Resin Shortage May Hit Europe’s Carmakers First

European automakers are likely to be affected first and most severely by shortages of nylon-12 resin because suppliers there carry lower inventories of the material, Bloomberg News reports, citing auto analysts.

The crisis began when a fatal explosion at an Evonik Industries factory in Germany on March 31 knocked out the source of about half the global supply of a key ingredient in the resin. Evonik also makes about 25% of the world's nylon-12, which is used in auto fuel systems and brake lines.

Credit Suisse Group estimates the world has a two- to three-month supply of the resin. CS predicts European companies will run out of the resin about one month before their North American counterparts. Daimler and BMW could be most vulnerable because of their build-to-order production system, forecasting firm LMC Automotive tells Bloomberg.

In Asia the outlook is mixed. Japanese suppliers have the largest stockpiles of nylon-12 because they already recognized the risks of the limited sources of the resin, according to Deutsche Bank AG. But LMC estimates that South Korean could be at risk because of lean inventories. The impact on China's auto output is unclear.

Analysts say efforts to obtain alternative resins will be hampered by the long period needed to validate substitute materials, especially those used in government-regulated safety and emissions equipment.