News from Notch Consulting, Inc.

January 31, 2008

Performance Fibers names new COO

Filed under: Tire Cord — Notch @ 6:09 pm

According to fibre2fashion, Performance Fibers has named Alexander J. Carnevale to the new position of vice president/chief operating officer. He will manage the company’s business operations worldwide. Performance Fibers also named Marc Sicre to lead its European business, where he succeeds Mr. Carnevale. The establishment of the new VP/COO position is designed to unite the company’s organizational structure, which is centered around regional businesses based in Europe, North America, and Asia. Under the new structure, leaders of these three regional businesses will report to Mr. Carnevale.

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Aditya Birla Nuvo & PCBL Report Results

Filed under: Carbon Black — Notch @ 5:32 pm

India’s two leading carbon black producers have reported their most recent results.

Aditya Birla Nuvo, parent company of Hi-Tech Carbon, reported consolidated revenues of Rs. 3,661.6 crore for Q3 FY 2008 (quarter ended December 31, 2007), up 58% from the same quarter last fiscal year. The carbon black business had its best ever quarterly revenues of Rs. 245.3 crore, up 25% from 3Q FY2007. Net Income (PBIT) was Rs. 37.4 crore, up 18% compared to Q3 FY2007, though high input costs lowered operating margins. Carbon black export volumes more than doubled during the quarter based on expanded capacity. (Note: HTC added capacity at Chennai in July 2007).

The press release is here. Financials are here. Presentation is here.

The Presentation includes a significant piece of information about HTC’s proposed new plant at Patalganga. From Slide 4, Key Highlights: “Carbon black business, though received environmental clearance for greenfield expansion by 120 K MT in Western India, will decide after examining other sites.” The project is mentioned again on Slide 27, Value Businesses: “Evaluating greenfield expansion by 120 K MT in Western India along with other sites.”

So it appears that the Patalganga plant is under review. The Patalganga plant was initially announced at 60 KTPY and then was expanded to 120 KTPY. Last month there were rumors (unconfirmed) that HTC had scaled the project back to 60 KTPY, at least initially. It is possible that Birla and PCBL (see below) were involved in a bit of one-upmanship with the spate of expansion announcements that came out of India last year.

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Phillips Carbon Black Ltd. released results for Q3 FY 2008 (the quarter ended December 31, 2007). PCBL achieved its highest ever quarterly sales volume (64,918 tonnes), reflecting a 3% increase over Q3 FY2007. Export volumes declined about 2% to 15,227 tonnes compared to Q3 FY2007 due to stronger domestic demand. Gross sales during the quarter were Rs. 31,073 lakhs, up 1% from Q3 FY 2007. Operating margins (EBITDA) improved during the quarter to 14.00%, up from 10.98% in Q3 FY2007, driven by improve operational efficiency, better yield, and cost management.

Results are here. Management discussion here.

Highlights of the discussion:

  • The expansion at Mundra is on schedule for startup during 4Q FY2009 (i.e., the first quarter of 2009). The Environmental Impact Assessment study has been completed, equipment orders placed, and the contract for civil construction has been awarded. The foundation stone ceremony (Bhumi Puja) was held on January 24, 2008.
  • The expansion at Cochin is on schedule for startup 2Q FY2010 (i.e., the third quarter of 2009). The Environmental Impact Assessment is still underway.
  • PCBL raised carbon black prices on January 1, 2008 to mitigate higher feedstock costs. Management expects that higher prices, coupled with higher production, improved operational efficiencies, and cost management, will maintain current EBITDA levels during Q4 FY2008.

January 30, 2008

Birla Mexico — Will They or Won’t They?

Filed under: Carbon Black — Notch @ 12:42 am

An air of uncertainty hangs over the North American carbon black industry. There are persistent rumors that one of the US producers will close a plant or at least a unit, but thus far there’s been no specific news (aside from Cabot Waverly). But the biggest question is related to Birla Group: will they move forward with their proposed carbon black plant in Mexico?

News of the project surfaced last year in the press, primarily through the Economic Times (India). As originally envisioned, the plant would have an initial capacity of 60,000 tonnes, expandable to 200,000 tonnes. The plant would be located in Altamira, Tamaulipas and would be structured as a joint venture between Alexandria Carbon Black and Thai Carbon Black. The original start-up date was set for 2008.

So what is the current status of Birla Carbon Mexico? Based on some off-the-record conversations with Birla people and competitors, it would appear that this project is on-hold. Birla Group’s carbon black business is focusing its capital spending on its current slate of announced expansions in Egypt (two new units in 2009), India (new plant in Patalganga) and China (doubling capacity this year), while Mexico has been put on the back burner. If the plant goes forward, Birla would break ground in 2009, with start-up about 7 months later (so late 2009 or early 2010).

What happened? As Birla worked to put the project together, the plant’s economics were less favorable than originally thought due to a number of unforeseen complications.

