Analysis of the recent price increase logic and prediction of the price increase cycle in the carbon black market

 

Keywords: declining raw material prices, rising prices in the Carbon Black market, downstream stocking of essential needs, continuity analysis of carbon black price increases
Introduction: In August, the high-temperature coal tar raw material for carbon black operated weakly, but the market price of carbon black did not fall but instead rose. The "Golden September and Silver October" season is approaching, and downstream tire and product companies are concerned about the future market. The increase in purchasing enthusiasm and the acceleration of carbon black companies' shipment speed are the main reasons. However, the continued weak terminal demand still restricts the boost of market confidence. The price increase cycle in the future carbon black market has become a key focus of market attention.
Weak demand but improved shipments, carbon black market stops falling and runs with small gains
After a weak operation in the carbon black market in August, the price of Carbon Black N330 in Shandong market has slightly increased. As of August 20th, the price range of carbon black N330 in Shandong market is 7600-7900 yuan/ton (non tire, accepted, delivered), slightly increasing by 50 yuan/ton or 0.6% compared to the average price at the beginning of August. The main performance of the carbon black market in August is as follows: firstly, in early August, the demand for deep processing and carbon black terminals was sluggish, and the ability to undertake high priced coal tar was insufficient due to the loss operation of deep processing. The continued weak downward trend in coal tar prices exacerbated the bargaining sentiment of downstream carbon black operators, but carbon black enterprises had a strong intention to maintain stable profits and prices, and the carbon black market price was mainly weak with a slight decline; Secondly, after the continuous decline in carbon black market prices in mid August, downstream tire and other product enterprises have shown a rebound in their enthusiasm for low-priced replenishment. Carbon black enterprises have accelerated their shipment speed, and mainstream carbon black factories currently have no obvious inventory pressure. Carbon black enterprises have a strong intention to raise prices, and the carbon black market prices and raw material prices have shown an inverted trend and stopped falling, with a small increase; Thirdly, the high inventory of all steel tires and the overall pressure on shipments have not shown a clear trend of easing, which makes them resistant to price increases in the carbon black market. However, there is still a passive acceptance of carbon black market price increases due to strong demand. In addition, the continued sluggish demand situation has limited the extent of carbon black price increases.
Strong intention to stabilize profits amidst improved shipments from major carbon black companies, supporting market price increases
The carbon black industry had good profitability in August. As of August 20th, the immediate profit level of carbon black N330 in Shandong region was 440.75 yuan/ton. In the first half of 2024, the profit level of the carbon black industry was unstable, and some carbon black enterprises suffered temporary losses in the second quarter; Although the carbon black industry is profitable in July, the industry's profit margin is not high; Under the concern of carbon black enterprises about the profit level in the fourth quarter, they have a strong intention to raise prices in August to ensure the stability of the annual profit level. In August, the carbon black market operated at a high price, and tire and other product companies were concerned about the potential price increase in the future carbon black market. As a result, their enthusiasm for entering the market and stocking up increased. Mainstream carbon black manufacturers had good order taking situations, with some companies taking orders until mid to late September; Carbon black enterprises are concerned about the potential increase in raw material prices in the future. As they enter the middle of the year, their intention to continue lowering prices in line with the coal tar raw material is weak. Some mainstream large factories have pushed up slightly in the opposite direction, and the carbon black market has stopped falling and is operating relatively strongly.
The tire factory's carbon black inventory is not high, and its rigid demand supports its passive acceptance of the carbon black market's rising prices
In August, the operating load of all steel tire enterprises decreased, leading to a decline in market demand for carbon black. As of August 9th, it was learned that 17 all steel tire factories had plans to shut down and take a vacation in August, with an average of about 9 days off. It is expected that this will affect production of 476000 pieces. Entering mid to late August, some of the previously suspended all steel enterprises saw a slight recovery in production. Last week, the operating load of all steel tires in Shandong tire enterprises was 55.65%, an increase of 3.39 percentage points from the previous period and a decrease of 8.38 percentage points from the same period last year; Last week, the operating load of semi steel tires in domestic tire companies was 78.66%, a narrow decrease of 0.08 percentage points from the previous period and an increase of 6.23 percentage points from the same period last year. Although the operating load of the all steel tire market remains low and raw oil prices are weak, there is a concentrated intention to replenish inventory under pressure. However, due to the weak outlook of tire factories for the future, there is not much stock of carbon black inventory in the early stage. In addition, carbon black enterprises have no intention to increase production at low prices. Tire factories are forced to accept the high price of carbon black market while maintaining normal production situation of essential inventory. The new order price of carbon black market is relatively stable.
