Issue No 227 February 2018

Chemical Market Intelligence
CARBON BLACK
Issue 227 28th February 2018
Price Summary
North America
N234 Contract $1,038 - $1,060/mt 47.20 - 48.20cts/lb ex-works
N326 Contract $834 - $851/mt 37.90 - 38.70cts/lb ex-works
Latin America
N339 Contract $900 - $950 mt delivered
N326 Contract $850 - $875 mt delivered
Western Europe
Domestic
N220 Contract $1,217 - $1,247 € 990 - € 1,015 mt delivered
N339 Contract $1,174 - $1,211 € 955 - € 985 mt delivered
N326 Contract $1,125 - $1,161 € 915 - € 945 mt delivered
Central Europe
N326 Contract $1,094 - $1,131 € 890 € 920 mt delivered
N660 Contract $1,020 - $1,057 € 830 € 860 mt delivered
Middle East
N220 Market $1,170 - $1,250 mt delivered
N330 Market $1,050 - $1,100 mt delivered
Asia
South Korea Exports
300 series Market $1,100 - $1,200 excl delivery
South East Asia
N220 Contract $1,150 mt delivered
N330 Contract $970 - $1,100 mt delivered
Currency $ Equivalent: € 0.810 £0.721 ¥106.30

Currency € Equivalent: $1.229 £0.891 ¥130.40
Chemical Market Intelligence

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Carbon Black Issue 227 – February 2018
Feedstock
Crude oil prices declined in mid February driven by fears that proposed US sanctions on steel and
aluminum could lead to a trade war and dampen economic growth, but have subsequently rebounded.
Global oil demand has been revised upwards slightly for 2018 to an increase of 1.4mbpd due to
optimistic global economic forecasts produced by the International Monetary Fund. Nevertheless the rate
of increase in demand will be slower than in 2017, in part caused by higher oil prices leading to fuel
switching in some emerging economies. In the US increasing crude inventories towards the end of
February are leading to suggestions that US crude demand has not increased as fast as the hike in crude
oil prices suggest.
Global oil supply declined marginally in January to 97.7mbpd, but increased year on year by 1.5mbpd,
driven by increasing output in the US. Crude oil output by the OPEC cartel declined month on month by
80,000bpd to 32.28mbpd in February, the lowest volume of output for ten months. The cut in output was
in part due to a decline in output of 30,000bpd in Venezuela, while oil output in the UAE declined by
50,000bpd due to maintenance. Saudi Arabia also cut its output by 80,000bpd in February from the
previous month to 9.88mbpd. The cartel is exceeding its agreed production cuts in order to speed the
depletion of high crude inventories.
Crude oil exports from Iraq reached a daily rate of 3.42mbpd in February despite no exports from the
northern oilfields in the Kurdish region, as oil output has been halted due to the take over of the region by
Iraqi forces.
In Libya, which is not part of OPEC’s current production reduction agreement, crude output increased by
70,000 bpd in February to 1.05mbpd, the highest rate of output since 2013. Despite continued political
instability foreign investors are securing supply agreements in Libya. In the past month PetroChina has
secured a contract with Libya’s National Oil company for the first time since 2013. This follows similar
agreements with BP, Shell and the French oil company Total, highlighting the recovery in crude oil output
in Libya. Crude output in Libya has stabilised at around 1.1mbpd, with higher oil output from the country’s
two largest oil fields offsetting the shutdown of the Italian Eni’s El-Feel oilfield.
Members of the OPEC cartel have met with US shale oil producers in Houston, Texas this month. The
talks suggest the cartel is seeking to broaden its dialogue with non OPEC oil producing countries and in
particular the US in order to address the on going over supply in the oil market. It seems unlikely that US
producers will be interested in any production quota arrangement with the OPEC cartel. Crude oil output
in the US just exceeded 10mbpd in November 2017, the highest volume of output for 47 years, before
declining by 108,000bpd to 9.94mbpd in December. With the number of US oil rigs increasing by almost
one third in the past year, the US Government is forecasting oil output will reach 11mbpd before the end
of 2018 due to increasing output in the shale regions of Texas and North Dakota.
With US oil production continuing to increase supported by higher oil prices, there is speculation that
OPEC could be forced to extend its current production cuts beyond 2018. However, OPEC’s chief
executive reports that the cartel expects the oil market to achieve a balanced position this year. Crude oil
inventories have declined from around 350mb in 2016, but remain 52m barrels above the five year
average.
There are suggestions that OPEC and its non OPEC partners, including Russia, could seek a longer term
agreement on production output in an effort to support crude oil prices. Both Saudi Arabia and Russia
need oil prices to stabilise in the range US$70pb to US$80pb to fund domestic budgets, and there are
signs that the two countries are developing closer relations since the current agreement has been
implemented.
With crude oil output in the US projected to increase at a faster rate than global crude demand in 2018, it
remains to be seen whether current crude oil price levels can be sustained. The International Energy
Agency is forecasting the rapid decline in crude oil inventories in 2017 will reverse in the first half of 2018,
due to the sharp increase in crude output in the US, which increased by over 800,000bpd in the three
months to November 2018. This could drive crude prices lower in Q2 2018.
© Chemical Market Intelligence 1

