◎ Ding Liping

Affected by multiple factors, China’s carbon black industry kept a stable growth in 2018. On the one hand, the price of raw oil frequently fluctuated, which restrained the selling price of carbon black, and the profitability of the enterprises slightly declined; on the other hand, affected by last round of market boosting, the newly-added capacity of carbon black increased slightly, the national carbon black capacity had reached 7.53 million tons, with a year-on-year (same below) growth of 6.4%, and the newly-increased capacity of 420,000 tons was completed. Meanwhile, influenced by the overseas trade friction and overseas factory building, the growth of downstream tire enterprises obviously slowed down, and the domestic market demand further shrunk, such conditions may become increasingly fierce in 2019.

Ⅰ. Analysis of Operation Conditions of Carbon Black Industry in 2018

1.The output kept a stable growth but the growth rate slightly slowed down

According to the statistics of CRIA Carbon Black Branch, in 2018, the national carbon black output was 5.72 million tons, with a growth of 3.3%, the growth rate slightly slowed down. In recent years, the carbon black output had a negative growth in 2015 and began to recover in the second half of 2016, the output increased by 6% in 2017, which is the growth peak in recent five years. The growth rate slowed down in 2018, the market competition continuously became intensifying, the output release constantly increased and the equipment utilization rate slightly declined.

Among the key enterprises in the statistics, the growth rate of carbon black output is higher than the national average growth rate of output, the newly-added capacity is mainly from Shandong province and Shanxi province, which is mainly manifested in high growth rate of output of the enterprises such as Qingzhou Bo’ao, Shandong Jinneng and Shanxi Anlun.

Fig. 1: Comparison Conditions of Growth Rate of Carbon Black Output from 2015 to 2018

2. Under multiple influences of raw materials and market, the scale of losses of carbon black enterprises was further widened

Firstly, the composition of raw materials for production of carbon black limits the development of China’s carbon black industry. Over the years, the raw oil for carbon black in China has been mainly coal tar. According to the statistics of CRIA Carbon Black Industry, among the composition of raw materials for carbon black in China in 2018, the coal tar accounted for 53%, the make up oil of carbon black accounted for 28%, the anthracene oil accounted for 12% and the ethylene bottom oil accounted for 7%, that is, the raw material oil of coal series accounted for 93%, there is a large difference with the surrounding countries such as Japan, India and Korea, in which the raw materials for carbon black is mainly American FCC oil. Although China is rich in coal resource, excessive dependence of carbon black production on raw material oil of coal series for years also becomes a bottleneck restricting development of China’s carbon black industry.

Table 1: Output Completion Conditions of Key Carbon Black Enterprises in 2018

Secondly, the influence of the market on carbon black industry should not be ignored. China’s tire industry is exportoriented, the export ratio has continuously remained as 40%~50% for years, however, in recent years, the trade friction with America, the EU, etc. has been increasingly fierce and the tire enterprises have chosen to build factories overseas, therefore the domestic tire output fell rapidly. In 2018, there was no newly-added tire output basically, and all the growth points moved to overseas factories.

Under the influence of the above two factors, the profit rate of carbon black industry gradually declined, after industrial loss and meager profit were temporarily gotten ride of, the profitability of the industry returned to the bottom. Among the enterprises in the statistics of Carbon Black Branch, 7 enterprises had deficit, with the scale of losses reaching 20.5%.

See Fig. 2 for the scale of losses of carbon black enterprises in the statistics from 2015 to 2018. Nearly 1/3 enterprises in carbon black industry were at a loss in 2015, the scale of losses was reduced in 2016, 2017 was a hard-earned bull year of carbon black industry after years of loss, and the scale of losses was further widened in 2018.

Fig. 2: Scale of Losses of Carbon Black Enterprises in the Statistics from 2015 to 2018

3. New round of production expansion appeared again and the market demand was changeable

From negative growth of output in 2015, the demand of carbon black market began to show an increasing trend, the market demand peaked in 2017 and began to decline in 2018. According to the statistics of CRIA Carbon Black Branch, from 2018 to 2019, the planned national newly-added carbon black capacity was 1.06 million tons, in which the regions with the largest production expansion were Shanxi province and Shandong province, which planned to expand the production by 360,000 tons and 320,000 tons respectively.

