Advanced Materials

Impact of COVID-19 on Advanced Materials Industry

While the Demand for Advanced Materials from Key Consumers is on a Downward Trend, Upsurge in the Demand from Healthcare is Expected to Keep the Industry Afloat During the Pandemic

Advanced materials are revolutionizing engineering and processes across sectors and industries, especially aerospace, defense, and automotive. Their chemical, physical, and biological properties make them the preferred choice over traditional materials. Advanced materials have been observing immense growth inthe last few years; however,the COVID-19 outbreak is likely to restraint the growth trend for the next few quarters.

The halt of Business Operations

Covid-19 impact on the industry

More than a third of the world’s population is under lockdown, and many are suffering from the COVID-19 outbreak,which is ultimately hampering the global economy and industries. The advanced materials industry is no exception in the present scenario. Most of the companies in the sector have either completely shut down facilitiestemporarily or curtailed production in some facilities. A few companies that have ceased or reduced business operations are mentioned below.

• In April 2020, Rayonier Advanced Materials Inc., a U.S. based company,curtailed production at seven facilities in Canada, and all of its other facilities in the U.S., Canada, and France are either operating at normal levels or as per local policies.
• In March 2020, Lubrizol Corporation announced a limited impact on its manufacturing operations; it has curtailed production at some of the world's facilities.
• In March 2020, Morgan Advanced Materials announced restrictions on some of its business operations; it assessed reopening its manufacturing facilities to support the life-sustaining business to overcome the pandemic.
• In April 2020, Owens Corning announced the current status of its business operations and quoted that it had curtailed production volume to achieve a balance between demand and production.

Some companies have also opened manufacturing facilities to produce essential products to join the fight against the COVID-19 pandemic. Before the outbreak,the capacity utilization rate for advanced material was 70–94% depending on the product, but the epidemic has reduced it to below 50% with continuously decreasing demand.

The Largest Consumers of Advanced Materials Expected to Face an Unprecedented Economic Downturn

The U.S., China, and Europe, among the world's most important trading centers, are also the worst affected regions in the pandemic. These three togethercontrol more than half the trading activities in almost every industry and sector. They cumulatively consume more than 50–60% of the total advanced materials, depending on the specific product; hence, reducing demand from these consumers is expected toprofoundly affect the advanced materials industry.

Table: Latest World Economic Outlook Growth Projections, 2019–2021 (Real GDP, Annual Percentage Change)

Source: International Monetary Fund

Note: In the above table *Europe includes only Germany, France, Italy, and Spain.

The U.S., China, and Europe cumulatively account for more than 60% of the demand for advanced material from automobile applications; hence,sluggish growth of the automotive industry in these regionshas severely influenced the global advanced material market.

The Chinese province Hubei’s capital Wuhan, where the pandemic originated, is a prominent production hub for China’s automotive sector. In December 2019, COVID-19 had begun to impact the country’s industry, and, in late February,it disrupted the supply-demand gap in the global automotive industry, chiefly the U.S. and Europe. China observed the most significant drop in automotive sales in February. In the U.S. and Europe, assembly line closures are further clamping down the economy. In mid-March, automobile production was ceased entirely in the U.S., and car sales in the country dropped by around 47% YoY to about 1.1 million for March, the lowest volume in the decade. Chevrolet and Toyota are the most affected brands in the U.S., and sales for both of the brands declined by more than 65,000 units. The situation in most affected countries, including Spain and Italy, remains critical, and vehicle sales are down by almost 75% YoY in March.

Automotive Industry Recording the Most Severe Blow of the COVID-19 Pandemic 

Advanced materials are extensively used in aerospace and defense, automotive, architecture, energy, infrastructure, marine, and sports and recreation, among other sectors. COVID-19 has negatively impacted most of its end consumers,especially automotive, support, and aerospace and defense,ultimately affecting the growth of the advanced materials industry. The trend is expected to continue until the end of 2021.

The impact of COVID-19 on the global automotive industry has been severe, and it commenced with automotive part shortages from Chinese export. Volkswagen Group, one of the largest automotive manufacturers with brands such as Audi, Bugatti, Lamborghini, Bentley, Porsche, Seat, Ducati, and Skoda, announced the closure of some of the facilities considering lowering sales figure and inadequate supplies. Apart from Volkswagen Group, several other vital automotive manufacturers such as Renault, Fiat Chrysler, Honda, Nissan, Toyota,and Suzuki either curtailed their production or entirely closed facilities across the world.

Electric Vehicles: A High Potential Consumer Segment of Advanced Materials

Advanced materials play a crucial role in electric vehicle (EV) manufacturing and are consumed in the body parts as well as battery manufacturing. Theyare imperative to the success of EVsin terms of weight reduction and battery performance improvements. Thus, EVs are considered among the most potential consumers of advanced materials. Most ofEV production facilities have either closed down or are unable to utilize their full production capacity due to raw material and staff shortage. For instance, recently, on March 23, 2020, Tesla halted operations at its car manufacturing plant in California in response to the pandemic.

Three Amongthe Many Reasons for Slowdown: Lack of Staff, Disrupted Production Cycles, and Minimum Passenger Traffic

Apart from the automotive industry, aerospace and defense are among the largest consumers of several advanced materials and are severely affected by the COVID-19 outbreak.The sector witnessed strong growth in 2018 and descent in 2019, while 2020 is expected to register the slowest growth in a decade.The global lockdown has led to labor shortages, disrupted production cycles, and minimum passenger traffic. Additionally, the demand for spare parts has also reduced as the closure of business operations has led to lower maintenance and repair activities. However, advanced materials also possess applications in the healthcare sector, which is less likely to be affected during the COVID-19 outbreak. 

The Critical Role of Advanced Materials in Healthcare Applications

Nanoparticles, ratiometric fluorescent, aptasensors, and graphene are a few of the advanced materials useful in identifying pathogens' identification and analysis. Advanced materials are also used to develop sensor technology, one of the appropriate ways to detect viruses on a broad level. On the other hand, composites are one of the primary raw materials used to manufacture medical devices and equipment. Several advanced material manufacturing companies have opened their production facilities to produce essential items or raw materials, including composites for the manufacturing of critical medical devices. Some of the companies serving the healthcare sector during the pandemic are mentioned below.

• The Lubrizol Corporation, along with NIKE, Inc., is working on producing full-face protecting shieldsand air-purifying respirators for medical workers fighting against COVID-19.
• Core Composites is engaged in meeting the urgent need for medical shelters caused by the COVID-19 pandemic and developing its rapidly deployable Tupelo Flat shelter for military command field hospitals in the U.S.

The International Association of Advanced Materials (IAAM) works closely with the World Health Organization (WHO) to develop advanced medical technology and high-tech healthcare to control the swiftly spreading COVID-19. Recently, in February 2020,the IAAM organized a program to create aconsortium for advanced medical research. Similarly, the European Glass Fiber Producers Association talks with the European Commission and works to ensure the continued manufacturing of glass fibers to produce essential goods. Thus, glass fiber manufacturers, distributors, and related stakeholders in Europe are working primarily to serve the medical sector.