China carbon black prices surge on supply shortage

12 March 2018 08:44 Source:ICIS News

SINGAPORE (ICIS)--Carbon black prices in China have continued to surge this year due to a supply shortage amid massive plant shutdowns caused by the Chinese government’s intensifying environmental protection campaign, industry sources said.

Major producers are currently selling N200 series in east China at around Chinese yuan (CNY) 9,100/tonne ($1,438/tonne) ex-works, more than double their levels a year ago.

Checks on compliance to environmental regulations at plants have become stricter and more frequent across China, and have meant trouble to a number of small carbon black facilities.

“They’re carrying random inspections and never inform us in advance. Many plants are operating stealthily,” said a Jiangsu-based producer.

The consequent plant shutdowns have resulted in industry consolidation, benefiting big producers.

“Significant achievements were made on eliminating inefficient capacities in chemical industry in 2017, thanks to polices like supply-side reform, de-leveraging on the financial market and tough implementation of environment rules,” said Shenzhen-listed Jiangxi Black Cat Carbon Black Co, one of the biggest carbon black producers in China, in a statement dated 28 February.

“Production of carbon black has centralized to quality, sizable and environment-friendly companies like us,” said the company, which has a carbon black production capacity of more than 1m tonnes/year.

The company guided for a more-than-fivefold surge in 2017 net profit to CNY481m amid strengthening carbon black prices.

Another leading producer, Hebei-based Longxing Chemical, was also projecting a 181% jump in profitability last year, saying that dominant producers maintained high operating rates and market share in 2017 as environment inspections reduced utilizations of non-compliant plants.

The tight supply conditions in the carbon black market will likely continue going forward, industry sources said.

“The trend is very clear. We all know that environment campaign will go more and more deep and broad. Prices of most chemicals may have to face further prices rise,” said a Guangdong-based trader.

Carbon black is a key ingredient in the production of tyres and industrial rubber products such as belts and hoses.

China is a major carbon black producer, from which India imports its requirements.

Due to the shortage and price surge of the material, a number of small and medium-sized rubber factories and tyre makers in India have had to cut production.

“This carbon black shortage is a serious problem and is impacting on the production of tyres and other industrial products such as belts and hoses. This in turn, weighs on demand for synthetic rubber which is also required in the production of tyre and other rubber products,” an Indian rubber trader said.

Synthetic rubber such as styrene butadiene rubber (SBR) and polybutadiene rubber (PBR) are also key feedstocks in the production of tyres for the automotive industry, while acrylonitrile butadiene rubber (NBR) is used in the production of belts and hoses.

Focus article by Fanny Zhang

Additional reporting by Helen Yan

($1 = CNY6.33)

By Fanny Zhang