The table below details carbon black feedstock export oil exports from the US for the month of January
2018.
US Exports of Carbon Black Feedstock Oil

January 2018 - Prices are FAS (Free Alongside Ship)
Destination January 2018

Barrels Mt US$/Barrel US$/mt
India 420,777 76,505 59.40 326.70
Thailand 288,000 52,364 67.00 368.50
Indonesia 253,000 46,000 67.00 368.50
Singapore 217,667 39,576 60.00 330.00
Egypt 183,043 33,281 63.72 350.46
Canada 19,292 3,508 44.00 242.00
Total 1,381,779 251,233 62.83 345.57
Carbon black feedstock oil exports from the US increased by 22% year on year in 2017 to reach the
highest volume of exports since 2012, as detailed in the table below.
US Exports of Carbon Black Feedstock Oil

2012 –2017 - mt
Country 2012 2013 2014 2015 2016 2017 %

Change
2017
India 780 740 690 830 970 1,150 22
Thailand 460 230 240 290 310 370 19
Singapore 120 130 100 180 210 315 19
Italy 110 100 150 160 165 230 50
Egypt 220 170 200 300 200 200 39
S Korea 350 100 70 16 570 130 -
Other 600 410 390 380 195 325 -
Total 2,640 1,880 1,840 2,160 2,230 2,720 22
The increase in exports in 2017 was largely driven by an increase in shipments to India of 180,000mt and
to Singapore of 105,000mt.

North America
Light vehicle sales in the US declined by 2% year on year to 1.3m vehicles in February. The decline in
sales could have been in part due to lower incentive spending on vehicles, which is assessed to have
declined year on year by $65 per vehicle in February. The seasonally adjusted light vehicle selling rate
declined to 16.9m vehicles in February down from 17.46m vehicles in February 2017, and from 17.18m
vehicles in January 2018. Tax reforms are expected to drive strong demand for light vehicles in the US
this year, however a surge in ‘off-lease’ vehicles coming onto the market, and increasing interest rates will
negatively impact overall volumes of demand.
Light vehicle production in North America declined by 1.6% or by 52,000 vehicles to 1.36m vehicles in
January 2018 versus 2017, as detailed in the table below.
Light Vehicle Production (North America) 2017 vs 2018 – One Month only – 000’s
Vehicle 2017 2018 % Change 2018

Passenger Car 476 415 -14
Light Truck 910 952 5
Total 1,420 1,368 -1.6
Passenger car output declined by 14% or by 61,000 vehicles to 415,000 vehicles in January, offset by an
increase in output of light trucks of 42,000 vehicles to 952,000 trucks.
In the US light vehicle output declined by 1.6% to 903,000 vehicles, with Ford reporting a 1.7% decline in
output to 200,000 vehicles, and Nissan an 8% decline to 68,000 vehicles. In Canada light vehicle output
declined by 10% in January to 171,000 vehicles with both passenger car and light truck output declining
by 10% year on year. Toyota reported a 13% decline in output to 46,000 vehicles in January. By contrast
light vehicle output in Mexico increased by 4% year on year to 293,000 vehicles, driven by a 27%
increase in light truck output. Much of the increase in light truck output was due to increased production
by Volkswagen of its Tiguan and Audi Q5 models in Mexico.
There is an expectation that vehicle output across North America will slow through most of Q1 2018.
Increasing vehicle inventories held by dealers is expected to lead to announcements by vehicle makers
that summer shutdowns will be extended, especially for those plants producing passenger cars, demand
for which is particularly weak.
General Motors reported a 7% decline in sales volumes to 220,900 vehicles in February, due in part to
lower sales of its best selling Chevrolet Silverado pickup truck, which declined by 16% year on year. GM
reported an increase in fleet sales of 7% year on year driven by a 15% increase in commercial shipments,
while sales to retail customers declined by 10% compared to exceptionally strong sales in February 2017.
Sales of passenger cars declined by 16% year on year to 46,900 vehicles.
Ford reported a 7% decline in sales year on year to 194,000 vehicles in February, despite a 3% increase
in sales of its F Series truck. Sales of Ford branded vehicles declined by 6%, and Lincoln sales decline by
23%. Retail sales declined by 8.5% for Ford branded vehicles and fleet sales by 3.8%.
Ford is forecasting it will increase production of its Expedition and Navigator large sports utility vehicles by
25% this year, from its plant in Kentucky. The company is seeking to gain market share in this high
margin sector of the market in order to address the erosion in its profit margins to 3.7% in Q4 2017
compared to 5.7% in Q4 2016.
Fiat Chrysler reported a 1% decline in sales volumes to 165,000 vehicles in February. Sales of Jeeps
increased by 12%, offset by a 14% decline in sales of Ram trucks, due to a decline in sales to fleet
customers. Fleet sales declined by 3% year on year, accounting for 26% of total sales volumes in
February.
Unit tyre production in the US declined for the second consecutive year in 2017, despite the opening of
three new passenger car and light truck tyres plants. The decline in tyre output reflects flat demand for
passenger car and light truck tyres in the US in 2017, with US tyre retailers reporting a 5.6% decline in
tyre sales. The table overleaf details unit tyre production in the US for the years 2015 to 2017.

