News from Notch Consulting, Inc.

This month, Notch Consulting published the 2015 edition of the Carbon Black World Data Book, the most widely read and authoritative report on the $16 billion global carbon black industry. Published annually and updated quarterly, this 355-page report provides extensive proprietary data on carbon black supply and demand. The report provides detailed coverage for 26 leading countries, as well as demand for 16 smaller national markets. Historical data are provided for all years from 2004 through 2014, with forecasts for all years through 2020, as well as 2025. Data provided for each country and region include carbon black capacity by company and plant, capacity utilization, production, imports, exports, demand, markets (passenger car tires, truck/bus tires, other tires, non-tire rubber, and specialty blacks), grades (tread, carcass, and other), as well as market value and average pricing. The report is provided in printable PDF format and includes a separate Excel spreadsheet with substantial additional data. Contact Notch Consulting at info@notchconsulting.com for more information or to order.

I’m late to this news due to summer vacation, but over the last several weeks, four of the five carbon black producers in the United States announced price increases. One primary driver for these increases is the widening differential between Platts prices used as the basis for formula contracts and the actual laid-in cost of feedstock. Another driver has been high inflation and currency volatility in South America. Details of each announcement are below.

Company: Cabot Corporation – Reinforcing Materials
Date of announcement: July 30, 2015
Effective: September 1, 2015 or as customer contracts allow.
Increase: NAFTA (North American Free Trade Agreement): 4%;
South America: 2%;
EMEA (Europe, Middle East and Africa): 7%;
ASEAN (Association of Southeast Asian Nations): 6%;
Japan: 6%;
In addition to these increases, Cabot is making an additional price adjustment of 14% in South America to account for the impact of local currency devaluation and cost increases in Brazil and Colombia. Cabot is also modifying all pricing formulas in those countries to mitigate future currency fluctuations.
Rationale: “In most regions, carbon black producers utilize oil-derived feedstocks that are specifically selected for the production of carbon black. Historically, certain fuel oil indices have been used as a proxy for the cost of these feedstocks, and Cabot’s costs have typically tracked to these indices over time. However, the actual costs of carbon black feedstocks relative to fuel oil indices have been rising. This widening difference between the indices and actual costs has persisted since early this year, and is forecasted to continue into the future.”

Company: Cabot Corporation – Specialty Carbons
Date of announcement: August 17, 2015
Effective: September 17, 2015, or as contracts allow
Increase: Up to 6% globally
Rationale: “This price increase is required due to escalating operating, logistics, currency devaluation and environmental compliance costs.”

Company: Orion Engineered Carbons
Date of announcement: August 6, 2015
Effective: September 15, 2015
Increase: Asia Region: 7%;
EMEA (Europe, Middle East, Africa: 8%
North America: 6%
South America: 12%
NOTE: These increases are in addition to the applicable raw material adjustments. Further adjustments may be applied for certain special Rubber Black grades.
Rationale: “Over the past several quarters Orion has experienced increased feedstock costs relative to the reference indices commonly used in the pricing of carbon black . . . These cost differentials are expected to continue due to increasing demand for these raw materials and lower availability of feedstocks of suitable quality. In addition to feedstock cost pressures, Orion has experienced extreme currency volatility in Brazil . . . therefore, our prices in local currency for product sold in South America require larger increases.”

Company: Birla Carbon
Date of announcement: July 31, 2015
Effective: October 1, 2015, or as supply agreements are renewed
Increase: 10%-12% for all rubber carbon blacks in North America
Rationale: “This measure is necessary to ensure the sustainability of our business and to make continued investment in processes and product possible.”

Company: Sid Richardson Carbon & Energy
Date of announcement: August 7, 2015
Effective: October 1, 2015
Increase: $0.04/pound for all spot purchases. For customers purchasing under annual contracts, current formulas will be honored until the agreement expires.
Rationale: Though not included in the announcement, a Sid spokesperson indicated that the increase was based primarily on the cost of reinvestment in the business, including hopper cars.