In an August 25, 2023 report by the European Rubber Journal, there is a divergence of opinions regarding the future direction of the global carbon black market in the upcoming months. Recent developments in the carbon black industry, especially concerning pricing and the anticipated supply-demand balance, have been sending mixed signals. The first-half results from the three major carbon black suppliers all underscore a common theme of rising earnings and profits, despite either stagnant or reduced year-on-year sales.
Donghai Carbon Co., Ltd.'s first-half performance aligns with this trend. While sales of carbon black for rubber remained steady compared to the previous year, there was a 15% year-on-year increase in sales and more than a doubling of operating profits. Donghai Carbon Company attributed this to improved production efficiency and the successful transfer of environmental investment costs, particularly in the North American market, which bolstered sales and operating profits.
Similarly, Cabot Corp.'s Reinforcement Materials division reported a 17% increase in profits despite a 14.5% decline in revenue and an 8% drop in volume during its fiscal third quarter. Cabot believes this is primarily due to reduced sales of rubber carbon black, influenced by a sluggish replacement tire market. The most significant drop in sales volume occurred in Europe, the Middle East, and Africa, with a 12% decrease, followed by the Americas with a 10% decrease, and Asia with a 5% decrease.
Orion Engineering Carbons continued this trend, with its rubber carbon black business experiencing a substantial year-on-year profit increase, primarily due to higher contract prices. However, Orion's rubber carbon black sales saw a 14% decline in the three months leading up to June 30, with volumes decreasing more than 9% year-on-year. The company's earnings report attributed the sales decline to "destocking and destocking" by customers in Europe, the Middle East, and Africa, as well as the Americas.
Despite the seemingly subdued market demand outlook, these three major carbon black suppliers remain optimistic about earnings and pricing for the remainder of the year. Cabot Corp. is among them, anticipating higher contract prices for carbon black through 2024 as market fundamentals remain "unchanged" in Europe and the US. Cabot's President and CEO, Sean Keohane, stated that they have signed multi-year contracts with certain customers who anticipate price increases next year. These price hikes will serve as the basis for pricing in their remaining contracts through 2024. However, there is an element of uncertainty, such as the possible EU restrictions on carbon black exports from Russia in June 2024, which could impact the market. In response, Cabot's leader, Keshanen, emphasized the importance of supply reliability to customers.
However, some individuals hold different viewpoints regarding the carbon black market's trajectory in the coming months. In anonymous feedback provided to the European Rubber Journal, one individual expressed the belief that "the global market is declining and will not recover in 2024. Therefore, let us remain vigilant and avoid unnecessary panic about the supply situation." Another perspective posits that "all major distributors of carbon black in Russia have warehouses in Europe filled with stocks that can meet demand in 2024 and 2025." Others maintain that "the supply of carbon black from external sources is sufficient to meet the demand of the European market," particularly as overseas producers expand their production capacity, and global freight rates are currently lower, rendering carbon black imports more attractive.