Expansion, addition to boost Cabot capacity

By Brad Dawson, ERJ Staff (R&PN)

BOSTON-Cabot Corp. is adding production capacity at sites in the Asia Pacific and Middle East regions, solidifying both as growth areas for the carbon black manufacturer despite the overall demand downturn of 2009.

The company last month announced an expansion at its PT Cabot Indonesia facility in Merak, a project that will increase carbon black capacity by 20 percent. The expansion is expected to be commissioned in mid-2011.

Cabot also has opened a black masterbatch plant in Dubai, United Arab Emirates, with production of plastics masterbatches slated to begin in August.

The initial capacity at the new site will be 25,000 metric tons per year, with provisions to increase to 75,000 tons down the road.

The company didn't disclose the investments at either site.

The Merak site is principally a rubber black facility, with the product serving primarily the tyre and rubber market, said Susannah Robinson, Cabot director of investor relations. Indonesia has a rapidly growing tyre industry and Cabot has the leading carbon black manufacturing position there, she said.

The Boston-based company also has a carbon black plant in Cilegon, Indonesia, and has signed an agreement to purchase land near that site in anticipation of expanding capacity. Any project in Cilegon would follow the completion of the Merak expansion, Robinson said.

The projects demonstrate Cabot's commitment not only to Indonesia but to the Asia Pacific region overall, she said. Over the past 10 years, the region has grown to represent one-third of the company's total revenue. “We continue to invest in the region to support our customers' demand for our products.”

The masterbatch plant in Dubai principally serves plastics applications, including building infrastructure for water supply, electricity and telecommunications projects, Robinson said.

The facility will provide product for global exporters of polyethylene and polypropylene compounds throughout the Middle East.

The region produces about one-fifth of the world supply of those materials, she said.

With the struggling global economy in mind, Cabot last year implemented a restructuring program developed to save about $80 million in fixed costs. Included in the plan were several closures and mothballings of plants to take out unnecessary-in some cases temporary-capacity.

But while 2009 was a difficult financial year for Cabot and the global economy overall and the downturn affected various companies' investment projects all over the world, Cabot maintained its plans in places such as China, Indonesia and Dubai because of its confidence in those regions as key growth regions, Robinson said.

Patrick Prevost, Cabot president and CEO, said following the company's last quarterly report that the results showed the robustness of its business across all its segments. Cabot's leadership positions in global markets, combined with the actions it took over the past year, were instrumental in the firm's improvement, he said.

The stabilisation of Cabot's end markets and its ability to deliver in key areas gives it “growing optimism for the future,” he said.

Generally, volumes are down 5 to 10 percent below predownturn levels, but remain stable as the end-market demand continues to improve, Robinson said. The tyre and automotive sectors are recovering globally, led by merging markets; Europe is an exception, however, as markets there remain somewhat weaker than the rest of the world, she said.

Cabot sales are well-balanced among its three key regions-the Americas; Europe, Middle East and Africa; and Asia Pacific-with the company diversifying its portfolio over the past decade, Robinson said. Despite being a US-based firm, about 80 percent of its revenues are generated outside of the country, she said.

From Rubber & Plastics News (A Crain publication)