Consolidation: I think that consolidation (e.g. Birla / Columbian, Cabot/Nhumo and Tokai / CanCarb) and plant closures of inefficient, small carbon black plants (e.g. Orion’s plant in Sines / Portugal) will continue for the next years.
Demand/supply: Although there currently might be a local over-supply of common carbon black products (e.g. ASTM categories and in particular N550), European industry consensus is that capacities might not be sufficient some 3-5 years down the line. Because of the volume nature of the business and slow communication especially in the tyre industry value chain, big switches of market demand in both directions are difficult to manage for carbon black makers.
Greenfield: While new production sites in the western world were traditionally built in strategic proximity to both key consumers and key feed-stock suppliers, and many Chinese plants were built without a pronounced market need but gigantomania rather, environmental regulations and developments in sustainable technologies have given growth stimuli to start-up companies like Boxer Industries (USA, carbon black from natural gas), Black Bear Carbon (NL, carbon black from tyre pyrolysis) and Carbon Clean Tech AG (D, carbon black from tyre pyrolysis).
Sustainability: Carbon black makers traditionally have challenges with the topic of sustainability. The industry is seen as dirty and indeed is an important consumer of mineral oil feedstock and a producer of CO2 burden. Considerable efforts and investments have been made by tier 1 players of the industry to reduce environmental impacts, in particular in the USA, where the EPA requires carbon black makers to upgrade their Sox and NOx systems. I think there are many opportunities in sustainability which go beyond compliance and this could soon be a differentiating and branding factor.
Import threats: The Indian carbon black manufacturer Philips Carbon is the latest to join the club of carbon black importers to European markets, following Chinese and Russians. Many importers focus on basic products, very often on the volume selling ASTM categories like N550 in semi-reinforcing applications and N326 in reinforcing applications. There is, however, interesting innovation in the area of bulk handling in the form of “sea bulk” or “flexi bulb” systems, which can transport bulk carbon black in a regular sea freight container.
Product innovation: The carbon black industry, as most chemical industries, needs more innovation in order to increase differentiation and fight commoditisation. In the field of industrial rubber goods, the last large scale product innovation were “clean” extrusion products, introduced some 15 years ago by Cabot and now widely adopted even by tier 2 players. In tyre tread applications, silica has taken a part of carbon black usage thanks to rolling resistance and grip performance. New innovations from Cabot now aim to claim that space back with close to silica performance in rolling resistance and grip and the carbon black typical added benefit of much better wear and abrasion resistance.
Service innovation: There still is considerable potential for carbon black service innovation, for example in the area of packaging, transport and storage.
Go-to-market time: The time required to implement new carbon black products is long. The last innovation in industrial rubber products were products with low polycyclic aromatic hydrocarbons (“low PAH”). After a couple of years, these products are not yet widely demanded by the market while regulation and standard test methods are still being changed. Tyre producers can take up to 7 years for new carbon black product implementation, while producers of industrial rubber products can require 1-2 years, depending on the end use. Better collaboration in the whole value chain could accelerate this process.
Energy centres: The valorisation of furnace process flue gases into energy is an industry standard and significantly improves economics. Careful management is required in times of down turns when plant occupacity is going down and economics shift.
rCB: A relatively new entrant to carbon black markets has previously been more focused on energy production: The tyre pyrolysis industry. I see big opportunities for a collaboration between established carbon black players and producers of recycled carbon black (rCB) from tyre waste. Pyrolysis companies have challenges entering carbon black markets, while the carbon black industry craves green product innovation. However, the product expectation level has to be managed. Even replacing carbon black with another furnace process carbon black rarely is a case of 1:1 “drop-in”.
Distribution: Catalysed by many small rubber companies who give up compounding on their own and start buying from custom compounders, the small lots distribution market for CB in Europe is in steady decline and the market for compounds has increased. For me, there still is a lot of value creation in the collaboration with a good distributor: Aligned and integrated sales strategy, exchange of market information, collaboration at joint accounts, repacking, transport services and many more.
Compounding: Rubber compounding is very similar to plastics compounding in that the value proposition is not a product only, but a custom tailored service. The competitive landscape is segregated with many smaller, highly specialised compounders on the one side and big global compounders on the other side. In the last down turn, even extrusion companies have entered the compounding market in order to fill their compounding capacities and to leverage their raw material purchasing power.