Unit Tyre Production (US) 2015 vs 2016 vs 2017 – 000’s
Tyre 2015 2016 2017

Passenger Car 126,100 123,700 121,300
Light Truck 26,400 28,300 26,100
Heavy Truck 14,800 13,700 14,000
Total 167,300 165,700 161,400
Unit passenger car tyre production declined by 2% or by 2.4m tyres to 121.3m tyres in 2017, reflecting a
4.1m decline in shipments to the OE market and only a marginal increase in the passenger car tyre
replacement market of 700,000 tyres to 209m tyres.
Unit light truck tyre production declined by 2.2m tyres to 26.1m tyres in 2017, reflecting a marginal decline
in demand in the replacement market of 700,000 tyres to 31.2m tyres, and despite an increase in demand
from the OE sector of 500,000 tyres to 5.4m tyres.
Medium and heavy truck tyre production increased by 300,000 tyres to 14m tyres in 2017, driven by an
increase in demand of 400,000 tyres in the OE truck tyre sector, and an increase in demand in the
replacement market of 900,000 tyres to 19.5m tyres in 2017.
The table below details demand for high performance passenger car tyres in the US for 2016 versus
2017.
High Performance Passenger Car Tyre Demand (US) 2016 vs 2017 – 000’s
Passenger Car Tyre 2016 2017 % Change 2017

OE 26,300 25,200 -4.1
Replacement 84,300 92,000 9.1
Total 110,600 117,200 5.9
The ten most popular tyre sizes in the OE tyre sector were all above 17” in diameter in 2017, with
Goodyear reported to remain the largest supplier to the OE consumer tyre market with an estimated
market share of 26.5% of the 17.2m light vehicles produced in North America, followed by Michelin and
then Bridgestone. Demand for H rated tyres and above increased by 9% to 92m tyres in 2017,
representing 44% of all consumer replacement tyre shipments. Replacement consumer demand for H
rated tyres increased by 11% to 48.8m tyres; V rated tyres increased by 8% to 25.8m tyres and Z rated
tyres increased by 3% to 17.4m tyres in 2017 versus 2016. Imports of tyres with a diameter of 17” or
above increased by 13% to 46m tyres in 2017, suggesting they accounted for 39% of high performance
tyre demand.
Sales of winter tyres declined by 36% year on year in 2017 accounting for just 2% of replacement
consumer tyre sales, compared to more than 35% in Canada.
The opening of the Hankook, Khumo and Giti tyre plants in the south east US in the past 18 months has
added almost 20m units of annual tyre production capacity in the US. However, declining demand for non
premium passenger car and light truck tyres with a diameter of below 17”, offset rapidly increasing
demand for tyres with a diameter of 17” or above in 2017. This factor together with reports from the tyre
industry that the conversion of light vehicle tyre production capacity from standard tyres to premium ones
can lead in a reduction in production capacity of 10-15% due to the complexity of the tyres being
produced and shorter production run lengths, will have contributed to lower passenger car tyre output in
2017.
Bridgestone reported an 8% increase in sales revenues from its Americas business in 2017 to ¥1,776.5bn
(US$16bn), with operating profit increasing by 6% year on year to ¥160.2bn (US$1.5bn). The company
reported a 3.5% increase in tyre output as measured in metric tonnes in the Americas in 2017 to
590,000mt of tyres from 570,000mt in 2016, with output increasing by 10,000mt year on year to
150,000mt in Q4 2017. It is possible that some of the increase in tyre output was in Brazil where the tyre
market started to recover in 2017. Bridgestone is forecasting sales of tyres to the North American OE
market will increase by between 6% and 10% in 2018, despite projected lower light vehicle output in
North America in 2018. In the North American light vehicle tyre replacement market Bridgestone is
forecasting a 5% increase in sales volumes in 2018. For the Americas Bridgestone is forecasting its tyre
output will increase by 5% in 2018 to 620,000mt of tyres.

