Orion expects sharp rise in rubber blacks profit level

Houston, Texas – Orion Engineered Carbons SA expects gross profit within its rubber carbon black business to continue to grow during 2023, driven mainly by the ongoing supply tightness.

Gross profit per tonne of rubber black stood at $350 (€330) during the final three months of last year, Orion officials reported during a fourth quarter earnings conference call.

“We continue to see a nice upward trend in our trailing 12-month gross profit per tonne now at $336 up sharply over the past two years,” CFO Jeffrey Glajch said 17 Feb.

The company, continued Glajch, expects another significant step-up in profitability in 2023, with pricing alone expected to move gross profit per tonne to “well above $400”.

Commenting further on Orion's performance, CEO and director Corning Painter described the rubber business gains as “the new baseline from which we can grow.”

According to Painter, demand continues to outstrip supply for rubber carbon black in many of Orion’s “key markets”.

“You can see clearly that in North America, the supply-demand balance has shifted over time and we expect it to continue to be tight for years to come,” he said.

Underlying demand in North America, he explained, is increasing due to planned onshoring of tire production.

In the meantime, high carbon black investment costs discourage significant new carbon black capacity in the region.

In Europe, Painter said the situation has become complicated due to the war in Ukraine and its impact on Russian supply to Europe.

“Significant amounts of Russian carbon black continue to flow into Europe and remain in some customers' supply-chains, even as some of it now flows to China,” he said.

As a result of the supply situation and an increase in the European tire capacity, Painter said he believed the carbon black market in the region “will tighten further.”

The comments come as Orion delivered a strong fourth quarter, with adjusted earnings up more than 83% at $40.3 million.

The US carbon black supplier linked the gains to pricing, pass-through of higher feedstock costs and higher volumes.

During the period, Orion rubber carbon black volumes rose by 5.1 kilotonnes, or 3.1%, year-on-year, helped by the start-up of a recently installed air-emissions control system.

Segment sales rose 28.8%, to $315.8 million, as higher pricing, pass-through of higher feedstock costs and increased volumes more than offset an unfavourable product mix development.