Carbon black capacity utilization may grow in short term

The average capacity utilization of China’s carbon black producers in Dec. 2017 was 52%, down 1.4% year on year, or down 4 percentage points from the previous month.

China’s carbon black sector showed the following characteristics in Dec. 2017.

Shanxi Yuncheng pulls down capacity utilization in North China

The capacity utilization of China’s carbon black producers in 2017 has been around 55%, with the maximum exceeding 60% and the minimum around 45%.

To address the smog during the heating season, in the winter of 2017-2018, many cities took actions to combat air pollution.

Off-peak production is one of the actions.

Many cities in Shandong, Shanxi, Hebei and other major carbon black production areas are necessary to combat air pollution.

Carbon black producers in Yuncheng, Shanxi province, are ordered to limit their productions, which somehow pulled down capacity utilization in North China.

As a result, capacity utilization of producers in southwest China and in Zhejiang and Jiangsu provinces have grown.

Lag effect on carbon black price down

As a major raw material of carbon black, coal tar has great impact on the price of carbon black.

Bidding price of coal tar in Shanxi, Hebei and Shandong provinces dropped significantly in Dec. 2017 by up to 23.29%.

But carbon black price didn’t drop immediately.

On the one hand, carbon black supply in Dec. was tight due to off-peak production; on the other hand, some carbon black producers still purchased coal tar at high prices, leading to lag effect on carbon black price down.

The overall supply in China’s carbon black sector will maintain tight in Jan. 2018.

Some carbon black producers will increase the work load to ensure supply, and the overall capacity utilization in the sector may grow in the short term.