Carbon Black

SIC 2895

Industry report:

This category covers establishments primarily engaged in manufacturing carbon black (channel and furnace black). Establishments primarily engaged in manufacturing bone and lamp black are classified in SIC 2816: Inorganic Pigments.

Industry Snapshot

Carbon black is essentially an oil by-product used to strengthen rubber. It is made by shooting a hot mist of oil particles into a flame, a very expensive process that has limited the number of competitors in the industry. Carbon black is a general name for a variety of trade name products such as acetylene black, attrited black, channel black, flame black, furnace black, lamp black, and thermal black. Carbon black production requires large amounts of heat. In addition to its main use in tires, the powdery reinforcing agent is used to make inks and other everyday products.

Carbon black is largely a homogenous product with many trade names. It is essentially an oil by-product used to make tires, inks, and other products. The principal economic industries responsible for the purchase of carbon black were domestic manufacturing industries, which purchased nearly 95 percent of the industry's shipments. A ranking of purchased carbon black output found these industries responsible for carbon black usage in the 2000s: tires and tire treads, 70 percent; belts, hoses, and other automotive products, 10 percent; industrial rubber products, 9 percent; plastics, 5 percent; ink, 4 percent; and miscellaneous, including paint and paper, 2 percent.

According to industry statistics, there were an estimated 44 establishments engaged in manufacturing carbon black, including two producers of furnace black, with shipments totaling $3.2 billion in 2008 and industry-wide employment of 2,401 workers. Louisiana and Texas held the majority of market share, while Massachusetts accounted for the bulk of industry shipments.

Background and Development

The Cabot family was involved in carbon black production from the industry's outset. In 1882, Godfrey Cabot built a carbon black plant in Buffalo Mills, Pennsylvania. At the time, carbon black was made by impinging a gas flame against steel. After World War I, it was discovered that carbon black had properties for reinforcing rubber products. It was this innovation that fueled the industry's growth.

As early as 1864, carbon black was used as a printing ink, and it was still employed in this sector in the mid-2000s. The most revolutionary application was developed for the rubber industry, which discovered that carbon black made tires tougher. In 1920, the rubber industry consumed only 40 percent of the carbon black produced. Today, the rubber industry is the largest market by far for carbon black.

By 1972, carbon black prices were deteriorating because production capacity was greater than production. Production was 3 billion pounds per year, while production capacity was about 4 billion pounds per year. In addition, the cutback in gasoline usage that followed the oil embargo of 1973 took a heavy toll on carbon black demand. At that time, 95 percent of carbon black use was associated with automobile applications; 70 percent went into tire production alone. Higher costs also had a detrimental effect on the industry. As carbon black prices increased, demand for the industry's products was reduced. Carbon black production capacity fell from an estimated 4.21 billion pounds in 1979 to 3.38 billion pounds in 1981. The decline in 1978 and 1979 mirrored the downturn in the U.S. automotive industry, but export business buoyed the industry.

By the 1980s, following four or five years of increasing prices, relative stability returned to the carbon black market. Prices for carbon black generally followed oil prices. As oil prices stabilized, so did prices for carbon black.

The total value of industry shipments increased 21 percent from $570 million in 1987 to $692 million in 1990. This number declined to a decade low of $604 million in 1991, but it rose steadily to $800 million by the mid-1990s. Despite the increase in carbon black shipments, leading producers in the fiercely competitive and sagging U.S. auto industry compelled producers to enter overseas markets. In the early 1990s, U.S. producers established operations in Europe and in Japan. The leading U.S. producer was Cabot Corporation, with sales of $1.69 billion in the mid-1990s. It recorded negligible profits in the United States but generated huge profits abroad.

By March 1995, U.S. demand for carbon black resulted in a 10 percent increase in price. This dramatic increase was not repeated the following year, however. Instead, 1996 operating rates were high and pricing was weak as carbon black sold for 28 to 50 cents per pound. Industry leaders attempted to raise prices 5 percent but were unsuccessful. Tire manufacturers, who purchased 50 percent of U.S. produced carbon black, resisted the price increase.

Despite tire manufacturers' protestations, carbon black prices rose in the late 1990s as demand for the commodity outstripped supply. The automotive sector, which consumed carbon black for tires, boomed in the bull market of the late 1990s. Moreover, the growing popularity of sport utility vehicles, which used bigger tires that wore out faster than those on cars, fueled demand for carbon black. Carbon black manufacturers also enjoyed low crude oil prices, which kept production costs to a minimum.

