European Carbon Black Prices Continue to Remain Subdued as Uncertainty Persists in Early 2024

Hamburg (Germany): The Carbon Black market continues to hover at lower levels in the early days of FY24, despite gains made in the last days of FY23, particularly in Europe, as the deadline for a complete ban on Russian rubber products approaches. Globally, the Carbon Black market is witnessing mixed results, with Asian markets remaining largely stable in FY23, while American markets showed a decline in the earlier half and recovery in the second half. Carbon Black prices in the early days of FY24 in American markets remained largely bearish, triggering mild pessimism among market players regarding the prospects of recovery in FY24.

European markets have remained subdued since February 2023, with prices traded around USD 1800/mt at the Hamburg port deflating to USD 1200/mt by December 2023, indicating a deep demand crisis in the European Carbon Black markets. ChemAnalyst's research revealed that rising interest rates, coupled with bullish energy and electricity prices since October 2022, have led to a fall in end-use consumption of Carbon Black-derived tires and rubber products. It was noted by a market player that contrary to earlier market sentiments, FY23 and the early days of FY24 are witnessing weaker demand for replacement tire markets as gasoline and gas prices continue to remain 24% higher than pre-pandemic levels, coupled with a high burden of interest rates and debt. "FY23 registered contraction in large parts of the Eurozone, adding a negative propensity to purchase or maintain private vehicles," added a downstream market player. Furthermore, EU regulations on Carbon Black and recycling mandates have pushed producers into negative cash flow territory due to weaker yields and lower economies of scale at the current level of recycling volumes. Europe importing Carbon Black from other markets like the UAE is pulling up purchaser prices, reducing margins for downstream suppliers. Demand remained subdued with a marginal rise in Carbon Black and synthetic rubber procurement activities observed in the tire markets in the early days on the optimism of early rate cuts in the US economy, consumer's pent-up demand, and stable feedstock prices. While optimism persisted in the first week of FY24, procurement activities reduced in the second week as pessimism strengthened in Carbon Black markets after the US Federal Reserve signaled delayed rate cuts. Furthermore, inflation in Germany rose from 3.2% to 3.7% in December, largely due to the contribution of rising energy supply charges.

With Houthi attacks triggering shipping companies to avoid the Red Sea, CIF prices globally are rising at a higher pace as a container shortage is being observed, with market players trying to secure a stable supply of feedstocks from other markets. The price trigger in Carbon Black imports is pushing downstream tire suppliers to reduce procurement rates as energy and electricity costs are anticipated to rise in the coming months due to the current crisis, forcing hopes of recovery in demand in the next half of FY24, as revealed by a market player. European consumers are facing high electricity costs amidst strong reliance on renewables, not currently scaled enough, forcing consumers to cut costs in major expenditures, largely private vehicular transport, and shifting towards public transport. If the shipping crisis continues for a longer period, the Carbon Black market recovery will be pushed back to 2025, as revealed by ChemAnalyst research. Asian and American markets are expected to show a slow recovery in Carbon Black prices, largely due to gradual recoveries in the US and China.