In February 2023, the European Union, the United States, and the UK collectively announced a new round of economic sanctions against Russia. These actions coincided with the first anniversary of Russia's invasion of Ukraine. The new measures primarily targeted Russia's mining and metals sectors but also included several directives aimed specifically at carbon black. The United States announced a new 35% import tariff on Russian imports of carbon black as of April 1, 2023. I wrote about the US import tariffs here.
As for the European Union, the new sanctions included a complete ban on Russian imports of carbon black in the European Union beginning June 30, 2024. The ban has three components:
A wind-down period until May 27, 2023 for contracts executed before February 26, 2023
An import quota totaling 752,475 tons of carbon black, which can be imported into the EU from February 26, 2023 through June 30, 2024.
A complete ban on imports as of June 20, 2024 or when the quota is exhausted, whichever comes first
As far as I can tell from the legislation, there are no limits on how much material can be brought in by company or country within the quota. The European Commission has a website where the quota can be tracked -- as of April 11 there was 729 KT of carbon black still remaining in the quota. According to Eurostat, in 2022 the EU27 countries imported 427 KT of carbon black with a market value of €534 million from Russia. This represented 25% to 30% of total EU demand.
This is a substantial portion of the market that will need to be replaced, but I saw no hint of panic following the announcement. This is because the European carbon black market is relatively soft right now, so there is plenty of material available. Imports of carbon black from non-Russian sources -- particularly from China -- surged following the outbreak of the war in Ukraine (say April to August 2022), and those inventories are still being sold down. And the wind-down period gives customers plenty of time to find and approve new suppliers in India, China, and elsewhere. Also, shipping rates have come down from their post-COVID highs, while the container shortage has eased. On the downside, the current supply chain from Russian carbon black plants to customers in the EU is extremely efficient, streamlined, and cost-efficient, and product quality is both high and consistent. The ban will necessitate replacing this existing supply chain with an ad hoc system involving new suppliers and points of entry. Transit times for imports will rise from 3-4 days for product coming in from Russia to 30-45 days for product coming in from Asia. And major investments in new infrastructure for transloading could be impeded by the uncertainty of when and how the import ban could be lifted. Warehouse space at transit points certainly will be at a premium over the next 18 months as material is brought in prior to the ban. Long term, the ban is expected to put upward pressure on prices for the region, but short term pricing could feel the effect of inventory overhang as these stockpiles are sold down. As for Russian exports, likely markets for that displaced material include China, India, Vietnam, Sri Lanka, Turkey, the Middle East, Mexico, and Brazil.
These are some initial thoughts, I'll have a more complete analysis when the new Carbon Black World Data Book is released this summer.