  • Steel costs remain quite high.
  • Due to poor water quality at the site (which would negatively affect the cogen unit and the quality of the carbon black), the plant would need to include a water treatment plant on-site, which increases costs.
  • Shipping carbon black out of the plant via container ships proved more expensive than assumed.
  • Bringing feedstock into the plant would be more expensive than thought. The plant would use imported CBO from the US Gulf Coast, but even though the proposed site is very close to the Altamira port, the costs of receiving, storing and transporting (by pipeline) CBO were higher than Birla pays in other countries.
  • Birla is not satisfied with the level of cooperation among Mexican authorities, particularly regarding tax incentives and permitting. By contrast, the permitting process is more fluid in Egypt, India and China, so the decision was made to focus on those operations.

In evaluating Birla’s situation, it may be instructive to look at Bridgestone’s experience with its new Mexican plant, which is starting up this quarter. Bridgestone’s new Mexican plant is said to be an exact duplicate of its plant in Thailand. However, the Thai plant was built in 2003/2004 for a cost of $40 million, while the Mexican plant was built in 2007/2008 at a cost of $81 million.

January 28, 2008

Consumer Reports Investigates Run-Flat Tires

Filed under: Run-flats, Tires — Notch @ 5:25 pm

Consumer Reports has been road testing the run-flat tires on the 2007 Toyota Sienna XLE AWD. Their verdict? So far so good.

The run-flat tires on this model of the Sienna were the subject of several class action lawsuits filed in September 2005 in California and New York alleging that the tires wore prematurely or unevenly. In October 2005, the National Highway Traffic Safety Administration announced that it was looking into the complaints, and the NHTSA began a preliminary investigation in February 2006. In August 2006, Toyota Motor Sales resolved the class action suits by offering to extend the warranty on the tires or to reimburse consumers who had paid to replace the tires. The deal covered Dunlop SP Sport 4000T and Bridgestone B380RFT tires equipped as original equipment on the vehicle. The NHTSA investigation was closed in August 2006.

Comprehensive information on the class actions suits and the settlement can be found here.

January 24, 2008

Cabot Releases First Quarter Results

Filed under: Carbon Black — Notch @ 11:13 pm

On Wednesday, Cabot Corporation released its financial results for the first quarter of FY 2008. The company announced net income of $36 million for the quarter, including $7 million after-tax of income from certain items.

Cabot’s results during the quarter were unfavorably impacted by approximately $17 million arising from the time lag of the feedstock related pricing adjustments in the Company’s rubber blacks supply contracts and the immediate recognition of higher feedstock costs in North America, due to the use of LIFO accounting. The Company’s results during the quarter were positively impacted by approximately $14 million of tax benefits arising from favorable settlements of tax audits as well as various tax credits in China.

The results are here.

Cabot held a conference call on the results this afternoon. A webcast of the conference call is here. For the first time, Cabot has provided a deck of slides to accompany the presentation. See the above link under “Supporting Materials.”

This was the first earnings call for Cabot’s new President and CEO Patrick Prevost, and it was a relatively staid affair compared to some of the company’s recent quarters. There was no major news regarding the carbon black business. The slide detailing “Carbon Black Business PBT” provided some useful and illuminating information by breaking down the effect of Contract Lag and LIFO (last-in, first-out) inventories for feedstock purchasing on the Carbon Black Business PBT. The data is provided going back nine quarters, to Q1 2006. In Q1 2008, Contract Lag and LIFO together reduced Carbon Black PBT by $17 million, and over the last 3 quarters these factors have reduced PBT by $47 million as feedstock costs have continued to rise. (Contract lag refers to the time lag in the company’s ability to pass on feedstock cost increases to customers for carbon black sold under long term contract.)

Below is an rough guide to some of the topics discussed during the webcast specifically related to carbon black. Times refer to the Windows Media version of the webcast, which begins at 45:42.

52:20 to 56:50 — Overview of the carbon black business. Cabot started up the new Performance unit at Tianjin, and is on schedule for an expansion at Tianjin by year-end 2008. China carbon black volumes declined this quarter because Cabot stopped importing “seed volumes” from other plants in the region. On Inkjet Colorants, Cabot completed a debottleneck for its colorants production unit, but a planned expansion has been put on hold because volume sales into the High Speed market have been below expectations.

59:10 to 59:50 — Geographic breakdown of revenue by region. Cabot continues to shift its sales focus to Asia (particularly China) and South America, while reducing its presence in North America.

01:08:55 to 01:10:50 — More detail of China volumes. Why Cabot reduced import volumes.

01:23:10 to 01:26:50 — Discussion of Contract Lag and LIFO effects.

Wired Magazine includes Run-Flat Tires in List of “Things That Don’t Suck”

Filed under: General, Run-flats — Notch @ 5:49 pm

From Wired Magazine.

