Report: Uncertainty looms over carbon black market in Europe

Article published in ERJ’s July/August issue:

London – Price-rises and closures mark the most recent developments within the carbon black sector, prompting industry insiders to warn about what is next to come.

Driven by growth in the tire sector, demand is set to hike as investment in car production increases and the replacement market remains stable.

A recent study by market analyst Smithers Rapra estimates the carbon black market to have grown, with demand rising from 8.4 million tonnes a year in the 2009 economic downturn to 13.2 million tonnes in 2015.

Capacity reduction

Price increases, mostly within the EU, have been announced by almost every leading producer and analysts are waiting to see how much traction they gain.

In addition to that, capacity reductions which have been announced in the region recently could lead to the loss of certain grades. This in turn could potentially require manufacturers to modify some of their rubber compounds.

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 Europe and Africa region, including reduction in corporate personnel, to preserve the long-term future development of the business.

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

Orion also announced a plan to close its site in Ambès on 3 June. The plant produces extrusion carbon black products for tire and non-tire applications, similar to the Birla site in Hannover.

The two carbon black facilities, according to consultant and former Cabot commercial director Martin von Wolfersdorff, produce similar grades and there will likely be a shortage of these products in the market in the future.

“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.

Smithers Rapra suggests that with less availability, plants will be operating at higher utilisation rates, achieving scales of economy and realising more profitable operations.

Another factor, though, is the role played by the new and existing entrants into the European carbon black market.

Russian and Chinese imports have been present in Europe for the past few years while Indian and Saudi producers are now stepping up their efforts.

Yaroslavl and Omsk, the biggest Russian players, have a number of competitive advantages 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

“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,” continued von Wolfersdorff.

Meanwhile, new production of carbon black is coming into Europe 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 a state of uncertainty this year, and any further movement in oil feedstock prices will add to the complexity.