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September 11, 2012 02:00 AM

Cabot aims to meet global demand

Mike McNulty
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    BOSTON—Cabot Corp. is continuing to gear up to meet carbon black demand in the marketplace with capacity expansions, a new plant and energy efficiency investments.

    Spurring the additions is an increased need for more capacity on a global basis, according to John Reese, Cabot vice president of global rubber blacks marketing. “This growth is being driven by strong mobility increases in Asian countries, but we see continued growth in the west as well.”

    Because of that, Cabot sees tight supply and demand balances in many of the western regions.

    “For instance, there are significant growth opportunities in South America, specifically in Brazil, which is making preparations for not one, but two major international events,” Reese said.

    He said the country is working on increasing infrastructure development and transportation as it prepares to host the 2014 World Cup tournament and the 2016 Olympic games.

    Brazil plans to invest $17 billion for mass transit, and the government has set aside about $4.3 billion for urban transportation infrastructure while state and local authorities have committed another $2.5 billion to the project.

    Then there's China, which he said has experienced significant growth in tire and auto production.

    “According to IHS Automotive, China's motor vehicle fleet is expected to grow by about 315 million vehicles over the next 10 years, up from 102 million vehicles today,” he said.

    Meanwhile, long-term factors and highly mobile populations in North America, especially in the U.S., along with Europe suggest that the need for carbon black won't be negatively impacted by economic factors, Reese said.

    In North America, the firm continues to see strong original equipment and off-the-road tire markets, but weakening consumer confidence is unfavorably impacting the replacement tire market, company officials said in Cabot's third quarter financial report.

    President and CEO Patrick Prevost did note in the report that “we are cautious about the near-term demand outlook due to uncertainty in Europe and slowing economic growth in Asia.”

    But despite that, “our value pricing and efficiency initiatives continue to support our strong performance,” he said. “We are also confident we can deliver on our other performance improvement objectives, such as new product introductions, implementation of yield and energy process technologies, and capacity expansions.”

    Meeting the challenge

    Cabot has several expansions in the works that were launched in 2011 or in the first half of 2012 and are expected to be completed in the next two years. They're aimed at boosting the company's presence in some of the fastest growing regions across the globe.

    The firm's annual carbon black capacity will be increased by more than 300,000 metric tons, or a 15-percent jump in capacity, when the projects are complete in 2014. Cost of the overall project was put at about $180 million.

    To deal with the growing demand in South America, Boston-headquartered Cabot is raising rubber black capacity about 20 percent by expanding the company's operations in Brazil and Argentina.

    In China, subsidiary Cabot (China) Ltd. has created a joint venture with Risun Chemicals Co. Ltd., a subsidiary of Risun Coal Chemicals Group Ltd. The two companies broke ground on a new production plant in Xingtai, China, in April, which is expected to be completed in mid-2013, producing initially about 130,000 tons of carbon black annually with the potential to handle as much as 300,000 tons down the line.

    Cabot, which holds a 60-percent equity interest in the business, and Risun are investing about $140 million in the new facility. Carbon black produced at the site primarily will be used to support the growing tire and automotive segments in China.

    The China addition will bring ultra reinforcing grades to the market, “which will be needed as Chinese tire makers work to meet global standards,” Reese said.

    In Indonesia, the firm increased capacity 50 percent at the two plants it operates in the country.

    Cabot also is debottlenecking three plants in Europe, which will increase capacity 10 percent.

    Innovation front

    While the capacity increases are geared to handle new demand in the market, Reese said, the company's efforts don't end there. “On the innovation front, Cabot is developing new technologies to improve production efficiencies, energy efficiency and to bring new products to the market,” he said.

    In January, the firm launched Transfinity elastomer composites, a class of materials that improves elastomer durability and delivers transformational performance improvements in wear resistance and vibration isolation applications, Reese said.

    Transfinity products are composites made from elastomer latex, a liquid form of rubber, and reinforcing particles, such as carbon black, and are produced in a process that creates composites that are stronger than conventional elastomer materials, the company said.

    Other additions include EcoBlack, a new option to meet demands for improved rolling resistance in commercial vehicle tires, and HiPer Tread, a new class of reinforcing agents targeted to deliver step change improvement in reinforcement performance in passenger car tire applications, he said.

    Reese said the company also is investing in several energy efficiency projects, two of which have been put into production in Asia. The new technologies are aimed at helping the firm address sustainability goals.

    Cabot's latest innovations along with those in the planning stages are aimed at helping customers develop products to meet market needs, he said.

    “Our Rubber Blacks business continues to benefit from the implementation of our value pricing initiatives and investments in yield and energy efficiency technology,” according to Prevost.

    Overall, the company had net income of about $66 million in the third quarter of fiscal 2012, up from $60 million in the 2011 third period.

    In the first nine months of fiscal 2012, net income shot up to $352 million from $186 million last year.

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