Boston, Massachusetts – Cabot Corp.’s reinforcement materials segment is set for a sharp recovery in 2021, but it may not be enough to reach 2019 volume levels, according to president and CEO Sean Keohane.
The segment, which supplies carbon black materials to the automotive and tire industries, will be driven by strong Asian spot pricing, the feedstock costs rise there, and volume strength driven by stronger underlying demand, said Keohane in an earnings call 24 Nov.
But according to Keohane, LMC projections for the tire industry suggest a 5-6% decline in demand in 2021, compared to 2019 levels.
“We're seeing very sharp recovery now, which is good and that recovery is likely going to continue as long as we don't have a big reversal in terms of Covid related economic impacts,” he said.
However, he went on to say, there will still be “a little further ground to cover to get back to what you call normal or what I might say with the '19 volume levels.”
Turning to the current business environment, Keohane said the company was seeing underlying trends in both tire and automotive demand strengthening with month-on-month improvement continuing through October and into November.
“The economic recovery is unquestionably linked to stabilising the public health crisis and this remains the key to bringing consumer confidence and the economy back to its full potential,” he added.
Citing LMC estimates, Keohane said global replacement tire sales are now expected to decline 12% for the full calendar year of 2020.
Light vehicle replacement tire sales improved in all regions in the September quarter, down only 6% year-over-year compared to a decline of 31% in the June quarter.
The December quarter, said the Cabot boss, is expected to approach 2019 levels with total replacement tire sales projected to be down 2% year-over-year.
“Building on the V-shaped recovery in the September quarter, we continue to see consistent improvement in terms of mobility and miles driven, and this bodes well for the replacement demand of tires,” he concluded.
Cabot’s reinforcement materials segment posted a 30% year-on-year decline in sales to $1.2 billion for the fiscal year ended 30 Sept. Segment earnings before tax (EBIT) declined by nearly 40% to $162 million.