Carbon black industry, strong potential for supernormal profitability – blogs – televisory gas definition science


Carbon black is a fine carbon powder and it is a disorderly form of graphitic carbon, which is produced by an incomplete or partial combustion of heavy petroleum or hydrocarbon products under a highly controlled condition. The products like FCC (fluid catalytic cracking) tar, coal tar and ethylene cracking tar are the most commonly used raw materials for the manufacturing of carbon black.

The furnace black method is the most widely used process for the manufacturing of carbon black among global players, which involve the blowing of petroleum oil or coal oil into high-temperature gases that act as combustion agent for raw material partially. This is a suitable manufacturing process for the mass production due to its high yield and control over the output properties like particle size and structure. However, this method has its drawbacks due to high-volume of pollutants such as sulphur dioxide, nitrogen dioxide and particulate matter.

The total global capacity of carbon black stood at ~16 million tonnes in 2017, with China as the largest player accounting for ~43% of the global capacity. The global carbon black industry is concentrated in nature, with the top 10 players controlling ~63% of the global capacity. gas x extra strength vs ultra strength The reasons behind the high level of industry concentration are:

The tyre industry is the largest end-user for carbon black as it consumes ~73% of the total global production. Carbon black finds its application in tyre manufacturing as a filler, rubber reinforcing agent and account for ~30% of the total weight of tyres. There is no viable substitute for carbon black in the tyre industry as it is the most cost-effective material, which meets the required specifications. The material also finds application in other non-tyre rubber products like shoes, pipes, etc. due to its rubber reinforcing properties. Hence, carbon black gets ~93% of its total volume demand from the rubber related industries. The remaining demand arises from speciality applications in plastic compounding, printing inks, paints and coatings due to its high colouring power and conductive properties.

Thus, the demand for carbon black is primarily dependent on the state of the global tyre manufacturing industry. electricity and magnetism purcell This industry is expected to grow at 3 to 4% during 2018-22, which will be spread across all segments including passenger vehicles, lorry and bus tyres. It is expected to lead for a healthy demand growth for carbon black with a majority of the incremental demand emanating from the high growth regions such as India and China, as they have a large potential for tyre growth in the medium-term.

China experienced a strong growth in the export volumes of carbon black, which grew at a CAGR of ~52% during the period of 2010-14. The major cause behind the strong growth of Chinese exports was the distinct cost advantage over global peers, which emerged as a result of the use of coal tar oil as the raw material feed. gas oil ratio chainsaw This was abundantly available because it is a by-product of the coking process of coal that expanded due to the growth of steel production in China. Thereafter, exports from China stabilised around levels of 640 thousand tonnes after 2014. This led to the capture of an incremental share of global demand by Chinese manufacturers as their volume supply rose from a level of ~2% of the total ex-China demand (2010) to ~10% (2014). types of electricity pdf This phenomenal rise in the Chinese exports for carbon black resulted in a situation of excess supply in the global industry.

The global ex-China players were forced to cut down on production because of the excess supply situation resulting from growing cheaper Chinese exports. Hence, the global ex-China capacity utilisations declined from ~80% (2011) to ~72% (2016). This impacted the dynamics of the industry as it reeled under weak price realizations and reduced output volume sales.

In the year 2016-17, the Chinese government came up with new effective measures that led to a large-scale closure and consolidation of polluting industries. Air pollution in the nation is caused by coal-intensive industrial activities and power generation, which has resulted in higher emission levels of carbon dioxide, sulphur dioxide, nitrogen oxide and particulate matter.

This policy impacted the production of carbon black as the prevalent manufacturing process by small players made use of coal tar derivative called carbon black oil. This led to emission levels that exceeded new permissible levels. There was an intense environmental compliance check in line with the new policy which led to a crackdown on small players within the industry. gas station near me This resulted in the consolidation of carbon black production among large players, which complied with environmental regulations. The small industry players, which were attempting to operate their plants under the radar faced stringent checks from regulatory authorities, which curtailed the total capacity utilisation in the country. According to an industry estimate, ~1 million tonnes of production capacity was impacted by the production curb and shutdowns in China.

The supply cut down from China augured well for ex-China carbon black manufacturers and the capacity utilisation of ex-China carbon black manufacturers recovered from an average of ~72% (2016) to ~83% (2017). This is further expected to reach around a peak utilisation level of 90-95% after 2018. gas 91 octane The effect of the robust demand growth from the tyre industry coupled with the supply side constraints is expected to move carbon black prices further northward in the next couple of years and may result in a phase of supernormal profit for the large ex-China producers.

While the demand for carbon black is expected to grow at a healthy pace given its criticality in the tyre manufacturing and planned capital layout of USD 22 billion by the tyre industry globally in the next five years, there remains a concern on over-supply. There are significant entry barriers in the industry, in the form of high capital intensity and most importantly stringent quality approval norms are expected to discourage new entrants. Therefore, incremental capacities can only come from established carbon black manufacturers with strong relations with tyre manufacturers. However, stringent environment protection norms in the US and Europe has discouraged fresh carbon black capacity additions in these regions. This augurs well for the carbon black manufacturers in Russia and India as they have large-scale production capacities and well-entrenched relations with the global tyre manufacturers, they also have less stringent environment protection norms.