Rotterdam (The Netherlands): Europe's polymer woes worsened as negotiations between Russia and the EU failed to reach a consensus on the issue of banning rubber products and Carbon Black. Previously, the European Parliament passed a resolution to completely ban the import of Russian Carbon Black into European markets. In this context, ChemAnalyst tracked Carbon Black prices delivered to Germany, which surged to new highs, marking a 70% increase since the beginning of the year. This upward movement, according to experts at VCI, the German chemical manufacturers' association, is a worrying trend highlighting the EU's significant dependence on imports.

Carbon Black is a versatile chemical with multiple grades sold across Europe. Russia is a major supplier of N220 grade, used in the production of highly durable tires for trucks and heavy automobiles. Carbon Black prices assessed by ChemAnalyst have moved in two trajectories: partly tracking crude oil prices as crude serves as the feedstock, and partly influenced by Styrene Butadiene rubber, another component in tire manufacturing.

Inquiries with a Dutch tire supplier revealed that despite a slowdown in electric vehicle (EV) sales, Carbon Black demand across Europe has remained high due to stable sales of internal combustion engine (ICE) vehicles and an improving replacement tire market as spring began in April. Domestic demand in Russia has also surged, reducing Carbon Black exports to Europe. Russia has seen a 21.7% increase in domestic tire production, reducing exports to Europe and leading to primarily spot deliveries within Russia. This supply squeeze has contributed to high Carbon Black prices since the start of the year.

Another factor, highlighted by Russian newspaper Kommersant, is reduced gasoline exports to Europe and allied countries, which has allowed the Russian domestic market to control gasoline prices. As summer approaches in Russia, both replacement and new tire markets are thriving. Although Brent crude hit USD 90 per barrel in April and eased to USD 82 per barrel in May, Carbon Black prices in Europe exceeded USD 100 per metric ton in May and remained high into early June. The latter acceleration in prices is largely attributed to high stocking demand downstream. Compounding these issues, flooding in the Rhine region since late May disrupted traffic across major petrochemical hubs, leading to supply shortages and delayed deliveries for Cabot subsidiaries and Orion Carbons in Germany's Rhineland, further driving up Carbon Black prices in Northwestern Europe.

Carbon Black prices are expected to remain high for the remainder of the month as the EU and Russia have failed to reach a consensus. Meanwhile, Indian deliveries to Europe, although increased proportionally over the past eight months, continue to face supply issues due to global freight shortages and carriers bypassing Indian ports.