News from Notch Consulting, Inc.

Notch hears that Continental Carbon Company is currently running only one unit out of two at Phenix City, Alabama, putting it at half capacity, or about 100 million pounds per year (45 KTPY). The company’s two remaining plants — Ponca City, Oklahoma and Sunray, Texas — are currently operating all units, though at reduced capacity (~80%). Phenix City will shift between the plant’s two tread units until the idle capacity is needed again.

The US carbon black industry is dealing with the downturn by temporarily idling under-utilized units, often using the downtime to do maintenance and repairs. However, given that corrosion is a serious problem for idled units, suppliers indicate that this is only a short term solution to overcapacity. If overcapacity persists for more than another six months, more capacity will probably be removed from the US permanently.

Notch Consulting has updated the Carbon Black World Data Book 2008 to reflect several recent restructuring announcements, most prominently Cabot Corporation’s decision to close two of its European carbon black plants and idle capacity in Canada and Indonesia. Cabot Corp. made the announcement on January 29. The carbon black report’s capacity and production forecasts have been revised to reflect the restructuring, which Cabot announced would remove 250 to 300 KT of capacity.

Even before the Cabot announcement, it was clear that the carbon black industry was in the midst of a profound restructuring, one that has already led to seven major plant closure announcements in 2008/2009. Unlike prior downturns, the pain is by no means isolated to a single region or group of countries but is truly global in scope. Chinese carbon black suppliers, for instance, are facing their first protracted downturn after more than 25 years of rapid, nearly uninterrupted growth. But the current restructuring goes beyond plant closures and cost-cutting measures. The rapidly escalating oil prices that characterized the first seven months of 2008 forced carbon black suppliers to evaluate the fundamental structure of their traditional supply contracts as they sought to better insulate their bottom lines from the vissitudes of a volatile oil market. At the same time, increased energy costs have prompted more carbon black suppliers to invest in energy-saving plant upgrades (such as higher-rated air and feedstock preheaters), as well as cogen units utilizing tailgas that was previously vented.

The Carbon Black World Data Book 2008 provides a detailed overview of the industry’s current conditions, as well as forecasts for short term recovery and long term growth. Here is an overview of the report, along with the full table of contents. For more information, write to Notch Consulting at info AT notchconsulting.com or visit Notch’s website here.

On January 29, 2009, Aditya Birla Nuvo reported its results for the quarter ended December 31, 2008 (Q3 FY 2008/09). The company posted a consolidated net loss of Rs 156.44 crore for the quarter, compared with the net profit of Rs 30.17 crore in the previous corresponding quarter. The company’s consolidated net sales grew 17 per cent to Rs 3,429 crore for the reporting quarter, compared to Rs 2,931.1 crore.

The carbon black business, Hi Tech Carbon, saw revenues decline by 10% during the quarter to Rs 221.9 crore, compared to Rs 245.3 crore, though revenues for the nine months ended December 31, 2008 were up 44% (at Rs 857.5 crore) compared to the comparable period a year earlier (when revenues totaled Rs 596.8 crore). The carbon black unit reported a standalone loss of Rs 20.1 crore for the quarter, compared to a standalone operating profit of Rs 43.2 crore in the comparable quarter. Quarterly production of carbon black declined 34% (to 38,589 tonnes), based on a 39% decline in sales volumes (to 36,831 tonnes). As a result, capacity utilization fell to 67.1% during the quarter, down from 101.6% during the same quarter last year.

The company remains committed to its new greenfield carbon black plant in Patalganga, India, and has placed orders for “long delivery period” equipment, though startup may be delayed. With regard to the plant, the presentation accompanying the results states, “Project activities will be aligned to match commencement of production with the demand revival.”