Changes in carbon black supply in North America: New regulations trigger a chain reaction in the market

On June 5, it was reported that recently, the carbon black supply market dynamics in North America have been frequent. Especially in the United States, although its carbon black mainly relies on China for production, imports from Canada also occupy an important position. As new U.S. regulations on greenhouse gases take effect in the first quarter of 2024, the market landscape has changed significantly.

The implementation of new regulations has led to a large influx of Asian carbon blacks, especially carbon blacks and rubber raw materials from China and India, into the U.S. market. The relatively low prices of these imported products have also led to the accumulation of raw collagen materials with higher greenhouse gas emissions. This change has had a profound impact on the U.S. carbon black market.

According to the Carbon Black Industry Network, Canadian carbon black suppliers provided more discounts on export contract prices in the first quarter in order to win the U.S. market, which accelerated the decline in carbon black prices. Specifically, the spot sales price of N220 for delivery from February to March 2024 quickly fell from US$2050/ton to less than US$1845/ton.

At the same time, oil production and inventories in the U.S. market have also rebounded, making refinery operations stronger. However, in February, refinery production fell, causing the price of raw materials used to make carbon black to soar on the spot market. Throughout the first quarter, U.S. West Texas (WTI) crude oil prices climbed from US$79/barrel to US$84/barrel. Despite this, the price of carbon black N220 fell, partly due to falling oil and pyrolysis residue prices. As refinery equipment operating rates and cracking furnace profits remain generally sluggish, Canada's oversupply of carbon black raw materials continues to exist.

In addition, tire producers 'demand for carbon black is expected to decrease by 2-3%. Tire giants such as Michelin expect sales to fall in the first quarter, although their forecasts for the tire market for the full year remain unchanged. Michelin recently announced that it would compress global tire production capacity by 15%. This decision further affected the carbon black N220 market. Suppliers are recalibrating their strategies and planning to cut production globally to restore market prices.

It is worth noting that despite an expected decline in demand in the U.S. market, high-performance carbon black and specialty carbon black production capacity in Thailand and India is expanding. At the same time, new greenhouse gas regulations in the United States are expected to further curb its carbon black demand in China. As tire sales in the new car market decrease and crude oil and oil prices rise, the price of N220 grade carbon black in the United States is expected to rebound in the second quarter of 2024. This could curb further recovery in sales, especially the growth in imports from Canada.