PCBL sees strong growth potential for India’s carbon black industry

Mumbai, India - PCBL Chemicals expects its roots in India to deliver medium and long-term benefits despite the current disruption to global trade routes.

In a 29 July earnings call, PCBL managing director Nilesh Koul said in addition to strong domestic demand, the market environment was particularly positive due to three structural changes which he said were reshaping the global carbon black market in India’s favour.

The factors, according to Koul, are the expanding Indian trade agreements, a tariff advantage in the US market and contracting Russian refining and carbon black exports.

“Global landscape [is] turning in India's and PCBL's favour,” Koul said, describing the developments as “structural tailwinds” rather than simply cyclical factors.

Trade deals

India’s trade architecture has strengthened considerably, he said, pointing to the India-US trade deal discussions and subsequent negotiations, which have brought tariffs on Indian exports down from last year’s peak levels.

The India-EU free trade agreement, concluded in January and now progressing through ratification, is also expected to remove the 4.5% EU import duty on Indian tires.

That, Koul said, should improve the competitiveness of Indian tire manufacturers in an important export market and, in turn, support domestic carbon black demand.

India’s agreements with the UK and EFTA, already in force, along with new economic partnerships with Oman and New Zealand, are further strengthening the country’s position as a preferred supplier.

“Very few carbon black producing geographies enjoy this breadth of preferential market access today,” Koul said.

The company also sees a particularly favourable position developing in the US.

According to Koul, Indian carbon black now attracts materially lower tariffs than material from competing Asian and Middle Eastern origins.

Meanwhile, US buyers are looking to diversify away from China, where effective duties are significantly higher.

“India [is] a natural beneficiary,” Koul said.

“We are seeing good traction from US customers. And even after accounting for elevated ocean freights, we are more competitive in the US market today than we were before the [Middle East] conflict,” Koul said.

The company’s “upcoming presence in Texas further strengthens our ability to serve this market,” said Koul without further elaborating.

Russian supply tightens

At the same time, the global supply chain for carbon black is tightening as Russian refining capacity and exports come under pressure.

“Ukraine's sustained strikes on Russian energy infrastructure have now hit all of Russia's largest refineries,” Koul said.

And Russian refining throughput has fallen to "new lows with a meaningful share of capacity offline," he said.

According to Koul, this has two direct consequences for the carbon black industry.

“Russian exports of carbon black feedstock have shrunk, keeping global carbon black feedstock availability relatively tight,” he said.

Russia’s own carbon black exports, historically an important source of low-cost material for Europe, Asia and the Middle East, have also contracted sharply, on top of European sanctions.

“This combination of shrinking Russian supply and India's improving market access creates durable white space for PCBL,” Koul said. “A structural, not just a cyclical opportunity.”

Tire sector offers further upside

The tire industry is another important source of confidence for PCBL.

While tire manufacturers continue to face cost pressures globally, Koul said demand in the US replacement market “has stayed resilient.”

In India, PCBL expects the tire industry to remain on 'a healthy growth path' following growth of around 7-8% this fiscal year.

Industry growth, according to Koul, is expected to remain in the high single digits through FY27-29, supported by an ageing vehicle fleet, premiumisation and rising electric-vehicle penetration.

“Leading tire makers [in India] are stepping up the capacity,” Koul said.

Several of the manufacturers, he noted, are operating at close to 90% utilisation and have announced new capital expenditure for the current fiscal year.

This provides PCBL with “good visibility on uptake for our carbon black volumes over the next few years”.

Furthermore, the group expects India’s tire exports to provide further growth opportunity.

Tire exports, Koul noted, increased 9% year-on-year in the previous fiscal year despite supply-chain disruption, elevated logistics costs and trade uncertainty.

The US remains the largest destination, while Germany, Italy, Brazil and France are also important markets.

With trade agreements now in place or progressing through ratification across the US, EU and UK, PCBL said it saw the potential for further growth in Indian tire exports and, consequently, domestic carbon black consumption.

“The runway for Indian tire exports, [and] therefore, for domestic carbon black demand only gets stronger,” Koul said.

Procurement a near-term headwind

However, the group leader remained cautious over the near-term outlook of the industry.

Some customers, he said, have adopted a more cautious procurement approach, which could temporarily affect volumes in the second quarter.

However, PCBL said it views the dip in volumes as “a timing issue” rather than a deterioration in underlying demand.

“We see this as a timing effect, not a demand effect,” he said, adding that the company remains “constructive on the second half of FY27”.

Kould went on to add that he was "positive on the opportunities in front of us.” 

“The three structural shifts I described ... are all durable tailwinds that play directly to PCBL's strength, scale, reliability with a global supply chain and an expanding specialty platform.”