Orion sees rising interest from customers to 'lock in' supply deals

Houston, Texas – Orion Engineered Carbons has reported record earnings in the quarter ending 31 March, as demand continues to grow for its rubber carbon blacks both in Europe and globally.

The carbon black maker posted adjusted earnings (EBITDA) of $83 million (€79 million), up 17.3% compared to the first quarter last year.

Total sales were up 34.5% at $484.5 million, while volumes fell 0.4% to 253 kilotonnes, due mainly to lower speciality demand.

The rubber black business, which supplies carbon black additives to the tire and rubber industries, reported a strong performance with adjusted earnings up 30.4% at $40 million.

Segment sales increased 42% to $307 million as volume rose 2.7% to 187 kilotonnes, Orion announced 5 May.

Higher sales, the company said, was primarily driven by pricing, impact of higher volume, and impact of favourable product mix.

Despite higher fixed costs, earnings grew for the quarter, helped by higher margins, higher volume, and favourable product mix.

Commenting on the first quarter performance during a 6 May earnings call, CEO Corning Painter said demand from the tire industry grew significantly in Europe following the Russian war on Ukraine.

The company, which recently initiated commercial sales from a new reactor in Ravenna, Italy, said the new unit is “already fully loaded with higher-margin specialty and rubber grades.”

“We had expected [the reactor] to be about two-third loaded this year, which would have been great, but this is a record for me,” he said.

According to Painter, Orion had earmarked the new Italian line for the higher margin specialty business, but has now accepted some rubber business "at comparable margins" to support European tire customers.

In addition to the Italian plant, Orion said it has been supporting rubber customers from its facility in Porth Elizabeth, South Africa, where the company has recently made ‘port-related’ improvements.

With the ongoing war in Ukraine and increasing sanctions on Russian products, Painter said he expected to see “higher loading” in Europe going forward.

This, he said, will be mainly driven by customer’s “reluctance about relying on Russia or Belarus as a long-term supplier.”

“I can confirm that [rubber] customers are interested earlier than ever to secure supply for next year, and not just in Europe,” said the CEO.

“Carbon black is going to have to be shipped around the world to support things… So, people are looking to secure that and they are interested in locking that up earlier than usual."