The table below details tyre output as measured in metric tonnes for Bridgestone in its North and South
America tyre division for the years 2010 to 2017, with a forecast for 2018.
Bridgestone Tyre Production (Americas) 2010-2018* – 000 mt
2010 2011 2012 2013 2014 2015 2016 2017 2018*

Tyre 540 580 550 570 570 560 570 590 620
* Forecast
In the North American truck tyre market Bridgestone is forecasting sales of its truck tyres to the OE
market will increase by 5% to 10% in 2018, with sales to the replacement market increasing by 5% in 1H
2018 and by between 11% and 15% year on year in 2H 2018. As a result then company is forecasting a
5% increase in sales revenues in its Americas tyre business in 2018 to ¥1,800bn (US$16.95bn), with
earnings increasing by 2% to ¥164bn (US$1.54bn).
Michelin reported a 2.2% increase in global tyre sales volumes year on year in Q4 2017, as demand
picked up after a strong half of the year when sales were pulled forward ahead of price increases.
Michelin reported demand for its passenger car tyres increased by 1% year on year in Q2, Q3 and Q4
2017 following a 4% increase in Q1 2017. The company reported demand for its 18” diameter tyres and
above increased by 19% globally in 2017, compared to a market, which increased by 13%. Michelin
reports that 18” diameter tyres and above account for almost all of its fitments of OE vehicles, and
account for one third of the company’s passenger car tyre sales globally. The company estimates
demand for 18” diameter and above passenger car tyres account for around 15% of the global passenger
car tyre market. For 19” diameter tyres Michelin reported a 34% increase in demand in 2017 from a
market, which increased by 16% globally. In the past the company has had a shortage of production
capacity for these premium tyres but new production capacity has not enabled the company to fully
benefit from strong demand for these premium tyres. Globally the company reported a 2% increase in
passenger car tyre sales volumes in Q4 2017, from a 1% increase in Q3, in part due to good demand for
winter tyres.
In North America Michelin reported OE demand for passenger car and light truck tyres declined by 4% in
2017, following an 8% decline in 2H 2017. In the replacement market demand in the US was flat in 2017,
while in Canada demand increased by 7%, and in Mexico declined by 5% year on year in 2017.
In the global truck tyre market Michelin reported a 3% decline in sales volumes in Q2, Q3 and Q4 2017
following a 3% increase in Q1 2017, when sales were pulled forward by price increases. In North America
the company reported the OE truck tyre market increased by 10% driven by fleet replacements as
demand picked up during the year. In the North American truck tyre replacement market demand
increased by 4%, with a slight decline in demand in 1H 2017, offset by a 9% increase in 2H 2017.
Michelin reports that the structural imbalance in the global truck tyre market caused by a large over
supply of production capacity and supply in China contributed to the deterioration in its earnings from its
truck tyre business in 2017. This is creating highly competitive markets globally, and particularly in
Europe, with truck tyre imports at record volumes. Michelin will take further steps to address high costs, in
order to improve profitability in its truck tyre business. Globally the company is forecasting zero growth or
at best a 1% increase in its truck tyre sales volumes in 2018.
In the specialty tyre sector Michelin reported a 19% increase in demand year on year in Q4 2017,
following a 13% increase in Q3 and a 17% increase in Q2 2017. The increase in demand was led by
strong demand from the mining sector which increased by between 5-10% in 2017, and steady growth in
the OE agricultural and earthmoving sectors. The company has added to its workforce for specialty tyres
to be able to deliver tyres in a timely manner. Michelin is forecasting demand for mining tyres will increase
by 30% in the years 2016 to 2020, having increased by around 15% in 2017. Michelin is forecasting a 5%
to 7% increase in demand for its specialty tyres in 2018, driven by a 5% to 10% increase in global
demand and a strong global economy.
As part of its competitiveness programme Michelin reported savings of €315m (US$389m) in 2017,
including €51m (US$63m) of raw material savings. The company is investing in research in new materials
as one its strategic priorities.
Cooper Tire reported a 7% decline in sales revenues from its Americas tyre business in Q4 2017 to
$645m, driven by lower sales volumes accounting for $43m of the decline, and $7m from an unfavourable
price mix. Unit tyre sales volumes declined by 6% year on year in Q4 2017 with volumes declining in both
North and South America, due to heavy promotional activity by competitors. Cooper’s sales of light

