Hurricane Harvey will turbocharge move to the circular economy

Harvey Oct17a

300,000 homes and half a million cars have been destroyed by Hurricane Harvey.  And in terms of business, it is often forgotten that Houston is home to more Fortune 500 companies than any other metro area than New York.  The damage will take years to repair, as families have to regroup and re-establish their lives – as I describe in my new feature article for ICIS Chemical Business, and in the above video interview with ICB Deputy Editor, Will Beacham.

The hurricanes are also likely to have a longer-term impact on the chemicals industry.  Regulatory concerns may well be increased, given the prominent reporting of the potential for toxic run-off from the two dozen Superfund sites in the area. There will also be increased pressure on the industry to rethink its basic business model and increase the priority given to sustainability.

Even before the hurricanes, consumer concern was mounting over the impact of plastic waste on the oceans and the environment. Now, the devastation they have caused will likely turbo-charge the move towards renewables and the circular economy. Fear is a strong motivator, and millions will take another look at climate change.

This development will, of course, create opportunities as well as challenges for farsighted companies. It is never easy to move away from a “business as usual” mind-set. But the increased need to adopt key elements of the circular economy agenda creates an opportunity to develop major new sources of revenue and profit for the future.

In a decade’s time, therefore, we will not simply remember today’s devastation. We will likely also recognise that it marked the moment when sustainability stopped being simply an item in the Annual Report, and instead opened the door to a new era for the industry and those who work and invest in it.

Please click here to download the feature article for ICIS Chemical Business, and click here to view the video interview.

US auto sales growth slows as Hurricane Sandy impact ends

US autos Apr13.png250,500 US autos were destroyed during Hurricane Sandy last November, according to official data from the National Insurance Crime Bureau. Their replacement was clearly going to have a big impact on auto sales for the following months. Yet strangely, the blog has seen no discussion of this impact. So it has made its own calculations as follows:

• It assumes the replacement cars were bought between December – February
• Total sales in these months were 3.589m, compared to 3.305m 12 months earlier
• The sales increase was thus 284k, of which 251k were hurricane replacements
• This was a 1% sales increase, compared to the widely reported 8.6% growth

A 1% sales increase would not, of course, have made many headlines. It would certainly not have convinced most people that US auto sales were well into recovery mode.

March data (red square) confirms the real trend. It shows sales were up just 3% versus 2012, despite a number of positive factors:

Credit remains easy to obtain for auto purchases
• The average loan is now for a record 65 months, as buyers remain short of cash
• Gasoline prices fell in March – counter to the trend of the past 10 years
• Tax refunds during the month worth an average $3k helped pay for deposits
• Average sales incentives were up 11% versus 2012
Chrysler’s incentives were up 30% to $3228
• Incentives on some pickup models were worth between $5800$7500

The auto sales data thus provides no reason to believe that consumers have somehow become more confident about spending. 90% of households have seen their incomes fall since June 2009, and the impact of the sequester on government jobs is set to grow. Whilst today’s longer loan periods will eat into future sales.

Sadly, therefore, the idea that a strong auto sales recovery is underway is as much wishful thinking as the widespread belief that housing is also in recovery mode.