Things that don’t suck: TV screens in the back of airplane seats. Twice-baked potatoes. Dryer sheets. DVRs. The set design on Mad Men. Farmers’ markets. Tap water. Touchscreens. Scissors. Pocketknives. Thumb drives. Kites. Strike-anywhere matches. Doorstops. Run-flat tires. Netflix. Noise-canceling headphones. Casual carpool. Guitar Hero. Salt-and-vinegar potato chips. Bicycles. Kevlar. Velcro. Carbon composite. Dradis. Flip-flops. The first half hour of Indiana Jones and the Temple of Doom. Seat belts. Zippo lighters. Spartan Laser. Heated seats. Public libraries. Remote control. Ice cream.

Can’t believe they didn’t include carbon black.

Solutia delays emergence from Chapter 11

Filed under: Rubber Chemicals — Notch @ 4:38 pm

On Wednesday, January 23, Solutia Inc. announced that its emergence from Chapter 11 bankruptcy will be delayed from the previously announced effective date of January 28, 2008. The delay was caused by problems in obtaining the necessary exit financing, a result of current conditions in financial markets. Solutia’s exit financing consists of a $1.2 billion senior secured term loan facility, a $400 million senior secured asset-based revolving credit facility, and $400 million aggregate principal amount of senior unsecured notes.

The lead arrangers of Solutia’s exit financing — Citigroup Global Markets, Goldman Sachs Credit Partners, and Deutsche Bank — informed Solutia on January 22, 2008 that they have been unable to complete the exit financing to which they committed on October 25, 2007. The lead arrangers contend that the failure to provide these credit facilities was the result of an adverse change in the capital markets since the agreement in October. Solutia, however, said that it believes that the ongoing conditions in the credit markets began long before the October agreement and that the lead arrangers therefore are required to fund their commitments themselves on or before February 29, 2008.

Solutia’s press release is here.

Solutia’s most recent Plan of Reorganization is here.

January 19, 2008

Working in a Carbon Black Plant

Filed under: Carbon Black — Notch @ 10:31 am

Talking about X number of tons used worldwide, it’s easy to forget where all this carbon black comes from. Here is an interesting essay on the author’s experiences working in a carbon black plant in the late 1970s. It gives new meaning to the phrase getting down to the nitty gritty.

A gallon of loose blacks weighed fractions of an ounce due to the entrapped air. So efficient was it as a coloring agent that a teaspoonfull was enough to completely color one’s skin a brilliant shiny, dark black. And because it was such a fine dust, it leaked out of just the tiniest of holes. We moved it around the plant in pneumatic conveyors: big pipes with big blowers that moved a mixture of loose black and air. Under pressure. Tiny hole in pipe? Little plume of loose black. You walk past, notice a black speck on your skin, wipe it with your hand, and suddenly your whole forearm is black. We had a lot of leaks. We were all black.

Carbon Nanotubes Used to Create Darkest Material on Earth

Filed under: Carbon Black — Notch @ 10:17 am

This week, US researchers announced that they had developed the darkest material on Earth, a substance that is more than 30 times darker than the carbon substance used by the US National Institute of Standards & Technology as the current benchmark of blackness. According to Reuters, the new substance, which absorbs 99.9% of light, is composed of carbon nanotubes standing on end. It has a total reflective index of 0.045%, compared to 5% to 10% for basic black paint.

Pulickel Ajayan, who led the research team at Rice University, said that the material gets its blackness from three factors:

  • It is composed of carbon nanotubes, tiny tubes of tightly rolled carbon that are 400 times smaller than the diameter of a strand of hair. The carbon helps absorb some of the light.
  • These tubes are standing on end, much like a patch of grass. This arrangement traps light in the tiny gaps between the “blades.”
  • The researchers have also made the surface of this carbon nanotube carpet irregular and rough to cut down on reflectivity.

Below is a photo of the new material. The nanotube material is in the center; at the left is the NIST’s reflectance standard; at the right is a piece of glassy carbon.

black-1.jpg

Photo: Shawn-Yu Lin, RPI via Reuters

January 18, 2008

Lanxess Invests in India Rubber Chemicals Unit

Filed under: Rubber Chemicals — Notch @ 10:26 am

Lanxess today announced a capital project for its Indian rubber chemicals business, Lanxess India Pvt. Ltd. Production of rubber chemicals will be moved from a plant in Thane (Maharastra state) to a plant in Jhagadia (Gujarat state). Lanxess plans to spend Eur 50 million expanding the Jhagadia plant, which will employ 250 people when the expansion is complete. Production is scheduled to begin in 2010, coinciding with the start-up of a new ion exchange resin plant, also located in Jhagadia. The head office of Lanxess India Pvt. Ltd. will remain in Thane. Lanxess also operates a second plant in India, in Madurai (Tamil Nadu state). The press release on the project is here.

The company did not announce whether the project will increase the unit’s capacity or product range. According to the Rubber Chemicals World Data Book 2007, published by Notch Consulting, the Thane rubber chemicals unit produces rubber antioxidants and sulfenamide accelerators. The report includes production capacity by type for this plant and nearly 70 others worldwide.

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