Orion S.A. (OEC) Jefferies Global Industrial Conference 2024 summary

Market conditions and industry trends

• Rubber market shows slight improvement over last year but remains below pre-pandemic levels, indicating a modest recovery without strong mid-cycle activity.

• EU bans on Russian and Belarusian carbon black are tightening supply, with the main impact expected in 2025 as contracts renew.

• Shipping disruptions and higher costs from Asia are increasing the value of domestic production in Europe.

• Global capacity utilization is in the mid-70s percent, with significant upside if trade flows normalize.

• Specialty and rubber black markets are stable, with profitability driven by product mix and gradual volume improvements.

Capacity, investment, and expansion

• New capacity additions in North America and Europe are unattractive due to regulatory and economic hurdles, with little new investment expected.

• Expansions are limited to brownfield projects, with no major greenfield investments planned.

• Specialty black capacity is sufficient for the next few years, with recent investments in high-end applications like lithium-ion batteries.

• Free cash flow is expected to increase as capital spending declines, supporting share buybacks, dividends, and debt reduction.

• M&A focus remains on small, technology-driven deals close to core business, avoiding large or transformative acquisitions.

Sustainability and innovation

• Circular economy initiatives for tire recycling are a major R&D focus, with strong customer interest and industry support.

• Regulatory changes in Europe on tire particulates may slightly benefit carbon black demand, especially as EVs increase tire wear.

• Conductive carbon products are positioned for growth in EVs, grid storage batteries, and high-voltage cables, supporting broader sustainability trends.

• Methane pyrolysis and low-carbon inputs are not seen as immediate threats, with overhangs discouraging overinvestment in new capacity.