Analysis: Black and greener

Based on article appeared in November/December issue of European Rubber Journal magazine.

Regulation is arguably the no. 1 challenge for carbon black producers right now. This is particularly the case in Europe and North America, where tougher environmental and health & safety regulations are set to raise production costs significantly.

On the other hand, demand for carbon black is on the up, with even a warning of shortages in North America, partly due to hikes in tire capacity, which is forecast to increase there by 10-25 million units/year up to 2022.

But this warning, from Leszek Nikiel, manager of the Fort Worth, Texas, Research Center for Sid Richardson Carbon & Energy Co. was equally linked to regulatory pressures on the carbon black industry.

The US Environment Protection Agency wants the industry to cut plant emissions of nitrogen oxides and sulphur dioxide by 90 percent and 95 percent respectively.

Both of these requirements carry major costs and process drawbacks – the former in particular.

“It is almost impossible to lower sulphur in carbon black operations and still make a viable product,” Nikiel said. “Lowering sulphur changes viscosity and reduces yield.”

Using a low-sulphur feedstock for carbon black is the best solution, but are expensive and in very limited quantity, he added in a report by ERJ sister title Rubber & Plastics News.

“There is not enough low-sulphur feedstock to meet demand, and it would bring carbon black prices up,” the Sid Richardson research center manager said.

The resulting cost increase will go beyond capital cost, having a significant impact on operating cost, he said. As a result, Nikiel warned that around 25 percent of US carbon black production – mostly smaller plants – could be forced to close because of the new EPA rules.

“An increase in environmental and health and safety regulations will increase the cost of doing business and that will impact the cost of carbon black products accordingly,” he said in a written statement to ERJ.

To comply with changing regulations, Doubman believes carbon black manufacturers must re-engineer their facilities and invest in equipment and controls.

These changes, he noted, “may also increase production costs as well.  We believe that ultimately these costs will be passed on to the consumer, through the value chain.”

But the Cabot executive also sees an upside to regulatory pressures – citing, for example, the

introduction of tire labelling in the EU and elsewhere: “As a result, we have seen increasing demand for high-performance tires with low rolling resistance.

“We expect continued growth in carbon blacks to meet these needs, such as our [range] of products that are formulated to deliver lower hysteresis of tread compounds without sacrificing durability,” he added.

Also driving change are new EU restrictions on the use of certain polycyclic aromatic hydrocarbons (PAHs) in rubber products, including sporting equipment, household items, tools, clothing, footwear, toys and childcare items.

“We see this trend continuing to impact the carbon black market in all regions in the coming years,”  said Doubman, noting that Cabot has developed a new low-PAH carbon black series to meet the changing market needs.

Going forward, Doubman listed three areas as key to success in the carbon black market.

“Innovation will be a critical differentiator,” he said. “We need to challenge design boundaries and find solutions that cross the value chain.

“Building long-term collaborations with customers will be key to garnering new insights and ideas and commercialising new materials.

“Additionally, as manufacturers, we need to continue to invest in the necessary environmental controls and other operational changes to ensure the sustainability of the entire tire industry.”

Foreign investment

Overseas investment remains another important option, as evidenced by Orion Engineered Carbons SA’s move to acquire Chinese carbon black producer Qingdao Evonik Chemical Co., Ltd. (QECC) from Evonik and other minority shareholders in the venture.

Established in 1994, the Qingdao plant has a capacity of around 75 kilotonnes per annum and “will greatly improve our ability to serve the highly important Chinese market, as well as the rest of Asia-Pacific,” said Jack Clem, CEO of Orion.

He added that: “Our plant in Qingdao will become a key pillar of Orion’s base of operations in APAC, joining our two plants in South Korea and our regional headquarters in Shanghai.”

The annual production volume rose 9 percent to 5,100kt last year, and is pegged at 5,500kt for 2015.

Last year, 75.4 percent of China’s carbon black makers had over 100 ktpa capacity, 17.5 percent had capacity in the range from 50-100 ktpa, and the rest 7.1 percent below 50 ktpa.

There are 60 carbon black manufacturers across the country in most provinces and municipalities except for Beijing, Tibet, Qinghai and Guangxi.

In 2014, China’s carbon black sector had a 1.12 percent profit margin, up by 28 percent from 2013 yet was the lowest among the world’s markets.

China’s carbon black export volume rose 16.9 percent in 2014 to 842kt; export value increased by 15.2 percent to $880 million (E815 m), compared to 9.5 percent and 5.2 percent growth rates in 2013.

Thailand was China’s largest export market last year, accounting for 15.7 percent of total export volume, followed by Indonesia and Japan.

Exports to the US jumped 24.7 percent to 26,000 tonnes last year.

Looking West

Moving in a near, opposite direction is Omsk Carbon, which is currently increasing its presence both in North America and Europe.

“The US team will work closely with the Canadian branch to leverage what was learned and shorten the learning curve,” said Timofey Kucherenko, executive director of Omsk Carbon Group.

“We believe we can work with customers and market intelligence to manage [the] supply chain, keeping adequate stock levels locally of all carbon grades needed to support our customers while minimising obsolescence and keeping cost as low as possible.”

In Europe, meanwhile, Omsk Carbon has recently renamed of its German office to Omsk Carbon Europe. This move, said Kucherenko, sends “a signal to the market as we move further in our strategy to be a reliable partner for customers all over Europe.”

In spreading its wings, Omsk Carbon is aware of the importance of meeting the increasing environmental and health & safety requirements in Western markets.

Omsk Carbon has established strategic benchmarks to minimise risks from the production and use of its products. The priority is “to optimally meet international chemical regulations [and] standards, market demands and consumer needs in safety.”

To deliver on these goals, Omsk Carbon has established a ‘product safety sector’ with specialists to monitor changes in chemical regulations, assess raw materials and study the influence of the processing upon product safety.

Among the initial outcomes from this work is a product with an ‘FA’ mark, which can be used as a starting substance for production of articles intended to come to contact with food.

“We plan to continually improve the safety parameters of our product for various sectors of use, including the key sector – tire industry,” said Kucherenko.