News from Notch Consulting, Inc.

February 25, 2009

Continental Carbon Idles Unit at Phenix City

Filed under: Carbon Black — Notch @ 7:25 am

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.

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February 24, 2009

UK Vehicle Production Falls 59% in January

Filed under: General — Notch @ 2:57 pm

From ERJ (subscription required) comes confirmation that the dismal European vehicle production figures that characterized the fourth quarter have continued into 2009. Car production in the United Kingdom fell by 58.7% in January (to 61,404 vehicles), while commercial vehicle production was down 59.9% (to 8,351 vehicles), according to figures published by The Society of Motor Manufacturers and Traders (SMMT). A record 83.5% of car output from the UK was allocated for export, a signal that domestic demand remains weak.

According to SMMT’s chief executive, Paul Everitt, “Following extended winter shutdowns, vehicle output continued to fall in January in line with expectations. The extent of the decline highlights the critical need for further government action to deliver the measures already announced and ease access to finance and credit.”

Press release from The Society of Motor Manufacturers and Traders Limited.

Goodyear Introduces Off-Road Tire Reinforced with Kevlar

Filed under: General, Tires — Notch @ 2:36 pm

On February 20, Goodyear announced the introduction of the company’s first off-road tire incorporating DuPont Kevlar para-aramid fiber to enhance sidewall puncture resistance. According to the company, the use of Kevlar, a material that is, pound-for-pound, five times stronger than steel, greatly improves sidewall cut- and puncture-resistance, a critical feature for off-road tires. It also helps reinforce the sidewall for conventional highway driving. The Kevlar-reinforced sidewalls in the new tire help increase sidewall puncture resistance by 35 percent compared to the original Wrangler MT/R.

The tire also includes a “wraparound” tread for better sidewall traction in deep mud, sand and rocks; an innovative asymmetric tread design to improve off-road traction while maintaining handling on the road; and advanced rubber silica in the tread for better off-road and wet traction.

Available in March, Goodyear is offering the tire in 30 sizes, fitting vehicles such as 1/2-, 3/4- and 1-ton pickups, Hummer H2 and H3, Jeep Wrangler, Nissan Xterra, Toyota FJ Cruiser and more. According to Goodyear research, there are more than four million drivers in the light-truck tire segment who use their vehicles primarily for off-road travel.

February 18, 2009

Carbon Black Report has been Updated

Filed under: Carbon Black — Notch @ 7:00 am

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.

February 4, 2009

Blood from a Stone: Chrysler Demands Price Cuts from Suppliers

Filed under: General — Notch @ 12:36 am

According to Rubber & Plastics News, Chrysler L.L.C.’s purchasing chief, Scott Garberding, is requiring a new round of price cuts from suppliers as the auto maker faces a Feb. 17 deadline to justify its federal bailout money. The cuts would become effective April 1, and would be in addition to annual price decreases required contractually of suppliers. Additionally, Chrysler will not grant price increases in 2009 related to increases in raw-material costs.

Details here (subscription required).

Hi Tech Carbon: Quarterly Carbon Black Sales Volumes Down 39%

Filed under: Carbon Black — Notch @ 12:18 am

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.”

February 3, 2009

Century Enka Cuts Tire Cord Output by 35–40%

Filed under: General, Tire Cord — Notch @ 11:22 pm

On December 30, 2008, Century Enka Ltd. announced that it was continuing its production curtailment for NTCF (nylon tire cord fabric), which was originally announced in mid-December. The Indian company has cut NTCF production by 35%–40% due to reduced demand from tire companies. The slowdown caused the company to build up excess inventories.

In the stock filing, Century Enka stated, “We regret to inform you that this partial suspension is still continuing as there is no revival in NTCF demand from tyre companies. At present, the production cut is in the range of 35-40%.”

The details of production and sales during the October-December 2008 quarter as compared to corresponding quarter of the previous year are as follows:

Products (Chips / Synthetic Textile Yarns / NTCF) – Sales
– October to December 2008 – 26,661 MT
– October to December 2007 – 29,564 MT

Products (Chips / Synthetic Textile Yarns / NTCF) – Production
– October to December 2008 – 27,507 MT
– October to December 2007 – 29,666 MT

Goodyear Reducing North America Production

Filed under: Uncategorized — Notch @ 10:42 pm

According to Rubber & Plastics News, Goodyear is reducing production of truck and passenger tires at its North American plants due to weak demand. The reduction is expected to last at least over the next several months, and will affect truck tire plants in Danville, Virginia and Topeka, Kansas, as well as passenger tire plants in Union City, Tennessee; Fayetteville, North Carolina; Lawton, Oklahoma; Napanee, Ontario; and Gadsden, Alabama. More details here (subscription required).

Responding to Downturn, Lanxess Shortens Work Hours, Cuts Salaries

Filed under: General, Rubber Chemicals — Notch @ 4:36 pm

Lanxess AG (Leverkusen, Germany) has announced a series of measures to deal with the global recession. Called “Challenge ’09,” the program includes the “introduction of a 35-hour working week with a corresponding remuneration decrease as of March 2009 for initially 12 months” and the elimination of bonuses for 2009. Lanxess agreed on the measures — which cover about 5,000 German non-managerial employees — after holding negotiations with employee representatives and the IG BCE (the German Mining, Chemical and Energy Industry Union). On the management side, Lanxess announced that the company’s managerial employees as well as its Board of Management would see a salary reduction of 10% of fixed salary, while fixed salary reviews for 2009 will be postponed by at least six months.

Here is the press release.

Private Investment in Emerging Markets to Decline 82% in 2009

Filed under: General — Notch @ 4:08 pm

The Wall Street Journal has an article (subscription required) detailing the rise in protectionism as the global economy falters. The article also highlights a startling drop in new private capital being invested in emerging markets.

Public officials and business leaders warned that the global recession could sharply reduce lending across borders and lead to more subsidies tucked away in economic-stimulus plans. Investment of private capital to emerging markets this year is expected to be 82% lower than it was in 2007.

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