News from Notch Consulting, Inc.

October 30, 2008

Cabot Announces 4Q 2008 and Full FY Results

Filed under: Carbon Black — Notch @ 9:45 am

Cabot Corp. announced 4Q and full fiscal year earnings on Wednesday, October 29. The conference call to discuss results will be held today (Thursday, October 30) at 2:00 pm EST.

Here are the results.

Cabot reported net sales of $853 million for 4Q 2008, up from $675 million during the same quarter of 2007, and net sales of $3,191 million for full year 2008, up from $2,616 million for FY 2007. Net income was $11 million for 4Q 2008, down from $24 million in 4Q 2007. Net income for full year 2008 was $85 million, down from $129 million for FY 2007.

Excerpts from the release:

Commenting on the results, Patrick Prevost, Cabot’s President and CEO, stated, “Although we are not pleased with our operating results this quarter, I am confident in the underlying strength of our businesses. Key drivers of this quarter’s performance are first, as anticipated, the negative time lag effect in our rubber blacks supply contracts was unprecedented. Rubber Blacks nonetheless improved profitability despite the difficult operating environment through strong margin and cost management. Second, the softening economic environment became more global in scope and affected our volumes during the quarter, particularly in the automotive and construction sectors. Third, our other income and expense was unfavorably affected by $9 million from the non-cash translation of intercompany loans, denominated in U.S. dollars, provided to our Brazilian subsidiary, whose currency depreciated during the quarter.”

Prevost continued, “It is clear that the global macroeconomic issues have begun to affect our business results in the form of reduced demand in some of our key industrial sectors. Our conservative financial practices have positioned us with a strong balance sheet to withstand these turbulent conditions and we remain focused on executing our longer term strategies to further advance our position as a global market leader.”

Results for Rubber Blacks:

Rubber Blacks profitability increased by $13 million when compared to the fourth quarter of 2007. Solid margin management and lower fixed manufacturing costs allowed the Business to overcome a significant unfavorable contract lag ($36 million) and lower volumes ($8 million). Volumes declined by 7% driven by economic softness in all regions as our tire customers reduced production on weaker demand. The Americas declined by 10%, with North America down 7% and South America down 15%; the Europe, Middle East, Africa region was down 6%; and Asia Pacific was down 6% overall, with China down 16%, in part due to the Olympics, more than offsetting an increase of 3% in the rest of Asia. For the full fiscal year 2008, operating profit before tax (“PBT”) increased despite the unfavorable contract lag and difficult economic conditions, which led to flat volumes. The Business was able to offset the vast majority of these unfavorable factors through solid margin management and strict control on manufacturing spending, and also benefited from foreign currency translation. The time lag of feedstock related pricing adjustments in the Company’s rubber blacks supply contracts had an unfavorable impact of $36 million and $66 million for the fourth quarter and full fiscal year 2008, respectively. This is compared to an unfavorable impact of $13 million and $6 million in the same periods of 2007.

October 28, 2008

Michelin Expects Run-Flats to Remain a Niche Product

Filed under: General, Run-flats — Notch @ 3:22 pm

The always erudite David Shaw recently had a short article in the European Rubber Journal (subscription required) that resonated with me. David reports on an interview with Michelin’s research director Philippe Denimal wherein he indicates that Michelin’s research suggests that only three percent of drivers would want to use a run-flat system. This means that these products will remain a niche product going forward. The issues preventing greater penetration are well-known: existing self-supporting run-flats are heavy and tend to have worse fuel consumption than conventional tires.

Nonetheless, Mr. Denimal indicated that there is still a strong demand for extended mobility tires in the marketplace, but that the solution will not be in form of either a spare tire or self-supporting run-flats. Indeed, Michelin believes that within ten years most cars would be sold with only four tires rather than five including a spare. Furthermore, the front tires would be a different size from the rear tires, which is already common in sports cars.

Mr. Denimal said that Michelin is working on solutions, as are its competitors. Conti, for instance, offers Contiseal self-sealing tires, which incorporate a sealant paste to seal punctures. Also, Pirelli and Conti are working on chip-in-tire technologies. For his part, Mr. Denimal offered the opinion that the sealant approach negatively affects fuel consumption, while current generations of chip-in-tire technologies are too expensive for the general market (though useful in specialty tires, such as mining equipment).

These conclusions back up Notch’s own findings in Prospects for Run-Flat Tires, a market research report published last year. In that report, Notch forecast that RFT would see double-digit gains but still constitute only about 2% of passenger tire demand by 2015, with usage heavily weighted toward the OE sector and HP/UHP tires. Attempts to introduce RFT on mainstream vehicles, such as minivans, have not been successful. In addition to the added weight and fuel consumption issues, RFT are too expensive and have too-short service lives to appeal to soccer moms. Also, the cell phone has done much to alleviate fears of being stranded by a flat tire.