However, in 1999, rising crude oil prices impacted the carbon black market. While demand for tires remained strong in North America, a surge of cheaper import tires undercut carbon black prices. Tires originating in Korea and Brazil claimed an increasing share of the market.

As the carbon black industry entered the mid-2000s, U.S. producers faced rising energy costs and continued competition from imports. However, the demand for carbon black was expected to grow, based in part on the recovery of the auto industry. Although the auto industry had slowed in the early 2000s, by 2004 domestic passenger, light truck, and truck tire shipments totaled 316.9 million units, an increase of 1.9 percent over the previous year, with demand at 3.5 billion pounds. Another factor that helped boost the carbon black industry was the increase in demand for larger tires, which required more carbon black per average tire.

Current Conditions

Higher domestic oil prices were having a profound effect on the price of carbon black in North America. Thus, carbon black producers such as industry leader Cabot Corp. began expanding operations offshore in China where operational costs would be more viable.

The global carbon black market was projected to reach 12.2 million metric tons in 2015, according to the 2008 "Carbon Black: A Global Strategic Business Report." Tires and rubber products accounted for the majority, 90 percent, of carbon black consumption. Asia-Pacific was the largest consumer, constituting 37 percent of total carbon black production. While demand in the U.S. for carbon black was expected to be flat, specialty blacks would likely offset carbon black decline.

Elsewhere, the "virgin carbon black" industry will come under scrutiny due to emissions of hazardous pollutants (HAPs), while increased demand for carbon black in the manufacturing of paints and coatings, and inks would occur between 2008 and 2013. Competition from carbon black substitutes, such as silica, were on the rise, because they offer better performance as well as being environmentally friendly.

Industry Leaders

The Boston, Massachusetts-based Cabot Corporation was the world's largest producer of carbon black in the mid-2000s and held 25 percent of the world market for the product. The Cabot Corporation was a conglomeration of specialty metals, chemical, and energy businesses. When the carbon black market staggered in the early 1980s, Cabot expanded into fields such as high-technology ceramics. Cabot also kept effective control over the slow-growth carbon black market segment through restructuring efforts, including drastic reductions in unit costs to counter the heavy fixed capital investment required for carbon black production. In 1997, the company introduced a new line of carbon black pigments, which helped it remain at the forefront of the industry. Cabot's efforts were rewarded. Sales in 2008 were $3.1 billion, and the company employed 4,300 workers.

Another large producer of carbon black was Columbian Chemicals Co. of Atlanta, Georgia. In the late-2000s, the company operated 20 plants in Brazil, Canada, Europe, South Korea, Japan, and the United States. Total sales were $276.9 million in 2005, and the company employed 1,300 people. In 2009, Columbian came under the control of One Equity Partners of New York.

Another major industry player was Degussa Corporation of Parsippany, New Jersey, with sales of $3 billion and 5,794 employees in 2004. In 1998, Degussa moved aggressively to capture a greater share of the Asian market for carbon black by acquiring the carbon black division of LG Chemical in South Korea. Other leading carbon black producers included JM Huber Corporation's Engineered Carbons Division of Borger, Texas, with $2.1 billion in 2007 revenues; and NORIT Americas Inc. of Atlanta, Georgia.

The major producers of carbon black expanded internationally in the mid-2000s. Cabot, Degussa, and Columbian all built new carbon black plants in Brazil in the mid-2000s. China was also a major growth area. In 2006, Cabot opened a $60-million black carbon unit in Tianjin, China, with an annual capacity of 105,000 metric tons. In 2007, Columbian acquired a carbon black plant in Weifang, China, in 2007 (its first in that country), and Degussa spent about $29 million to expand its research and development center in Shanghai, China, in 2007.

Research and Technology

In 1996, Degussa AG, an industry leader, researched the effects of carbon black in relation to workplace exposure and found it safe. This study was completed after reports from the International Agency for Research on Cancer (IARC) of the World Health Organization (WHO) indicated that carbon black could cause tumors in rats. IARC found that long-term exposure to fine dusts, including carbon black, could cause lung cancer and respiratory diseases. It wanted to reclassify carbon black as a carcinogen. Degussa countered with data that only rats exposed to massive amounts of dust were affected, concluding no evidence showed that mice, hamsters, or humans were significantly affected by the dust.

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