Supply issues hit North American carbon black industry

The US carbon black market has seen some turmoil over the three weeks due to operational issues at Continental Carbon’s carbon black factory in Ponca City, Oklahoma. Here is Notch Consulting’s understanding of what is happening:

1. The carbon black factory in Ponca City receives feedstock via pipeline from the Phillips 66 refinery also located in Ponca City.

2. The carbon black plant also receives feedstock by tanker truck from various suppliers.

3. The Phillips refinery previously announced a major scheduled turnaround from September to October. However, Phillips initiated the shutdown of the decant operations earlier than expected (late July), and the shutdown now will extend through December 1.

4. Phillips 66 shut off feedstock supply to the carbon black plant during the last week of July.

5. CBO will not be available from the refinery during this period (i.e., through December 1).

6. Continental Carbon declared force majeure for the Ponca plant on August 2.

7. Continental Carbon reports that the Ponca plant will remain operational during this period. The plant is working to bring in replacement feedstock but details are still under development at this time.

This development comes on the heels of Orion’s announcement earlier this month that it plans to mothball one production line at its Orange, TX at the end of 2017. These two developments have raised serious concerns about carbon black supply in the United States over both the short and long term. Notch Consulting estimates that $5.2 billion will be spent in the United States on new tire production capacity from 2016 through the end of 2021, including new tire factories from Continental, Giti, Hankook, Kumho, Nokian, Qingdao Sentury, and Wanli, as well as major expansions from Bridgestone, Continental, Goodyear, Sumitomo, Toyo, and Yokohama. Obviously these expansions will put a strain on existing supply, particularly as no capacity expansions have been announced for the region and three of the five domestic producers of carbon black are in talks with the EPA regarding new emission standards (which could potentially lead to the closure of some capacity).

Notch Consulting this month is publishing the new edition of its Carbon Black World Data Book, which covers global supply and demand in this $13 billion industry. This year’s edition will include a special report on conditions in the North American market given recent events, including near and long-term scenarios for imports and domestic supply. Contact Notch at info @ notchconsulting.com for details or to order.