Falling feedstock costs push prices down
By Staff -- Purchasing, 3/11/1999
Despite the declining price of crude-oil feedstocks, contract and spot market prices for carbon black have remained fairly stable the past few months. But downward pressure from oversupply, increased imports from Asia and Latin America, and a lessening of demand in automotive markets will soon take hold of carbon black pricing, according to buyers responding to Purchasing's monthly chemical transaction price survey.Current prices for commodity carbon black contracts average about 34¢/lb, and have been fairly stable for the past six months. Buyers forecast those prices to drop about 4¢/lb by the third quarter of 1999, where they will remain until increased demand causes a price increase of a few ¢/lb to stick in the first quarter of 2000.
On the spot market, prices are forecast to decline similarly, according to buyers. In the first quarter of 1998, carbon black spot tags averaged 38.3¢/lb. Spot tags have risen slightly (almost 1/2¢/lb per quarter) to their current level of 39.8¢/lb. Buyers expect prices to drop to 35¢/lb by the third quarter, and remain at that level through the end of the year.
According to pace Consultants, a petrochemical industry analysis firm based in Houston, Texas, crude-oil prices in November were about $12.75/barrel--a 12-year low. pace attributes the drop in crude oil to opec's failure to extend a reduced-production agreement until the end of 1999. Analysts at pace expect crude-oil prices to remain flat due to weak market fundamentals through the first quarter of 1999.
One of the indicators of commodity carbon black price activity is the U.S. automotive industry, since the main end use for carbon black is in the manufacture of automotive parts, tires in particular. Carbon black prices remained fairly stable throughout most of last year, even despite the General Motors labor strike. Experts cite a slowdown in production this year, which is further evidence of declining prices in coming months.
Demand for carbon black in 1998 was very good, according to producers gauging the performance of the automotive industry, but a fall off in demand in the past few weeks is likely to continue for the first half of the year, say buyers. Some analysts also point to overstocked end-user inventories for the fall off in demand.
Operating rates for carbon black production are currently stable at 90% to 95%. Production is down a bit from its peak levels seen a few years ago, but is likely to remain at this level or slightly below for the remainder of 1999, barring any unforeseen plant outages.
Degussa recently announced its intention to acquire more than 470 million lb/yr of capacity divided between two plants owned by LG Chemical, which, when finalized, would give Degussa a total capacity of more than 2.2 billion lb/yr. Also, Degussa announced that it plans to expand capacity at its Belpre, Ohio, plant in the early part of 1999, and it is currently debottleknecking its plant located in Ivanhoe, La.
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