DETROIT, Apr 20: Dupont and Dow Chemical are among chemical firms working with global automakers who are bracing for a crunch in production, after a German chemical plant explosion cut a chunk of supply of a nylon resin used in brake and fuel systems.
The risk of production cuts is greater for car markers in the United States and France, and less in Japan and Germany, UBS said in a research note.
‘We see high risk of production stoppages in the second quarter,’ UBS analysts said in the research note issued on Thursday. But they also saw an ‘equally high probability’ that alternatives would be found within the same quarter.
The global supply of PA-12, used in several industries including auto manufacturing, was already stretched thin before the explosion at an Evonik Industries AG plant in Marl, Germany on March 31, that led to the nylon resin shortage.
Auto experts and analysts are not clear how the shortfall would affect China, which has overtaken the United States as the world’s largest auto market.
Florian Schattenmann, research director for Dow Automotive Systems, said Dow ‘has allocated essential resources to find alternative solutions’ to the use of the nylon resin PA-12, also known as Nylon-12.
DuPont CEO Ellen Kullman, in an earnings conference call with reporters on Thursday, said the company has three polymers that could be a replacement in some automotive applications.
As the race is on to find alternative substances to the nylon resin and as automotive engineers seek ‘work-arounds’ to keep making cars without PA-12, solutions likely will not be found in time to keep global auto production from falling in the second quarter, several analysts said.
Evonik is the leading maker of cyclododecatriene, or CDT, which is a base material used to make PA-12. The UBS research note said Evonik had 70 percent of the global available capacity of CDT used for the nylon resin PA-12.
Evonik made 40 percent of the world’s supply of CDT, said UBS. The available supply figure is higher because some makers of CDT do not make it available to other companies to make the nylon resin PA-12, UBS said.
Two workers were killed in the March 31 blast. Evonik stopped all its production of CDT.
Evonik has said it will be at least three months and perhaps until the start of next winter before it can resume full production of CDT.
LMC Automotive said on Thursday that North American automotive production, ‘which has been in overdrive in recent months’ faces a ‘real and substantial risk’ of slowed output.
Automakers will be forced to more closely manage inventory and the types of vehicles they produce to cope with the ‘looming shortage,’ said Jeff Schuster of LMC Automotive.
Neither LMC or UBS, nor major automakers around the world contacted by Reuters this week, have said how deeply production may be cut in the coming months.
JAPAN, GERMAN AUTOMAKERS LESS AFFECTED
Japan’s automakers rely on Asia’s biggest maker of PA-12, Ube Industries based in Yamaguchi, and German automakers can turn to Switzerland’s Ems Chemie Holding , UBS said.
French automakers will be exposed, UBS said, because they largely rely on France’s Arkema SA for the nylon resin and Arkema relies on Evonik for CDT to produce its PA-12.
U.S. Automakers and suppliers are highly reliant on Evonik or companies reliant on the German industrial conglomerate to make PA-12.
‘Whilst the industry will likely approve substitute materials within the second quarter, the disruption to production in coming weeks may disproportionately affect automakers with already weak balance sheets,’ the UBS note said.
Italy’s Fiat SpA and France’s PSA Peugeot Citroen were named by UBS as two automakers that ‘may experience further working capital disruptions in the second quarter’ due in part to payment to suppliers for first-quarter production.
All suppliers, even those that do not make auto parts using PA-12, will be affected by the shortage, UBS said. If the shortage impacts brake and fuel systems, it will affect other components because it is difficult to assemble vehicles and fit critical parts later, the bank’s analysts said.
Schattenmann of Dow Automotive said: ‘While we do not manufacture CDT or utilize the resin made from CDT in our manufacturing processes, we are actively evaluating alternative material solutions that could replace PA-12 in select applications.’
And Kullman of DuPont said: ‘Our specialists are working on the ground with the specific (automakers) and understanding if we could provide those that it does look like we’ll get some upside from that.’
She said it was too early to say how deeply DuPont would become involved in the business of supplying polymers for auto suppliers and automakers, but that the effort would be ‘positive’ for DuPont.
Invista Inc, a subsidiary of privately held Koch Industries of Wichita, Kansas and the maker of Stainmaster carpets, produces CDT. Invista will help the auto industry with CDT supply as much as it can, but has little to spare beyond its existing customers, said Invista spokeswoman Jodie Stutzman.
TI Automotive CEO Bill Kozyra sounded the alarm on the severity of the nylon resin PA-12 shortage to customers in a letter last week. That was followed by a meeting of major automakers and suppliers in suburban Detroit attended by more than 200 people.
Frank Buscemi, spokesman for TI Automotive, said cooperation among automakers, suppliers and chemical companies was high.
‘Alternatives may not be the same for every type of auto part that uses PA-12,’ said Buscemi, who added that different suppliers and automakers may use different solutions to keep making the same type of tubing, hoses or fuel tanks.
(agencies)

