The Carbon Black market continues to move up in the Chinese domestic market regardless of another resurgence in Covid cases in China. Carbon black has been lackluster since the beginning of the quarter. However, a drastic change in the market sentiment has been observed in the last few weeks. Carbon black has been a crucial component for the tire industry, providing both stability and strength for tires.

China has employed “zero Covid tolerance” policy since the beginning of the outbreak, and Chinese authorities have remained persistent in applying the policy. The latest outbreak of Omicron cases in several cities has again set off the alarm bells in China, and Chinese authorities have been quick in responding to contain the cases. As a result, the city of Shenzhen has observed lockdowns while the port of Yantian has witnessed reduced activities culminating in curtailed trading activities.

Carbon Black prices in China market have gained strength since the beginning of the 2^nd week of March. The Carbon black market has observed a substantial gain of 5% in the last couple of weeks and was assessed at USD 1520 per MT on an FOB basis. Cost pressure from upstream coal tar has been robust, contributing to the sudden spike in prices of Carbon black.

Several manufacturers have reported stable to strong production activities; some reported operating rates in the north of 80%. This has resulted in ample material availability in the domestic while also ensuring solid product procurement from the international market.

On the demand side, China automotive industry has been the least impacted by the global semi semiconductor shortage. Consequently, there has been limited adverse effects on the output numbers of the industry. Hence, Original Equipment (OE) tire demand along with replacement tire demand has been firm in China.

As per Chem Analyst, “Carbon black market is expected to normalize in coming weeks, which may stabilize prices in the domestic market. The consistent and substantial rise in Carbon black prices is unlikely to be sustainable, and prices may tone down once the procurements ahead of Q2 will ease in the Chinese market along with stabilization in feedstock coal tar prices. ”