However, that does not mean that RFT can not be an attractive niche for tiremakers, as these are premium tires sold to highly educated, high income consumers. In many ways, RFT mirror the larger trends in the passenger tire market, which is becoming increasingly compartmentalized between a large, cost-above-all-else segment for most average consumers, and a series of small but highly profitable (and overlapping) niche segments, including HP/UHP tires, winter tires, run-flats, off-road tires, etc. The question going forward is, how badly will the current era of high fuel prices and economic uncertainty hit these niche segments?

October 27, 2008

Lanxess Invests in Leverkusen

Filed under: General, Rubber Chemicals — Notch @ 11:03 am

On October 26, 2008, Lanxess AG announced that its Basic Chemicals business plans to invest Euro 35 million at its production site in Leverkusen, Germany to expand its aromatics network, including capacity for basic chemicals cresols, Vulkanox BHT, Vulkanox BKF and monochlorobenzene. The work is scheduled for completion by the beginning of 2010. This will enable an increase in capacity of up to 60 percent. Lanxess is aiming to begin increasing production of monochlorobenzene by the third quarter of 2009. According to Lanxess, the aromatics network in Leverkusen has basically existed for more than 100 years. It comprises a large number of products which act as essential starting products for agrochemicals, polymers, surface coatings and pigments.

Vulkanox BHT is an antioxidant intended for use in elastomers, latices, polyether polyols, mineral oils, propellants, adhesives, paints, printing inks, plastics, and other materials. Vulkanox BKF is a bisphenol antioxidant used in elastomers, latices, paints and polymers.

Tire Recycling Plant Gets State Funding

Filed under: Carbon Black, General, Tire Recycling — Notch @ 10:43 am

The Pittsburgh Tribune-Review has reported that Delta-Energy’s new tire recycling plant in Greene County, Pennsylvania has received $2.5 million in state funding from the Redevelopment Assistance Capital Program.

As previously reported on this blog, the plant will be used for tire depolymerization, a process that recovers petroleum-derived products, oil, gas and carbon black, from scrap tires. The facility will process 25 tons of waste tires per day.

According to Delta-Energy, this process results in much higher quality recycled carbon black than traditional pyrolysis, which makes the material more competitive with virgin carbon black. Bill Cole, VP, Product Management of Delta-Energy will deliver a paper on the process at next week’s Carbon Black World 2008 conference in Vancouver, BC.

October 21, 2008

Bridgestone Inaugurates New Mexican Carbon Black Plant

Filed under: Carbon Black — Notch @ 11:40 am

On Tuesday, October 21, 2008, Bridgestone Group announced that it had officially opened Mexico Carbon Manufacturing SA DE CV, a wholly-owned carbon black in Altamira, Tamaulipas, Mexico. The new plant will supply Bridgestone Group’s tire plants in North America as well as Central and South America. Production capacity at the plant is forecast to be approximately 35,000 tons a year. The new plant is operated by MXCB and this is the Bridgestone Group’s third carbon black plant, joining facilities in Japan and Thailand. Bridgestone is currently the only major tire manufacturer to be directly back-integrated into carbon black manufacturing.

According to the press release, the management goal of the Bridgestone Group is to establish the status of being the undisputed world No. 1 tire and rubber company both in name and reality, and to this end, is working to enhance competitiveness throughout the entire supply chain. By making the most effective use of raw materials and equipment manufactured internally, the Bridgestone Group is able to develop and produce high-quality tires while ensuring stable costs and supply over the long term. Going forward, the Bridgestone Group will continue aiming for optimum raw material procurement by combining internal manufacture with procurement from external suppliers.

Below are the details of the new plant:

Outline of Mexico Carbon Manufacturing SA DE CV Location : Altamira, Tamaulipas, Mexico
President : Yoichi Shiroki
Plant : Start of operation — May 2008
Plant site — approximately 430,000m2
Product — carbon black
Production capacity — 35,000 ton/year
Employees — approximately 100

________________________________________________________

Update: Here is a Spanish language article on the opening of Bridgestone’s new carbon black plant. It provides additional details about the inauguration ceremony, which was led by the mayor, Javier Gil Ortiz, accompanied by the Secretary for Economic Development and Employment in the state, Alfredo Gonzalez Fernandez on behalf of the Governor Eugenio Hernandez Flores.

Other attendees included the directors of Bridgestone Group, Toshiro Iwata, Yoichi Shiroki, Narumi Zaitsu, Osama Inoue, and Pascuali of Ariel; Japan’s Ambassador to Mexico, Masaaki Ono; the Vice-Chairman of the Daewoo Group, Il Woo Han; the Secretary General of the Executive Committee of the National Union of Petrochemical Industry, Gilberto Muñoz Mosqueda; and the Director General of the Port of Altamira, Alejandro Gochicoa Matienzo.

