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

Market conditions and industry trends

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

• EU bans on Russian and Belarusian carbon black are tightening supply, with the full impact expected in 2025 due to annual contract cycles.

• Shipping disruptions and higher costs from Asia are increasing the premium for domestic production in Europe and North America.

• Capacity utilization globally is in the mid-70% range, with significant upside potential as trade flows normalize.

• Limited new capacity additions in North America and Europe, with regulatory and economic barriers discouraging investment.

Contract negotiations and supply chain dynamics

• Current contract negotiations are commercially sensitive but benefit from supply chain disruptions and the EU ban, creating a positive setup for 2025.

• Industry restructuring is ongoing, with tire manufacturers shifting capacity to the U.S. and Europe, while new carbon black capacity remains minimal.

• Take-or-pay contracts could incentivize new capacity, but current risk factors make such investments unattractive.

• Methane pyrolysis and low-carbon inputs are not seen as immediate threats due to slow project development and regulatory uncertainty.

Specialty black and technological developments

• Specialty black offers better investment returns, with recent capacity expansions focused on high-value applications like lithium-ion batteries and wire/cable.

• No immediate need for further specialty capacity, as existing facilities can support growth for several years.

• The market for carbon conductivity in EVs and batteries is stabilizing, with a focus on acetylene-based materials over carbon nanotubes due to cost and purity advantages.

• Demand mix and product profitability vary widely, with new facilities like La Porte expected to improve margins.