Orion optimistic for 2021 recovery in rubber carbon black business

Houston, Texas – Orion Engineered Carbons is optimistic that a recovery is in sight for its rubber carbon black business, as manufacturing resumes and auto sales rebound globally.

“I think 2021 is going to be a great year. If you look at 2010, coming out of 2009 [recession], for the industry, it was a great year,” said Corning Painter, CEO and president in an earnings call 5 Aug.

Orion's rubber carbon black volumes decreased by 46.4%, year over year to 107.5 kilotonnes in the second quarter of 2020, reflecting declines in all regions.

Net sales decreased fell 58% to $108.3 million (€91 million), primarily due to lower volumes and, to a much lesser extent, the pass through of lower feedstock costs to customers.

Adjusted earnings (EBITDA) went into negative territory, decreasing by $41.7 million to negative $1.2 million. Orion cited lower volume and the unfavourable impact on margins of lower feedstock costs, for the decline. 

Despite the weak performance, Painter said "current trends, such as the recovery in driving rates and auto sales from historic lows early in the second quarter, are very positive for us."

According to Painter, demand for rubber carbon black improved sequentially across all geographies between April and July. 

“We believe our rubber carbon black business will continue to be one of the first economic sectors to respond to improvements in the broader situation,” he added.

In the replacement tire sector, which makes up roughly 60% of Orion’s rubber business, the company said it had seen “a relatively sharp bounce off the April bottom.” 

While levels are still below 2019, demand has significantly picked up vis-a-vis "the doldrums of March," Painter added.

On the OE side, which makes up 40% of Orion’s rubber black volumes and 15% of speciality volumes, Painter said the business “will ultimately track global sales of new trucks and light vehicles.” 

The company boss said he was "encouraged" by the improvements in the truck and light vehicles market. 

However, he said, he expected the OE business to lag the replacement market, as it is closely linked to indicators of a classic downturn, such as unemployment levels and consumer confidence.