Cabot: Full of confidence in the global carbon black market this year

In an interview with European media recently, Cabot's European regional executives said that despite the severe challenges faced by Europe due to geopolitical conflicts, the company is still confident in the global carbon black market this year. The company has seen significant growth in demand for carbon black for rubber and is evaluating options including expanding production capacity and implementing acquisition plans to address growing global market demand.

"Since the outbreak of the Russian-Ukrainian conflict in February of this year, we have been doing our best to support the production of tires and industrial rubber products," said Haumee Campania, vice president and regional business director, Reinforcements, Cabot EMEA. customers.” The company’s four carbon black plants in Europe have maintained high operating rates. He said that the company is now considering further plans to increase production to meet the rebounding market demand in the post-epidemic period; at the same time, it is also considering means of expanding production and acquisitions to expand carbon black supply.

Campania also acknowledged that there are many difficulties in the current global market. In terms of investing in new factories, Campania believes that the cost of building a factory in Europe is higher due to issues such as waste control measures and environmental regulations. He said: "If you want to build a new plant, you need to invest 300 million to 400 million US dollars, and you need to find a place where raw materials are easy to obtain." But the crucial raw material issue has not been paid enough attention. Because the raw material for carbon black production is the by-product oil in the petroleum distillation process, steel and plastic production process, and due to the conflict between Russia and Ukraine and Western sanctions, it is difficult for companies to purchase high-quality oil. "Cabot's strong execution across its global network is well positioned to manage and neutralize this impact. In addition, logistical issues and escalating energy costs can lead to price increases, which Cabot sees as an opportunity, Because the company is seeing a surge in the number of customers asking for long-term, multi-year contracts.

In addition to the European market, there is also a shortage of carbon black supply in the United States, which can be attributed to insufficient capacity and Russian import restrictions. Campania pointed out: "Russia exports about 600,000 to 700,000 tons of carbon black to the United States every year, and currently Russian carbon black is not sanctioned by the United States, but many companies have voluntarily stopped Russian products. In terms of production capacity, Although some companies are closing U.S. factories recently, the rubber processing industry in North America continues to grow as the economy recovers in the post-pandemic era. These factors have exacerbated the shortage of carbon black capacity in the United States.”

Campania said that in the United States, due to high costs, the best way to ease the tight supply of carbon black in the US market is to import from surrounding areas. Cabot has expanded capacity at its Mexico plant and from there exports carbon black to the United States.

Regarding the near-term outlook for the global carbon black market, Campania expects demand to remain strong as customers continue to produce tires. He said that the replacement rate of the tire market is 70%, or even higher. Even in a recession and soaring oil and gas prices, people in Europe and America are happy to drive on vacation. In addition, during the epidemic, inventories were decreasing, and downstream companies were replenishing them. The replacement tire market will remain strong despite many uncertainties amid a possible recession and high inflation. On the other hand, the original equipment tire market is indeed very weak, with car sales in Europe, for example, falling by 17% year-on-year in May. But things may improve in the future, as the auto industry was previously constrained by chip supply shortages, a problem that has been alleviated. Cabot remains confident in the carbon black market in 2022 due to strong demand for replacement tires and a rebound in the OE tire market.