WOLFERSDORFF CONSULTING
Economies of scale
Carbon black is a value adding high volume raw material which is mainly consumed in tyre production (~70%). In consequence, many efforts of the carbon black industry throughout economic cycles have been on economies of scale. Long term and scalable access to low cost feedstocks, production line size, reactor yields, energy recovery, plant occupacity and proximity to bulk / tyre customers are some important economic factors which can make or break a factory's success. High cost factories have disappeared and will continue to disappear, e.g. Cabot Berre, Zierbena and Stanley, Orion Sines and soon also the Birla site in Hannover. Other sites will surely follow. Some European sites seem merely be operated for energy rather than carbon black production. I also think that three tier one factories in Italy are more than probably needed in this market, despite local tyre manufacture by Michelin, Trelleborg, Pirelli and Bridgestone. European import competitors like Omsk Carbon manage to balance relatively high logistics costs by low manufacturing and/or feedstock costs.
A map of carbon black sites in EMEA
The above map of carbon black sites is intended as a little pun and contains some "Easter eggs": I have included 3 decanting stations (there are more) and 10 recovered carbon black ventures. Decanting stations extend the reach of carbon black manufacturing sites and decrease the time to service. Tyre pyrolysis carbon products have not yet found a broad commercial access into the market (and especially not into passenger car tyres), but technologies are evolving. The shown ventures will have commercial production and access to at least some parts of the carbon black market by 2017. I think that more tyre pyrolysis ventures will follow, if they focus on high value addition instead of cheap price / low quality.
Where does the volume shift?
With 50 ktpa capacity of mostly non-tyre extrusion products at Birla Hannover and some unknown line capacity of tyre products from Birla ACB disappearing soon from the supply side, the hot question now is "who will replace this volume?". Chances are that, for contract and especially tyre contract customers, the business likely will stay where it was. Supply security is rated high in tyre and other volume business. This is reflected in multi-site and back-up sourcing. Also, tyre application approvals can take up to 5-7 years, which locks in accepted and homologised products for this time period. Import and domestic players will fight for the rest of the volume. Some of the Hannover production are so-called "clean" or low grit carbon blacks for profile extrusion. Initially introduced by Cabot some 15 years ago, these products are however now offered by all main competitors and even some import players, which has decreased their differentiation value in today's market.
New carbon black sites in the Middle East
Middle East oil companies have very successfully built their presence in polymers and plastic compounds. In recent years, there have been concerted efforts to also enter the rubber sector. Two companies are soon starting carbon black production: Kemya (JV between Exxon and SABIC) in Al Jubail KSA (50 ktpa carbon black and 350 ktpa polymers, started in 2015) and Takreer ("The Abu Dhabi Oil Refining Company") in Ruwais, Abu Dhabi UAE (40 ktpa carbon black, starting in 2017). Kemya carbon black will be marketed by Continental Carbon Europe under the trade name Continex, targeting tyre business. Takreer will mainly supply the Ruwais compounder and polymer manufacturer Borouge ("Abu Dhabi Polymers Company", JV of "Abu Dhabi National Oil Company" with Borealis) with both carbon black and propylene.
Need help?
Are you sourcing carbon black as filler or pigment? Do you want to grow carbon black sales in EMEA or elsewhere? Let's explore in a Skype call how I can support you! My Skype ID ismartin.von.wolfersdorff
If you like this post, please share it with your networks!
Best wishes, Martin
Martin von Wolfersdorff is principal consultant at WOLFERSDORFF CONSULTING. He helps chemical, materials and other B2B companies optimise sales & strategy and connects OEM companies with innovation providers. Martin also has expert knowledge in titanium dioxide, custom colour masterbatch, carbon black and tyre recycling materials like recycled carbon black and devulcanised polymers. He has held various roles from R&D engineer to commercial director EMEA at ICI, Huntsman Pigments, Americhem Europe Ltd and Cabot Switzerland GmbH.
For more frequent updates, follow him on LinkedIn.
Further LinkedIn Pulse articles:
"Leadership: The Art of Possibility in a business context"
http://bit.ly/Art-of-Possibility
"Optimising the chemical distribution channel"
http://bit.ly/optimise-distribution
Prospects for recovered Carbon Black 2023
Wolfersdorff Consulting Berlin
