-materials-maker-techmer-pm

editor 2020-07-26

Ascend aiming technology at surgical masks FRANK ESPOSITO

Ascend aiming technology at surgical masks FRANK ESPOSITO Materials maker Ascend Performance Materials is seeking approvals for a technology that officials said can deactivate the virus that causes COVID-19.In a June 30 news release, officials with Houston-based Ascend said that the firm — a leading maker of nylon 6/6 resins and compounds — has submitted its first FDA 510(k) for clearance to market its patent-pending Acteev technology in the U.S. in a surgical mask. Technology used in the mask would be marketed under the Acteev Biodefend brand name.Independent laboratory testing has found Acteev nylon 6/6 fabric made by Ascend achieves more than 99 percent efficacy at deactivating bacteria, fungi and viruses, including SARS-CoV-2, according to the company."We've partnered with independent labs for comprehensive testing and have reallocated resources to ready ourselves for world-scale production upon receiving regulatory clearance," Chief Technology Officer Vikram Gopal said.Acteev technology embeds active zinc ions into the matrix of a specialty polymer. Acteev Biodefend technology has been shown in lab tests to deactivate SARS-CoV2, the coronavirus that causes COVID-19, and other pathogens including H1N1, staphylococcus and E. coli, Gopal said."What is unique about Acteev is the marriage between the antimicrobial ingredients and the polymer," he added. "Because it isn't a simple topical finish or coating, the antimicrobial protection can last much longer. It will not flake off or be worn away.""And, unlike some other antimicrobials, zinc is environmentally friendly," he said.Acteev technology has been tested in multiple end forms, including knit and woven fabrics; engineered plastics; and nanofiber, meltblown and spunbond nonwoven materials, officials said. The technology "could provide an answer to the calls to identify an immediate, positive solution to restart the economy and reopen our schools and universities safely," Gopal added."The current global scarcity of pathogen-resistant materials is not going to end unless scientists and engineers look for novel ways to face the challenge," he said. "We are proud to submit Acteev Biodefend as a potential solution."Earlier this month, Ascend launched Acteev Protect, an antimicrobial line of protection formulated to guard against the growth of fungi, bacteria and other microbes on textiles and nonwoven fabrics. Officials said that Acteev Protect can be used to make face coverings, filtration devices, and textiles for upholstery and apparel.Ascend employs 2,600 and operates nine global locations, including five fully integrated manufacturing facilities in the southeastern U.S. and a compounding plant in the Netherlands.source: https://www.plasticsnews.com/news/ascend-aiming-technology-surgical-masks

editor 2020-07-05

Polyplastics highlights DURANEX PBT Grade for high-voltage automotive applications

Polyplastics highlights DURANEX PBT Grade for high-voltage automotive applicationsThe Polyplastics Group is offering an improved polybutylene terephthalate (PBT) grade which provides improved tracking resistance for a range of high-voltage automotive components. DURANEX PBT CG7030 is a 30% glass-filled grade which also delivers strong dimensional stability and highly stable electrical resistance and dielectric breakdown properties. The automotive industry is undergoing drastic change with electrification gaining traction due to worldwide efforts to reduce the use of fossil fuels and cut emissions. As car makers move increasingly to electric vehicles, the demand for high-voltage components is expected to increase. Polyplastics conducted extensive testing of both PA 66 and PBT in temperature environments ranging from -40ºC to 140ºC for electric car applications such as batteries, power control units (PCUs), and motors/generators.Polyplastics offers an improved PBT grade for a range of high-voltage automotive components.Since the properties of PBT grades experience little change even in hot, moist environments, Polyplastics determined that they are more suitable than PA66 for use in high-voltage applications. These results suggest that using PBT could produce less variation in electrical properties when environments change. DURANEX PBT CG7030 exhibits highly superior dimensional stability. Polyplastics reports that both moisture absorption and dimensional change rates for PBT grades are around one-tenth of the values observed for PA66-GF33%. Test results also show that DURANEX PBT CG7030 maintains its dielectric breakdown strength in high heat and humid environments (85ºC/85%RH, after 1,000 hours). Indeed, a significant decline of around 40% was observed for PA66-GF33% in high heat and high moisture conditions. DURANEX PBT CG7030 also has improved volume resistivity versus PA66-GF33% which shows significant declines in high heat and high moisture environments.Source：Adsale Plastics Network link : https://www.adsalecprj.com/en/news_show-68034.html

Editor 2020-04-01

As coronavirus hits auto supply chain, question looms: Who pays for pricey freight?

