Analysis: Carbon black pressure continues in Europe

UK: Market analysts are waiting to see how much traction the recent flurry of price-rise announcements in carbon black prices will gain by summer time.

As it stands, major carbon black producers including Cabot, Orion, Sid Richardson and Russia’s Omsk Carbon have announced price rises for rubber black prices effective this summer.

But will these announcements gain traction?

“These negotiations are made customer-by-customer and it is difficult and at times risky to re-negotiate existing contracts with big customers,” according to carbon black consultant and former Cabot commercial director Martin von Wolfersdorff.

According to CEO Jack Clem the company “expects to see some positive impact on margins in the next few quarters.”

Clem, however, admitted that cost negotiations were continuing, adding that it “is premature for us to make any assessment as to how these efforts will play out over the course of this year.”

More significantly, the Orion boss said that the surcharge was just a temporary fix and that more structural measures were needed to shore up rubber black prices longer term.

According to Clem, the problem for Orion, and other suppliers to tire and rubber manufacturers, is overcapacity and slow growth in the many markets around the world.

In May, Birla Carbon was first to announce a structural change, the closure of its plant in Hanover, Germany, and of a production line at its Alexandria, Egypt facility.

The company said it was restructuring its operations in the European and African region, including reduction in corporate personnel, to preserve the long-term future success of the company.

Birla Carbon plans to consolidate and move production to its remaining manufacturing facilities in the region once the restructuring is complete.

Orion also announced the plan to possibly close their site in Ambès, France on 3 June. This site also produces extrusion carbon black products for non-tire applications, similar to the Birla site in Hannover.

“These two plant closure announcements surely are supporting recent price increase announcements, both in psychology and, later in the year, through a change in the supply-demand balance for extrusion carbon blacks,” explained von Wolfersdorff.

But there are also new and existing entrants into the European carbon black market.

Yaroslavl and Omsk are the biggest Russian players and they have a number of privileges over their European counterparts.

According to von Wolfersdorff, “the size of their manufacturing lines helps with economies of scale, while the access to low cost feedstock helps with producing at low cost.”

“Shipping costs”, he said, "are a key factor but even then, these can be overcome with distribution- and decanting-stations and by bringing production further towards the West as Omsk Carbon is doing with their Mogilev site in Belarus."

“We are talking about a price difference of several hundred Euros between Russian carbon black and comparable tier 1 products from Cabot, Birla and Orion.” explained von Wolfersdorff.

New production of carbon black comes from Saudi Arabia. Kemya, a joint venture between Sabic and ExxonMobil, and licensed by Continental Carbon Co. started up its 50 kilotonnes-per-annum carbon black plant in Al-Jubail, Saudi Arabia in March.

The plant output, which will go mainly to the tire industry, is to be commercialised by Continental Carbon Europe, under the Continex tradename, mainly in Europe and the Middle East.

All these developments will keep the European market for carbon black in motion and any further movement in oil and feedstock prices will add to the complexity.