LUXEMBOURG—Orion Engineered Carbons S.A. will introduce a carbon black oil index surcharge for rubber carbon blacks sold into Europe, effective April 1.
The move is in response to continuing volatility in the energy markets, said Luxembourg-based Orion, noting that the surcharge will supplement its existing formula-priced agreements for all European rubber industry customers.
Due to the “impact of energy market developments … current carbon black sales prices no longer adequately cover Orion's variable costs of production,” the company said in a March 8 news release. This, it added, had not been anticipated in the price formulas used for rubber carbon black sales.
The company designed its existing carbon black pricing agreements to pass along the carbon black oil and other energy-related cost to its customer base.
This pass-through is based on a defined pricing formula, comprising a base price plus a raw material adjustment to cover the consumption and the CBO procurement cost.
However, over the last nine months, Orion has had to pay significantly more for CBO in Europe, without being able to pass on these additional costs to customers via the pricing formula.
The price development of light fuel oil as an underlying index no longer reflected the CBO purchase price development in Europe, the company said.
Orion further pointed to structural changes in all major CBO market categories that were lowering the availability of suitable CBO and independently increasing the demand for specific CBO qualities.
“Both effects drive CBO purchasing cost up and result in significant premium differentials that OEC must pay,” the company said.
Orion will look at introducing similar surcharges outside of Europe if CBO markets on other regions “continued to decouple from the indices used in the respective local pricing formulas.”