Report: Uncertainty looms over European carbon black market

LONDON—Rising prices and plant closures are among the most recent developments in the carbon black sector that have prompted industry insiders to warn about what is to come.

Driven by growth in the tire sector, demand is likely to grow as investment in car production increases and the replacement market remains stable.

A recent study by market analyst Smithers Rapra estimates the carbon black market to have grown, with demand rising from 8.4 million metric tons a year in the 2009 economic downturn to 13.2 million metric tons in 2015.

But Europe, which has seen a number of capacity reductions since the 2009 economic crash, should brace for more change. Price increases, mostly within the EU, have been announced by almost every leading producer, and analysts are waiting to see how much traction they gain. In addition, capacity reductions recently announced throughout the region could lead to the loss of certain grades. This could require manufacturers to modify some of their rubber compounds.

In May, Birla Carbon was first to announce a structural change, the closure of its plant in Hanover, Germany, and of a production line at its facility in Alexandria, Egypt. The company said it was restructuring its operations in the Europe and Africa region, including reducing corporate personnel, to preserve the long-term future development of the business.

Birla plans to consolidate and move production to its remaining manufacturing facilities in the region once the restructuring is complete.

Orion also announced a plan to close its site in Ambes on June 3. The plant produces extrusion carbon black products for tire and non-tire applications, similar to the Birla site in Hannover. The two carbon black facilities, according to consultant and former Cabot commercial director Martin von Wolfersdorff, produce similar grades and there will likely be a shortage of these products in the market in the future.

“These two plant-closure announcements surely are supporting recent price increase announcements, both in psychology and, later in the year, through a change in the supply-demand balance for extrusion carbon blacks,” explained von Wolfersdorff.

But these cutbacks could potentially be advantageous for producers as a tight market usually brings about price increases—which have already been announced by the likes of Cabot, Orion, Sid Richardson and Omsk Carbon.

Smithers Rapra suggests that with less availability, plants will be operating at higher utilization rates, achieving scales of economy and realizing more profitable operations.

Another factor, though, is the role played by the new and existing entrants into the European carbon black market. Russian and Chinese imports have been present in Europe for the past few years while Indian and Saudi producers are now stepping up their efforts. Yaroslavl and Omsk, the biggest Russian players, have a number of competitive advantages over their European counterparts.

According to von Wolfersdorff, “the size of their manufacturing lines helps with economies-of-scale, while the access to low-cost feedstock helps with producing at low cost.”

“Shipping costs”, von Wolfersdorff said, “are a key factor, but even then, these can be overcome with distribution- and decanting-stations and by bringing production further towards the West as Omsk Carbon is doing with their Mogilev site in Belarus.”

“We are talking about a price difference of several hundred Euros between Russian carbon black and comparable tier 1 products from Cabot, Birla and Orion,” continued von Wolfersdorff.

Meanwhile, new production of carbon black is coming into Europe from Saudi Arabia. Kemya, a joint venture between Sabic and ExxonMobil, and licensed by Continental Carbon Co. started up its 50,000 metric tons-per-year carbon black plant in Al-Jubail, Saudi Arabia in March.

The plant output, which will go mainly to the tire industry, is to be commercialized by Continental Carbon Europe, under the Continex tradename, mainly in Europe and the Middle East.

All these developments will keep the European market for carbon black in a state of uncertainty this year, and any further movement in oil feedstock prices will add to the complexity.