-As coronavirus hits auto supply chain, question looms: Who pays for pricey freight?AdientWhile Covid-19 coronavirus is not yet a global health pandemic, the outbreak's costs are mounting more than 7,000 miles away and it's not yet known who will be left holding the bill.Automotive suppliers and automakers are gaming out how to ensure parts shipments depart China and make it to the U.S. West Coast and in plants throughout North America without even costlier disruptions.Companies with a large presence in China, where the outbreak began in early January, are now beginning to make predictions on the virus' impact. Plymouth-based Adient plc is projecting at least a $60 million hit to its income in 2020 from the virus; Troy-based Aptiv said the outbreak will drop income by as much as $80 million; and Van Buren Township-based Visteon Corp. said revenue in the first quarter alone with be impacted by $60 million.Many government-mandated quarantines in China have been lifted and production has resumed at nearly every factory in China, though many are not at full capacity. Anderson Chan, global communications manager for Ford Motor Co. told Crain's the automaker restarted production on Feb. 10 and will "continue ramping up our production without compromising the safety of our employees."Now the industry is faced with the problem of getting those parts from China to the U.S. — and quickly. The industry ramped up production ahead of the Chinese Lunar New Year, where most plants shut down between Jan. 24 and Feb. 2, but with typical freight taking six to eight weeks to reach U.S. shores on freighters, many companies are using costly expedited air freight.The arguments arising are because expedited air freight is very expensive, especially as demand for those services ramp up.Moline, Illinois-based Deere & Co., the maker of John Deere agricultural equipment, told investors on Feb. 21 that it anticipated spending $40 million on expedited air freight on exporting out of China in the first quarter of 2020.Air freight prices for moving product out of China have increased from roughly $3.65 per kilogram ($1.65 per pound) to $6.65 per kilogram ($3 per pound) in the last month, American Shipper reported on Feb. 25.Executives from New York-based freight company Atlas Air told investors last week during its fourth quarter earnings call that it's in discussion with customers to secure future freight as capacity is already running out, American Shipper reported.In the auto sector battles are brewing over who is responsible for paying the shipping costs, said Daniel Sharkey, partner at Birmingham-based law firm Brooks Wilkins Sharkey & Turco PLLC, specializing in automotive contract law."The arguments I'm having today are who is responsible for filling any gaps in the parts supply pipeline," Sharkey said. "Some of the (automakers) are saying they will pay for expedited air freight, no problem. Others are are saying the supplier has to do everything its power to get those parts out of country and pay for it."Sharkey said FCA Automobiles is taking a hard-line stance in attempts to force suppliers to pay for expedited freight."FCA continues to monitor its global supply chain in relation to the coronavirus outbreak and is working with our supplier partners to ensure the safety of all personnel and to facilitate on-time deliveries," Michael Palese, FCA's communications manager said in an emailed statement to Crain's. "We do not comment on supplier contracts."Suppliers are seeking to exercise the force majeure clause in their contracts with automakers to shift costs, said Tom Manganello, partner at law firm Warner Norcross & Judd LLP in Southfield.The clause excuses companies from fulfilling contractual supply obligations and penalties from an "act of god" beyond their control. Force majeure have been previously used in several major catastrophic events, such as the 2011 earthquake and tsunami in Japan."Shipping is going to be expedited and there will be disputes on shipping terms," Manganello said. "This all really just puts a magnifying glass on the interdependence of the supply chain. The irony, of course, is the (auto makers) started this big push for the supply chain to go to China and now they want them to pay for (the shipping during this problem) too."BorgWarner Inc. and Lear Corp. declined to comment on contracts with customers.The China Council for the Promotion of International Trade, which controls the issuance of force majeure in China opposed to contracts in the U.S., had issued 1,615 force majeure certificates as of Feb. 17 for companies in more than 30 sectors, totaling a total of $15.7 billion in contracts, The China Daily reported.Coincidentally, the limited trade deal China and the U.S. signed in December also has a force majeure clause that allows China to forgo its obligation to purchase $200 billion of U.S. goods and services over the next two years.U.S. stocks plummeted Tuesday after the U.S. Centers for Disease Control warned Americans to prepare for a Covid-19 outbreak. Shares of General Motors Co. and Ford Motor Co. were both down nearly 4 percent in Tuesday afternoon trading.Aptiv was down 3 percent, Visteon down nearly 5 percent, BorgWarner down 3 percent and Lear down 1 percent.The virus has infected more than 80,000 as of Feb. 25, mostly in China, and claimed the lives of more than 2,700. However, it's spreading outside of China quickly. There are now 52 cases in the U.S. with no reported deaths.See more Plastics News coverage of coronavirus here. source: https://www.plasticsnews.com/news/coronavirus-hits-auto-supply-chain-question-looms-who-pays-pricey-freight

editor 2020-03-01