Carbon black enterprises are concerned about the rebound of raw material prices after hitting bottom, and new orders are mainly negotiated to raise prices
In August, the price of high-temperature coal tar, a raw material for carbon black, showed a continuous downward trend. As of August 20th, the price of high-temperature coal tar in Shandong Province was 3865 yuan/ton, a decrease of 145 yuan/ton or 3.6% from the beginning of August. On the one hand, in August, the deep processing industry suffered losses and had a weak ability to accept high priced coal tar. Additionally, the demand for coal tar declined due to reduced production in the deep processing industry. As a result, the coal tar market supply was relatively abundant, and the weak operation was mainly due to the lack of significant price support. On the other hand, although carbon black and deep processing enterprises have poor shipments, they are still concerned that if the raw material prices drop significantly, it will have a significant impact on market shipments and new order price negotiations. Therefore, the downstream sector of coal tar supports a relatively small decline in coal tar prices. As coal tar falls below the 4000 mark, the intention to replenish raw materials in the carbon black and deep processing fields has increased. Carbon black industry players are concerned about the rebound of coal coke oil inventory in the future, which will further increase the cost of carbon black. Therefore, carbon black companies tend to sell at high prices and have weak intentions to accept new orders and offer discounts, in order to avoid the risk of further losses in the future.
Prediction: Expectations of price increase in the "Golden Nine" carbon black market, and gradual weakening of the price increase effect in the "Silver Ten" market
In terms of cost: After the short-term weak market price of coal tar, downstream deep processing and carbon black enterprises have increased their enthusiasm for replenishment, supporting the acceleration of inventory consumption in coke enterprises; At the same time, due to sustained losses in the early stage, the operating load of deep processing enterprises has dropped to a low level. Recently, the operating load may rebound at a low level due to a certain stocking demand in September, and the purchase of coal and coke oil for essential needs has increased. On the other hand, with the recent sluggish demand for steel, coking enterprises are expected to reduce production in the future. At that time, the supply of coal and coke oil may tighten, and there may be expectations of an increase in coal tar prices in September. However, the sluggish demand for deep processing terminals still limits the improvement of its profitability, and the industry still faces loss pressure. After the rise in coal tar prices in the future, its ability to undertake will decline again. At the same time, some deep processing enterprises will gradually enter autumn maintenance after late September, and the demand for coal tar will decline again. Therefore, the upward momentum of coal tar prices in October may be insufficient.
In terms of supply and demand: In the short term, the inventory of raw material carbon black in tire factories is not high, and there is a high enthusiasm for replenishment due to concerns about the increase in carbon black prices in September. Carbon black enterprises have good shipment performance, and mainstream large factories have a strong mentality of price increases due to low inventory; However, after the price increase in the carbon black market in September, the enthusiasm of downstream enterprises to enter the market for procurement may gradually decrease, mainly consuming the inventory of previous orders, and the new order volume of carbon black enterprises may decline. The Mid-Autumn Festival in mid September and the National Day in October run through it. The holiday period under the pressure of all steel tire inventory may be longer than that of the same period last year. At the same time, the production of semi steel tire snow tires has basically completed, and the construction of semi steel tires in the future also has a slight downward trend. It is expected that the demand for carbon black in the market will continue to decline, and the price will continue to rise or show weakness under the slowdown of carbon black enterprise inventory consumption.
Overall, the short-term downstream demand for replenishment and the gradual bottoming out and rebound of costs support the rise in carbon black market prices in September; However, in the medium to long term, the continued decline in demand coupled with weak continuity in raw material price increases may limit the upward momentum of carbon black market prices in October.