KOODANKULAM, Apr 20: The first unit of the 2X1000 MW VVER nuclear reactor of the Koodankulam Nuclear Power project (KKNPP) was expected to attain criticality and start power generation in two months, as the preparation for commissioning the plant was progressing as planned, S K Jain, Chairman and Managing Director of Nuclear Power Corporation of India Limited (NPCIL).
He said KKNPP was awaiting clearance from the Atomic Energy Regulatory Board (AERB) to open the reactor pressure vessel for inspecting the internal components’ performance and subsequent loading of enriched uranium fuel rods.
He said work on commissioning of the first unit was in full swing. The hot run of the unit had been done a few months ago and a report of tests had been submitted to the AERB. We are expecting a review by the AERB and once the permission is obtained, the fine tuning of the equipment would be carried out. Before the interruption due to protests by the locals, 95 percent of the required tests had been conducted.
Mr Jain said “the integrated core cooling tests is scheduled in about a week. The opening of the pressure vessel after obtaining clearance from AERB is the next step. Once this is done, the dummy fuel will be removed and the reactor cleaned for another inspection by AERB”. After this, enriched uranium fuel would be loaded. It was expected that fuel loading might be taken up by mid June and criticality attained in the next few weeks, he added.
Asked about reports that some countries had decided to scrap nuclear power projects after Fukushima disaster, Russian expert Valery Limarenko rejected the reports and said infact, his company which was involved in the construction of 20 nuclear reactors in Russia and China, was holding talks with Bangladesh, Vietnam and Turkey for the construction of nuclear reactors in those countries.
Mr Limarenko said KKNPP incorporates several layers of the most modern safety features to ensure security of the workforce and the people living in the vicinity.
KKNPP, India’s largest civil nuclear programme, an Indo-Russia joint venture, was in the midst of controversy after the locals demanded that the Centre scrap the project. (UNI)

TOKYO, Apr 20: Japan’s Nikkei index fell on Friday to post its third straight week of losses a fter a Spanish bond auction failed to extinguish fears of a rerun of the euro zone debt crisis, though a softer yen offered some support.
The Nikkei closed 0.3 percent lower at 9,561.36, below i ts 13-week moving average near 9,575, and was down 0.8 percent on the week.
The broader Topix dropped 0.3 percent to 811.94.
(agencies)

AMSTERDAM, Apr 20: The International Monetary Fund can count on achieving at least a 350 billion dollar boost to its financial firepower, and maybe between 400 and 500 billion dollar, European Central Bank Governing Council Member Klaas Knot said in a newspaper interview.
“Even though the IMF money is not specifically designed for Europe, the European debt crisis is now the biggest threat to the world economy. So that the IMF will focus on this,” Knot told Dutch daily newspaper De Telegraaf in an interview published today.
Knot said that with firepower of over one trillion euros, Europe would have sufficient funds to defend euro zone members such as Italy and Spain.
“That’s a lot of money we are talking about, sufficient to keep countries such as Italy and Spain within the fold.”
“The new European emergency fund now has 800 billion euro. The European central banks have 150 billion euro loans to the IMF. Japan has pledged 60 billion dollar, Britain 15 billion dollar, Sweden, Denmark and Norway together now more than 30 billion dollar. China, still about 40 to 50 billion dollar. That is all together about 350 billion dollar,” he told the newspaper.
“With help from countries like Russia, Brazil, Saudi Arabia and India, a sum of between 400 and 500 billion dollar is in easy reach”.
(agencies)