Carbon black shortfall rocks India's rubber industry

New Delhi – Antidumping duties combined with increased demand and capacity constraints is causing a shortage of carbon black for the domestic Indian market, according to the All India Rubber Industries Association.

In a recent statement, AIRIA—which consists of small-to-medium sized non-tire rubber product manufacturers—said the shortage has led to nationwide shutdowns throughout its membership. AIRIA estimates that about 1,000 small manufacturers are on the verge of closure, which will lead to about 200,000 job losses.

The nation has antidumping measures against carbon black imports used in certain rubber applications imported from China and Russia.

"All India Rubber Industries Association has appealed to the Indian government to consider, in the short run, allowing imports with nil or lesser duty and/or restricting exports at least to the extent of shortfall in supply, and over the long haul encourage domestic CB producers to increase their capacities and production to cater to the domestic demand," the association said in an email responding to questions on the matter.

According to AIRIA, the shortage can be attributed to:

• Closure of many sites in China, the largest producer of carbon black according to AIRIA, thanks to pollution control measures;
• An unanticipated demand surge in India, which has put domestic producers of carbon black behind in capacity;
• A separate antidumping duty on certain types of tires from China, resulting in an increased domestic production of tires and further contributing to the demand for carbon black; and
• Unscheduled production shutdowns by carbon black manufacturers.

AIRIA said the country's capacity in 2016 was about 975,000 metric tons per year with an export commitment for about 230,000 tons. However, after production suspension from one local producer, the accessible limit going forward is about 875,000 tons per year.

If growth in demand for the next two years is 8.5 percent, AIRIA said the general shortfall will come in at about 390,000 tons per year. "We see some industry reports that a couple of the domestic producers are adding greenfield and brownfield capacities," the association said. "But that may take some time."

Tire makers and other large rubber companies are not immune to this shortfall, but AIRIA said—unlike their small-to-medium sized members—those companies have price negotiation power as mass purchasers of the material.

"The seriousness of the issue is felt more in the small-to-medium sized territory thanks to the fragmented structure of the units, inability to project their demand in view of fluctuating order flow and their spot order procurement framework bringing about feeble bargaining limit," AIRIA said. "They are the price takers and cannot dictate the manufacturers."

In a meeting with AIRIA, Indian carbon black suppliers have cited their commitment to existing customers, mostly the large tire makers, as the reason why they could not meet the demands of their small-to-medium sized membership. AIRIA said that the domestic suppliers confirmed that their plants are running on full capacity.

The association is hopeful the Indian government will consider a number of policy changes, starting with lifting the duty on carbon black imports.

"We believe the government is considerate enough to look at the antidumping duty measure in right earnest," AIRIA said. "Market economy treatment is expected for the rubber sector. There may not be any protectionism for the upside of one sector to the hindrance of others. We shall make our submission to the government to focus for termination/cessation of the antidumping duty on import of carbon black used in rubber applications."