Tokai Carbon to build on record carbon black gains

Tokyo – For 2023, Tokai Carbon is forecasting a 30.0% year-on-year rise in operating income to Yen16.0 billion (€108 million) at its carbon black business, on projected sales of Yen166.0 billion, 20.0% higher than last year.

In its Spring 2023 newsletter to shareholders, Tokai Carbon said its carbon black business had continued to deliver record increases in sales and profit in 2022.

Last year, the carbon black business achieved a 39.2% year-on-year rise in net sales to Yen138.5 billion – 41% of group-wide sales – while operating income jumped 39.8% to Yen12.3 billion.

The gains were achieved amid global economic slowdown linked to factors such as the Covid-19 pandemic and the crisis in Ukraine, according to Tokai Carbon.

While last year saw a decline in new vehicle production, this was offset by higher demand for replacement tires due to increased usage of vehicles for the transportation of people and goods, the company reported.

Tokai Carbon went on to focus on the US, where more than half of the company’s carbon black production capacity is located.

The US, it noted, is home to many major tire manufacturers, and is the world’s second biggest carbon black market with a 15% share – behind only China (34%) and ahead of the EU (12%).

Following the lifting of pandemic lockdowns in 2021, the US market for replacement tires rebounded sharply, creating a “demand crunch”, according to the company.

With demand for new vehicles also expected to recover, Tokai Carbon expects tire production in the US “to continue growing at a rate of 2-3% per year.”

But, delivering increased supply volumes “is no easy matter,” continued the carbon black supplier.

In particular, it said, high transportation costs and strict US environmental regulations that make it "a hard market to serve."

In addition, trade friction with China and the crisis in Ukraine have reduced US imports of carbon black from China and Russia so that the supply-demand gap is expected to widen.

Tokai Carbon aims to benefit from this situation, as it “owns the largest scale carbon black plants" in the US and has invested to ensure its facilities meet all environmental standards.

“This means we will have a stable production and supply framework that can meet the needs of tire manufacturers in the US,” the Japanese group stated.

“Going forward, we will work to provide products with even greater added value by reflecting production and facility investment costs in product prices, ensuring a robust increase in profit.”

Tokai Carbon's carbon black activities in the US encompass plants in Addis, Big Spring and Borger, supported by a research centre in Fort Worth.