Orion carbon black volumes decline amid lower demand

HOUSTON—Orion S.A. has seen demand for rubber blacks decline over the first nine months of 2023, due in part to a soft truck tire market and the United Auto Workers strike.

Volumes for the three months to end of September declined by 3 percent year-on-year to about 185,300 metric tons, the carbon black maker reported Nov. 2.

Third quarter net sales declined by 15.4 percent year-on-year to $315.8 million, primarily on "pass-through" effects linked to declining oil prices, as well as lower volumes. These effects, the company said, were partially offset by improved contractual pricing.

Adjusted earnings (EBITDA) increased 3.6 percent to $51.2 million for the quarter, on improved contractual pricing, partially offset by lower volumes and "cogeneration profitability."

Orion linked the softer demand for its carbon blacks to weak replacement tire markets both within the passenger car and heavy truck segments. Meanwhile, disruptions due to the UAW strike against the Detroit 3 affected OE demand in the passenger car tire market, it added.

Over the first nine months of 2023, Orion's rubber black business noted a 5.4-percent year-on-year dip in volumes to 539,500 tons, with sales down 7.3 percent at $964 million.

Adjusted earnings were up by nearly 35 percent at $172.4 million, primarily due to improved contractual pricing, partially offset by lower volume and cogeneration profitability.

"We are confident that we can deliver a third consecutive year of earnings growth, despite lower demand," Orion CEO Corning Painter said in looking ahead.

In terms of tire demand, Painter said trends toward greater tire-making capacity in North America and Europe and "valuing local supply" should help drive growth.

"Our 2024 rubber business negotiations for EMEA and the Americas are nearing completion, and we expect to wrap them up in the next month or so," he added.

Having commissioned its final U.S. air emission controls system, Painter said Orion would now focus capex on "profitable growth, reducing debt leverage, and returning value to shareholders."