News from Notch Consulting, Inc.

My thoughts and prayers go out to all of the people affected by Hurricane Harvey. The images of not only the devastation but also the resilience and generosity of the people of Texas and Louisiana is humbling.

Here is an update on the effect that the hurricane is having on the US carbon black industry. Concern has been high as nearly 80% of US carbon black capacity is located in Texas and Louisiana and supplies in the US market are already tight.

As of Thursday morning, Harvey — now downgraded to a Tropical Depression — was over northern Louisiana on a northeasterly route that will take it through northern Mississippi and central Tennessee and into West Virginia/southern Ohio by Friday evening. The storm made its final landfall around 3:30 AM CDT Wednesday morning near Cameron, Louisiana, which is about 240 miles west of New Orleans.

The path of the storm raised concerns about four CB plants:

• Orion Engineered Carbons’ plants in Orange, TX and Ivanhoe, LA
• Cabot Corporation’s plant in Franklin, LA, and
• Columbian Chemicals’ plant in Franklin, LA

Of these, Orion’s Orange, TX plant was most directly in the storm’s path. On Wednesday afternoon, company sources indicated that Orange had to be shut down temporarily due to an external power outage. Around noon on Thursday, company sources said that power would be restored on Thursday afternoon and the plant restart process would begin immediately thereafter. The plant itself sustained no damage, and raw material supplies are secure. The three coastal Louisiana plants (Orion Ivanhoe, Cabot Franklin, and Columbian Franklin), which are grouped close together just west of New Orleans, were largely unaffected.

Additionally, two US CB suppliers with office space in Houston reported no flooding and expected office hours to resume soon.

With carbon black capacity largely unaffected, the longer term effects of the storm relate to three issues:

1. Feedstock issues: more than 30% of US refining capacity was directly affected by the storm, particularly in the Houston, Corpus Christi, and Baytown areas but also in Beaumont and Port Arthur. Potential issues include flooding, disrupted crude oil supplies, and power outages. Despite these issues, as of Thursday, none of the CB suppliers I spoke with had been notified of potential problems with feedstock deliveries, but obviously those issues may still arise as refining capacity is assessed.

2. Other raw material issues: It is possible that the storm may cause shortages of other key raw materials, including butadiene and synthetic rubber, and that may cause problems for tire plants that would affect carbon black deliveries.

3. Logistical issues: Shipping channels, rail lines, and trucking routes have been affected by flooding. No word yet on severity, but obviously these issues could reverberate down the entire supply chain over the next few weeks.

With the purchase of the 5% stake it had not already owned, Tokai Carbon Corp. has acquired full ownership of Thai Tokai Carbon Product Co. Ltd. (TCP).

TCP was established in 1989 as a carbon black manufacturing and selling company through a joint venture consisting of several companies in Thailand.

In 1990, Tokai Carbon started a technology licensing agreement with TCP and acquired a 25% interest. It subsequently acquired 95% ownership.

Making TCP a wholly owned.

Sourced article found here (subscription required).

The US carbon black market has seen some turmoil over the three weeks due to operational issues at Continental Carbon’s carbon black factory in Ponca City, Oklahoma. Here is Notch Consulting’s understanding of what is happening:

• The carbon black factory in Ponca City receives feedstock via pipeline from the Phillips 66 refinery also located in Ponca City.
• The carbon black plant also receives feedstock by tanker truck from various suppliers.
• The Phillips refinery previously announced a major scheduled turnaround from September to October. However, Phillips initiated the shutdown of the decant operations earlier than expected (late July), and the shutdown now will extend through December 1.
• Phillips 66 shut off feedstock supply to the carbon black plant during the last week of July.
• CBO will not be available from the refinery during this period (i.e., through December 1).
• Continental Carbon declared force majeure for the Ponca plant on August 2.
• Continental Carbon reports that the Ponca plant will remain operational during this period. The plant is working to bring in replacement feedstock but details are still under development at this time.

This development comes on the heels of Orion’s announcement earlier this month that it plans to mothball one production line at its Orange, TX at the end of 2017. These two developments have raised serious concerns about carbon black supply in the United States over both the short and long term. Notch Consulting estimates that $5.2 billion will be spent in the United States on new tire production capacity from 2016 through the end of 2021, including new tire factories from Continental, Giti, Hankook, Kumho, Nokian, Qingdao Sentury, and Wanli, as well as major expansions from Bridgestone, Continental, Goodyear, Sumitomo, Toyo, and Yokohama. Obviously these expansions will put a strain on existing supply, particularly as no capacity expansions have been announced for the region and three of the five domestic producers of carbon black are in talks with the EPA regarding new emission standards (which could potentially lead to the closure of some capacity).

Notch Consulting this month is publishing the new edition of its Carbon Black World Data Book, which covers global supply and demand in this $13 billion industry. This year’s edition will include a special report on conditions in the North American market given recent events, including near and long-term scenarios for imports and domestic supply. Contact Notch at info @ notchconsulting.com for details or to order.

Phillips Carbon Black, India’s largest carbon black producer, announced today a plan to invest Rs 300 crore (US$47M) in the current fiscal year to increase carbon black capacity by 80,000 tons at its plants in Mundra and Palej by March 2019. The project will raise PCBL’s total capacity to 560,000 tons. The company reported that it used 98% of its 480,000 tons of currently installed capacity last year. PCBL is also considering a new greenfield carbon black plant of 120,000 tons to be located in Tamil Nadu or Andhra Pradesh. The company already owns a 60-acre plot in Tamil Nadu, which makes it the most likely location, though Andhra Pradesh is also under consideration. Both states are in southeastern India. Previously, PCBL announced plans to install a new production line dedicated to specialty blacks at its plant in Palej. This project is separate from the above announcement.