Texas (USA): Michelin reported Q1 results for 2024, indicating a 4.1% YoY fall, attributed to softer demand in the truck and specialty tire segments. Light truck tire volumes dropped by 1.1% YoY, while equipment truck tire volumes fell by 16% YoY, despite significant discounts. This decline reflects subdued construction and infrastructure demand across North American markets, mainly due to higher interest rates and modest wage increases. The slowdown in tire sales in the USA is mirrored in the prices of Carbon Black N220 grade tracked by ChemAnalyst.

North American Carbon Black supply, especially in the US, is largely domestically produced but substantially depends on imports from Canada. The US regulation on GHG, effective in Q1 2024, led to significant stocking of cheaper Asian imports of Carbon Black and rubber materials with higher GHG emissions, especially from China and India. This partially brought down prices as local suppliers heavily discounted.

Prices decelerated as Canadian Carbon Black suppliers offered extended discounts to US contracts for Q1, subsequently allowing spot volume sales to drop from USD 2050/MT to below USD 1845/MT for deliveries scheduled between February and March 2024.

During this time, US markets also experienced elevated petroleum production and stocks, allowing for stronger refinery operations, except in February, where refinery output declined, and feedstock prices surged for Carbon Black production in the spot market. As crude prices surged from USD 79/barrel to USD 84/barrel throughout Q1 on a WTI basis, Carbon Black N220 grade prices fell, partially due to falling prices of petroleum and cracked residue oils as refinery utilizations and cracker margins overall remained subdued with an oversupply of feedstock for Carbon Black in Canada persisting. Canadian export prices rose from USD 1790/MT to USD 1945/MT for February as supply got disrupted in Sweeny, Texas, along with Mont Belview remaining offline due to strong cold weather.

Carbon Black demand from tire suppliers, according to USMTA, is estimated to be 2-3% lower in volume terms, while Carbon Black suppliers begin to offset their lower volumes by recovering prices through increasing downturns and reducing supply by calibrating production across streams. Michelin anticipated the Q1 sales decline for tires, so their full-year guidance for the tire market remains the same, projecting tire volume to be flat or slightly down by the end of 2024.

Michelin recently announced a 15% reduction in tire capacities globally, partly due to deteriorating margins and relatively weaker sales performance. This announcement has further impacted the Carbon Black N220 market, as suppliers are now recalibrating their strategy and planning to cut volumes and recover prices globally. While this is anticipated, Thailand and India are seeing capacity expansions for performance Carbon Blacks and specialty carbons. The new GHG regulation in the US is expected to subdue domestic demand for Carbon Black for the current fiscal year of FY24-25. With a 2% reduction in tire volumes in the new vehicular market, increased crude and petroleum oil prices after Q1 are expected to raise raw material costs for Carbon Black production in the US. The US is expected to observe price recoveries in Carbon Black N220 grade in Q2 2024, offsetting volume recoveries, especially increased imports from Canada.