Carbon Black Makers Enjoy High Demand, Low Oil Prices

27 April 1998 00:00  [Source: ICB Americas]

While crude prices have been falling, carbon black makers are enjoying level prices for their product following a January 1 price increase. The industry is also excited about specialty blacks, which are outperforming other industry segments.

High demand and low oil prices are relatively good news, says Ted Reilly, Columbian Chemical Company's director of marketing for industrial carbon blacks. He says Columbian's utilization rate is in the high 90 percent range and its strong rate is echoed throughout the industry. The spot market has even shown some signs of shortage, he adds. Other companies are also reporting high production at their plants.

Columbian, which operates 11 carbon black plants, says the 30-million-pound line at its Hickock, Kan., facility and its 70-million-pound expansion in North Bend, La., came on stream late last year and are now running fully.

The US tire market is growing at 1 to 2 percent on a base of 3 billion pounds, according to Ted Herz, business director for Degussa's rubber chemicals and pigments division. He adds that the 300-million-to-400-million-pound specialty black demand has been rising 3 to 6 percent annually.

Mr. Herz expects such growth to continue for the next two or three years. "It depends on the economy," he says. "If it stays good than things will look pretty good."

Craig Mott, Cabot Corporation's market director for pipe and cable, agrees that specialty demand is high and will remain so for the next few years, but he puts its growth at 3 to 4 percent. "I don't think it will exceed GDP. For the most part, even the specialties side of the business is pretty mature," he adds.

Strong demand in the carbon black market led to the 5 percent price increase for rubber grades, which stuck with the exception of some of the major tire makers, industry watchers say. Specialty producers instituted a 5 percent hike late last year.

List prices for carbon black range from 28 cents per pound for large-particle blacks to 46 cents for finer grades, according to Bob Douglas of Camford Information Services Inc., Toronto, Ontario.

Meanwhile, the price for West Texas intermediate, the feedstock benchmark of the industry, has been slipping since October when WTI first purchase prices where $19.83 per barrel, according to Department of Energy. March spot prices for WTI hit a low of $14.31 and are currently in the $15 to $16 dollar range.

One petroleum analyst says the price should hang between $14 to $17 for the rest of the year and may even dip down to $12 this summer if the crude supply is not tightened by announced production cuts.

"Production cuts, if adhered to, could be sufficient to reduce or eliminate excess world supply, but past failures of production discipline are reflected in market caution," notes Department of Energy.

Vince Guercio of CTC International says the fact that prices have remained stable despite falling crude prices and added capacity speaks for the strength of the carbon black market. He adds that oil prices fell more than expected, yet the carbon black price increase is holding because of the tight market for blacks.

Many producers have announced increases during the past two years, a reaction to the shortage the industry experienced in 1995, says Ed Schmidt, general manager of carbon black at Engineered Carbons Inc.

He adds that while the market for hard black, used in tire treads, has been saturated with expansions, there is still some room for production boosts in soft blacks, used in tire carcasses, and specialty blacks--segments in which ECI could be looking to expand.

Degussa completed a 26-million-to-27-million-pound expansion in specialty blacks at its Belpre, Ohio, plant last November. The project gave the facility 50 million pounds of specialty blacks for the coatings, plastics and printing industries.

Other expansions in the industry were mostly in the rubber black segment. Degussa is building a 110-million-pound plant in Brazil, scheduled for completion in late 1999. That plant will only produce rubber blacks, says Degussa's Mr. Herz.

Cabot Corporation completed a 200-million-pound expansion last year that was concentrated on the tire rubber market. Mr. Mott says the company has no plans to add capacity to its specialty black business. "We're always looking to improve product quality rather than add new capacity," he says.

NYLON RESINS--Solutia Inc. will increase the prices of its Vydyne nylon engineering resins by 5c. per pound, effective with shipments on or after May 15.

"Strong global demand for nylon resins and intermediates continues to drive the need for producers to invest in new technology and new capacity," says Gene DeJackome, commercial director for Solutia's nylon plastics business. "We continue with our plans to make certain we have both products and capacity to support our customers needs," he adds.

UNSATURATED POLYESTER RESINS--Alpha Corporation has obtained the remaining interest in Alpha/ Owens Corning LLC, its 50-50 joint venture with Owens Corning.

The company, a major producer of unsaturated polyester and vinyl ester resins, will change its name to AOC LLC and also retain its developmental partnerships with Owens Corning, the DSM/BASF joint venture, and Japan's Takeda Chemical Industries Ltd. Owens Corning's share had been on the block since January.

AOC has five plants in the US and Canada along with a joint venture in Mexico.

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