October 19, 2008

Carbon Black World Data Book 2008 will be published in November

Filed under: Carbon Black — Notch @ 11:45 pm

Notch Consulting will publish the latest edition of the Carbon Black World Data Book in November 2008. This comprehensive report on the global carbon black industry will be fully revised and expanded, including the latest data on expansions, capacity, utilization rates, production, demand, markets, and pricing.

The 2008 edition of the Carbon Black World Data Book will include several major additions:

  • For all countries and regions, volume demand for carbon black in tire markets will be further broken out into passenger tires, truck tires, and other tires/retreading.
  • Purchase of the report will now include quarterly updates of carbon black pricing for four major rubber grades.

October 16, 2008

Columbian Completes Hungarian Expansion

Filed under: Carbon Black, Tires — Notch @ 3:22 pm

The Budapest Business Journal (citing MTI-Econews) is reporting that Columbian Tiszai Carbon has completed its expansion of its carbon black plant in Tiszaújváros in northeast Hungary. Columbian Tiszai Carbon is a subsidiary of US-based Columbian Chemical Company, the third largest carbon black producer in the world. According to Columbian Tiszai’s CEO, László Dobos, the expansion cost Ft. 7 billion (US$35 million) and raised capacity to 100,000 tonnes/year. Columbian Tiszai Carbon and its parent company covered most of the cost of the investment, but the unit was also awarded a Ft 400 million (US$2 milion) grant from the EU for the project.

Most of the plant’s output goes to tire markets, with the remainder going into rubber goods, plastics, and paint. Hungary is currently in the midst of a major expansion in its tire production capacity. Bridgestone completed construction on a new PC/LT tire plant in Tatabanya in 4Q 2007 and began tire production in 1Q 2008. This is the first Bridgestone plant in Europe to use the company’s BIRD tire-building technology. Hankook Tire opened a new PC/LT tire plant in Dunaujvaros in 2007, and the plant will be gradually scaled up to full capacity by 2010. Michelin produces tires in Hungary through Taurus Rubber, with plants in Budapest and Nyriegyhaza. With all of this activity, Apollo Tyres recently scrapped plans to build a new plant in Hungary by 2009. The company is investigating other sites for the plant. Even with the cancellation of the Apollo plant, Notch Consulting estimates in the Carbon Black World Data Book that carbon black demand in Hungary nearly doubled from 2006 to 2008, and demand will nearly triple through 2010 as this new tire capacity is ramped up.

October 10, 2008

Cancarb Names New President

Filed under: Carbon Black — Notch @ 5:02 pm

Cancarb Limited, a Canadian company that is the world’s leading producer of medium thermal black, yesterday named a new president. Effective October 9, 2008, Dave Petrie has been appointed President of Cancarb, replacing David Carmichael, who has left the company to pursue other interests. Dave Petrie has been with Cancarb since 1996, most recently as the Director, Marketing, responsible for global marketing of Thermax medium thermal black as well as overseeing customer service, logistics, and quality assurance. I have known Dave for years in this capacity and have always found him to be highly knowledgeable, capable, and helpful. We wish him luck in his new position, and wish good luck to David Carmichael in all his future endeavors.

Here is the press release (PDF).

October 9, 2008

Columbian Chemicals Names New President and CEO

Filed under: Carbon Black — Notch @ 11:23 pm

According to R&P News (subscription required), Columbian Chemicals Co. has appointed Kevin Boyle to the position of president and CEO, succeeding Jae Sup Lee, who is retiring. Mr. Boyle is currently a member of the company’s board of directors and has more than 20 years of experience in the chemical industry. Most recently he was president and CEO of OCI Chemical, a wholly owned subsidiary of DC Chemicals Ltd. of South Korea (which is also the parent company of Columbian). Boyle has also held positions at Petrofina, which now part of the French-based Total S.A.

October 5, 2008

India Begins Anti-Dumping Investigation for Nylon Tire Cord Fabric from Belarus

Filed under: Tire Cord — Notch @ 1:35 pm

The Hindu Business Line reports that India’s Commerce Ministry has initiated an anti-dumping investigation into the imports of nylon tire cord fabric from Belarus, following a complaint by the domestic industry represented by the Association of Synthetic Fibre industry. The probe was requested by SRF Ltd and Century Enka Ltd. The period of investigation is from April 1, 2007 to March 31, 2008, while the injury investigation covers the fiscal years 2004-05, 2005-06, and 2006-07 over and above the period of investigation.

As previously reported on this blog, India also has initiated a sunset review of the anti-dumping duty on nylon tire cord fabric imported from China. India’s domestic tire cord industry has requested the review and seeks to have the current anti-dumping duty both continued and enhanced.

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