Table 2: Newly-added Capacity Actually Built in China in 2018

In August 2018, it was reported overseas that carbon black industry had been one of the most active industries in rubber industry, from solving environmental problems to coping with supply shortage and price rise, and then to capacity expansion and enterprise merger, global carbon black producers were reshuffled, and some large companies in other regions also declared that they would further expand the carbon black capacity of overseas factories, such as China Rubber Group, Cabot and India Birla.

4. Both the export volume and price of carbon black rose

In 2018, China exported 897,000 tons of carbon black, with a growth of 22.7%, the export volume accounted for 15.7% of total national output, the export amount was USD 1.069 Billion, with a growth of 55.4%.

In it, the export volume of China to India increased by 140%, and the export amount increased by 200%. Ranking second in growth rate of export volume was Pakistan, with a growth of 90%, and the export amount increased by 152%.  

In 2018, China imported 95,000 tons of carbon black, with a fall of 6.6%; the import amount was 258 Million Yuan, with an increase of 4.7%, the domestic high-end carbon black market was basically rigged.

Ⅱ. Analysis of Development Trend of Carbon Black Industry

1. Automobile industry entered an era of negative growth

According to the statistics of China Association of Automobile Manufacturers, in 2018, China’s automobile output and sales volume were respectively 27.8092 million and 28.0806 million, with a decrease of 4.16% and 2.76%; with an average annual growth rate of -2.8%, it is the year in which the automobile sales volume fell for the first time since 1990. In it, China’s output and sales volume of passenger cars in 2018 were respectively 23.5294 million and 23.7098 million, with a decline of 5.15% and 4.08%.

In 2019, China’s automobile industry still faces high pressure, it is predicted that the sales volume will be about 28.10 million vehicles, which is basically flat with that in last year. Among it, the sales volume of passenger car is predicted to be about 23.70 million vehicles, which is basically flat with that in last year; and the sales volume of commercial vehicles is predicted to be about 4.40 million vehi-cles, with a grow of about 1%. 
With the import and export factors balanced, the demand of China’s au-tomobile market in 2019 will be 28.20 million vehicles, the growth rate in out-put and sales is lower than the expected. Relatively high pressure will be faced in the short term due to overall withdrawal of purchase duty preferential policy on the one hand and influence of the factors such as fall in growth rate of macro economy and consumption confidence on the other hand.

2. The tire industry faced multiple pressures and the industrial data fell sharply

According to the statistics of CRIA Tire Branch, China’s tire casing output was 415.62 million units in 2018, with a growth of 0.5%, but the tire output had a growth of 5.1% in 2017. And there are multiple reasons for the fall in the growth rate.

Firstly, the tire enterprises accelerated its step of going out. At present, the tire enterprises which have gone out have achieved steady development, the capacity release amount of Sailun Vietnam Factory, Linglong, Zhongce, Sentury and Double Coin has a two-digit growth. The enterprises which are ready to go out also accelerate their step, for example, the construction of the tire factories of Guizhou Tyre in Vietname, Triangle Tyre and Sentury in America, Prinx Chengshan and Zhaoqing Junhong in Malaysia has entered the substantial stage. And the channel construction and service level of overseas market are also being improving.

Secondly, the structural surplus conditions of tire capacity are not fundamentally reversed, the influence of trade friction on capacity release of tire industry becomes more severe, the environmental protection task is heavy, high import tariff of natural rubber hinders high-quality development of the industry, and multiple factors such as gradual appearance of demographic dividend restrain the development of tire industry.

3. It is predicted that the output of carbon black industry will increase by 2% in 2019

It is predicted that the output of carbon black industry will increase by 2% in 2019 and the overall output of carbon black will be 5.83 million tons.