Prices rising amid strong demand for carbon black

Article based on report published in the Nov/Dec 2018 edition of European Rubber Journal magazine:

London - Responding to tightness of supply and higher feedstock costs, carbon black prices are expected to continue rising, according to industry analysts.

Such expansions include Birla Carbon’s decision in July to increase carbon black capacity by 150 kilotonnes per annum (ktpa) over the next 18 months.

Cabot Corp also announced in May that it was adding over 300ktpa of capacity through a plant expansion, operational improvements, and debottlenecking projects.

While Birla and Cabot’s expansions cover Asia and Europe, further capacity expansions have been announced in China and India to address demand, which is largely driven by the growing tire industry.

“These capacity additions will not come on stream in time [to ease] 2018 and 2019 carbon black shortages in Europe, the US or India,” said Martin von Wolfersdorff of Wolfersdorff Consulting Berlin.

This opens opportunities for carbon black imports and also recovered carbon black (rCB) in the meantime, said Wolfersdorff, who ran an rCB workshop during the Dusseldorf conference.

Meanwhile, the tire industry continues to invest heavily in new production capacity, with $23 billion scheduled to be spent between 2017 and 2022, according to Ita.

However, increasing raw-materials costs, including carbon black, will be a major headwind for tire makers.

In the US, for instance, all major carbon black makers have settled with the EPA for stricter emissions control, which will trigger additional price increases in a growing market.

Investment cycles

Current shortages stem from the different investment cycles between tire/rubber customers and carbon black manufacturers, Tomas Celka, MD, Omsk Carbon Europe GmbH, told the Dusseldorf conference.

According to Celka, global consumption of carbon black is expected to grow at a CAGR of 3.5% – surpassing 15 million tonnes per year by 2030.

In Europe, Middle East and Africa, carbon consumption is estimated at 2.45 million tonnes this year, with the figure set to reach 2.75 million tonnes by 2023.

Production in the region is expected to reach 2.35 million tonnes by the yearend: Russia remaining the biggest supplier of the material with an estimated production capacity of 1 million tonnes a year.

Europe, he added, will largely remain import-dependent with demand set to reach 2.4 million tonnes and production at 1.5 million tonnes by 2023.

The main import sources will continue to be Russia, Ukraine, the Middle East and Latin America. Ukraine and Russia, with possibly Chinese players finding a role too, suggested Celka.

China squeezed

With annual consumption of 4.77 million tonnes, China remains the world’s largest carbon black market. Suppliers are, however, facing a squeeze from competition from countries with lower cost bases and the more advanced industrialised regions.

The Chinese carbon black industry has also been hit by higher prices for the coal-tar feedstock used for its carbon black production.

But according to Celka, China has shown flexibility to win new markets.

“The 2025 ‘Made-in-China’ plan is about to move further up the value chain and to focus upon new technologies, new materials and new energy vehicles,” the Omsk Carbon official said.

According Celka, technological centres have been established to develop innovation capabilities for the tire industry and adapt to challenging market conditions.

Monique Lempereur, managing director, Continental Carbon Co. Europe, also predicted that China would be further focusing on developing speciality carbon blacks to reduce its imports and to facilitate exports.

Critical point

A regional market that was significantly impacted by carbon black shortages during the current year was India, which has seen steady and strong growth in its automotive industry.

With 25.3 million vehicles manufactured in 2017, India is the world’s fourth largest automotive industry and the world’s biggest market for two-wheelers with 17.7 million sold in 2016.

Growth in these markets, along with a lack of investment in the carbon black industry and anti-dumping duties on Chinese and Russian carbon black imports, led to an unanticipated surge in demand for the material in the country.

The Indian market, according to Lempereur, is set to grow at the rate of 8–9 % for the next 10 years and is expected to reach just under 1.9 million tonnes by 2027.

Among the companies seeking to address the expected rise in demand, Continental Carbon India Ltd is gearing up for a green field project in the state of Gujarat with Phase I capacity of 150ktpa.

Expected production start-up of the plant is in the first quarter of 2021, according to the Continental Carbon boss.

A shifting market

The carbon black industry has seen major changes in terms of acquisitions and capacity additions during the course of this year, according to Paul Ita of Notch Consulting.

Among the most significant developments was Japan’s Tokai Carbon announced acquisition of Sid Richardson, the largest carbon black producer in the US, Ita said in written comments to ERJ.

In July, Birla announced plans to increase carbon black capacity by 150 kilotonnes per annum (ktpa) over the next 18 months, including projects in Egypt, India, Italy, and Thailand.

And, having since added another project in Spain, Birla also has future plans to double the size of its new carbon black plant in Jining, Shandong Province China, which started operations in 2017, Ita noted.

Cabot announced in May that it was adding over 300ktpa of capacity through a plant expansion, operational improvements, and debottlenecking projects.

In early October, Cabot also announced the acquisition of a 50 ktpa carbon black plant in Pizhou, Jiangsu Province, China from NSCC Carbon, part of Japan’s Nippon Steel Carbon.

The acquired capacity will be upgraded to produce high-value speciality grades, which are quite tight in China, the Notch Consulting analyst pointed out.

Phillips Carbon Black, the largest Indian producer, is also expanding through a series of debottlenecks, new production units, and a new greenfield plant, continued Ita.

India, he said, will also see two new producers entering the industry: BKT Tyres and Epsilon Carbon, with investments that come in response to expansions within the tire industry.

Elsewhere, North America is continuing to attract a disproportionate share of new tire capacity, with 30% of the total planned investments going into the region, primarily the US and Mexico, Ita added.

Europe is also seeing some large investments in tire capacity, particularly in the Czech Republic and Hungary.  And, forecast the industry expert, China and the rest of Asia will continue to see large investments in new tire capacity – particularly India, Thailand, and Vietnam.