The impact of the Covid-crisis on industrial segments
The impact of the worldwide Covid-19-pandemic strains all areas of life and work as well as all classes of population all over the globe.
The industry is changing due to Covid, whereby the impact is different in the various market segments. Currently, the biggest impact is recorded in the aerospace industry, where Boeing and Airbus are and will be suffering a lot from the overall decrease of travels, including governmental restrictions. In the next 6 or 7 years, the industry will still not be able to reach the same sales figures as before the crisis.
The Automotive market has also suffered considerably since the production lines were standing still for more than 6 weeks in the first half year of 2020. In addition, they are also generally impacted by the transition to more e-mobility which has created a lot of draw-backs and lead to less sales. We expect that the Automotive market segment in plastics overall will be 20% below last year.
Conversely, the building and infrastructure industry is still doing extremely well and is actually able to benefit from this crisis-impact. In the plastics industry, this market segment is to date even 3.6% above last year´s figures. The wind energy market is also still strong, particularly in Germany and will remain strong.
To give only a few numbers from the plastics industry in general: in terms of materials and technology, the overall thermoplastic composites market is around 16% below last year (YTD) and we expect this segment to be at minus 15% at the end of the year 2020, with relation to LFT, GMT and short-fiber reinforced thermoplastics. We expect also that the SMC market, which is the largest thermoset market in the world, minus 20%.
Overall, the momentum is that we saw a certain recovery in the months of September and October which were actually quite good and also November looks good so far. Of course, there is more uncertainty with the recent announcements of new lockdowns overall in Europe and we don´t know whether there will be an early shutdown until mid-January or whether we will have more orders on hand.
To give only one example for successful cross-border work even during the crisis, I would like to highlight to current EU-funded Interreg-projects, Light Vehicle 2025 and AACOMA, where an event with over 50 companies could take place in September in Aachen, Germany.
Some growth applications and economical outlook
In general, the consensus is, also by other panel experts, that it will need 2021 as a kind of transition year where the industry will be slightly coming back. If everything goes well, in 2022, we could then reach the figures that we had before the crisis.
I will give a few examples of applications which, despite the crisis or thanks to it, are doing extremely well. People invest in individual, safe and secure travelling models. Thus, caravans and motorhomes, in which a lot of composite material is involved (e.g. in the panels, the roofs and the interior), experienced a growth rate of more than 30%.
In the SMC market, the build rates for the trucks went significantly down immediately in March. For example, DAF was producing 250 trucks per day before the crisis. Today, they are still down to a production of 150 per day so far, but the lines are slowly improving and due to more logistics and transportation, the industry is coming back slightly and we can expect a quick recovery here.
Changes and re-orientation options in Aerospace
The supplier base to Boeing and Airbus has to regroup and reconsider and they will focus on other markets like automotive, infrastructure or consumer goods or on other regions like companies which are today more active in Europe or America will divert to Asia and more particularly China where this market segment is still tremendously growing because the Chinese need to connect over 100 cities with more than 1 billion people via inner-country air-transportation and thus require a lot of smaller aircrafts in the next couple of years.
Global industry overview
Seeing the industry of in a global context, the only country with positive growth rates in 2020 will be China. Coming from a growth rate of 6-7% in 2019, they are still forecasting 3.4% for the rest of year 2020. There a very positive trends which were also confirmed at the Composites trade Show in China in September 2020. Here, particularly, the glassfiber supply is getting very tight. The glassfiber prices went up two times 7%, almost 14% in total, because there is not enough fiber supply in that market, especially for construction applications. That is the only region that is slightly doing better than last year.
In terms of recovery, Europe is leading and particularly Germany, while countries in Southern Europe have to deal with more severe impacts like Spain and Italy. They might loose more business to low cost countries like Northern Africa, Middle East and Asia.
North America is a little bit similar on the pattern to Europe with a slight delay of a recovery from the ongoing crisis. Of course, the elections also play a role here, but we expect that the overall economy will only come back in year 2022.
Market forecast for Germany 2020
To give you an idea of the overall trends, the whole industry will be down significantly like thermoplastics by 15% and thermoset maybe even a little bit more. Overall, the easier to recycle thermoplastics industry might recover quicker because of the nature of the business linked to mass production in transportation, electronics and consumer goods.
Covid-caused changes in the day-to-day business interaction
Now, what has changed in the day-to-day business interaction especially in the sales and business development departments? Due to Covid, it has become very difficult to have any personal meetings. The focus must now lie on building on good relationships from the before-the-crisis and on maintaining existing business relations and projects. In the industry, there is nearly no willingness to change anything, nor to undertake any risks or investments, unless there are really significant advantages.
The commercial organizations of the raw material producers are defending their existing customer base. Tier1 and Tier2 are not willing to change.
Instead of undertaking personal visits, as of day 1 of the crisis early March 2020, the move to use online-video-conferening tools for customer, supplier and even team meetings has been immediate as well as working from the home-office.
It was disappointing to see some large-scale industrial players, particularly multi-national raw material suppliers, stepping very quickly out of the composites business and the related innovative lightweight material developments, going back to their traditionally used materials since the developments with composites take a longer development time.
But crisis spark also resourcefulness: In Germany for example, a good crisis-decision has been the short-time-work-program which is in place until the end of 2021. This enables companies to not loose their talents and brings down the possible rates of unemployment.
What will remain after Corona?
The use of video-conferences instead of personal meetings and working from home will certainly remain afterwards in order to reduce travel and office costs for the companies. There will certainly be much less short-time long-distance travels, like what we did in the past, to fly to the USA for a 1 day business meeting or 2 days to China. There is definitely a big need for personal meetings which may be covered differently like at fewer trade shows where you can meet a lot of people on one spot which last maybe more days or when travelling overseas staying for a longer period meeting more customers. So a sales person in the future will still travel to certain customers but in a more efficiently and less costly way, combining this with the use of video-conferencing systems and maybe other media. And working from home will remain.
What does this mean for innovations?
The innovation pipeline is of course full and filling, but It is very difficult to work on, test and implement new products and innovations during the Covid-19-crisis. We expect to lose a year in any innovations because our customers are not available, their laboratories are not staffed, people cannot meet to run the projects and therefor, a lot of innovations are held up for a couple of months until the crisis will be under control. Hopefully, by mid of 2021, the innovations will appear in the light of day.