vehicle tyres declined by 8.3% in the US, compared to an 0.8% increase for tyre companies which are
members of the US Tire Manufacturers Association. In Mexico Cooper reported a 1.7% decline in light
vehicle tyre shipments in Q4 2017, compared to a 6% decline in the Mexican light vehicle market.
For the full year of 2017 Cooper Tire reported a 7% decline in sales revenues from its Americas tyre
business to $2.41bn from $2.6bn in 2016, with operating profits declining to $325m, or 13.4% of sales,
from $440m or 16.9% of sales in 2016.
Cooper Tire reports its tyre sales volumes were challenged in the US throughout 2017 due to volatile
pricing and promotions, high raw material costs, and soft retail demand. The company also exited some
private branded tyre business, which had a significant impact upon its sales volumes. Indeed Cooper
reports sales of private branded tyres has declined by 5m tyres per annum since 2012, and are being
replaced by higher margin tyre sales.
Cooper Tire’s operating profit declined by 47% to $61m in Q4 2017 from $116m in Q4 2016, due to an
increase in raw material costs of $17m, lower sales volumes of $12m. A reduction in manufacturing
output in Q4 2017 in the US to manage tyre inventories due to lower sales volumes accounted for an
additional $17m from earnings in Q4 2017. Cooper Tire is forecasting its earnings will be at the low end of
the 9% to 11% of sales revenues in 2018 due to reduced output in Mexico, and a challenging US tyre
market. The company is seeking to launch new tyre models faster in future in the US.
Cooper is to take steps to reduce costs including balancing of production capacity within the network
automation in its plants, and has reduced its salaried workforce by around 5%. Due to the continuing
significant market decline in the Mexican tyre market, Cooper Tire has cut its workforce in Mexico by over
400 people, and reduced production from seven days to six days. Higher manufacturing overheads for
Cooper Tire in 2017 were due to the fact that the company was not running its US tyre plants at full
operating rates.
In the truck tyre market Cooper’s tyre sales volumes increased at a faster rate than the market in the US
in 2017. The company has recently announced an off take agreement with Sailun Vietnam for the
production of radial truck tyres.
Sumitomo Rubber is increasing tyre production capacity in the US to 2,950mt of tyres per month in 2018
from 2,700mt of tyres per month in 2017. Globally Sumitomo is forecasting a 5% increase in tyre output to
1,162,000mt of tyres in 2018 versus 2017, with output outside of Japan increasing by almost 9% to
452,000mt of tyres in 2018. Sumitomo Rubber is to start the production of medium truck tyres at its plant
in Tonawanda, NY this year. In 2016 Sumitomo announced an investment of US$87m at its Tonawanda
plant to double production capacity for passenger car and light truck tyres to 10,000 tyres per day by the
end of 2019.
Continental Tire is adding production capacity for procured tread rubber at its tyre plant at Mount Vernon,
in order to reduce delivery times to its retread customers. Currently the company supplies its retread
customers from a plant in Morelia in Mexico, which has an annual production capacity of 9,500mt.
A recent analyst report suggests the German tyre company Continental Tire is approaching Goodyear in
terms of the volume of passenger car tyres it sold in 2H 2017 globally. Both companies are assessed to
have been in the region 140-150m tyres per annum on an annualised rate in 2H 2017. Since 2012
Goodyear’s annual passenger car tyre sales volumes are assessed to have declined from around 160m
tyres per annum, while Continental AG passenger car tyre sales increased from around 125m tyres per
annum.
Hankook Tire reported sales revenues of KRW506bn (US$472m) in Q4 2017 in North America up 11%
from Q4 2016, driven by an increase in sales to both the OE and replacement markets, with an
improvement in mix towards larger diameter tyres. For the full year of 2017, Hankook Tire reported a 2%
increase in tyre sales revenues in North America to KRW1,920bn (US$1.79bn) from KRW1,874bn
(US$1.75bn) in 2016 of which high performance tyre sales accounted for 36% of total sales revenues.
Toyo Tire reported an 8% increase in sales revenues in North America in 2017 to Yen186.3bn
(US$1.75bn), with operating income increasing by 12% to Yen8.6bn (US$81m). The company reported a
6% increase in tyre sales volumes in North America in 2017. Toyo Tire reported its tyre output in North
America increased by 17% to 66,800mt of tyres in 2017 from 56,900mt in 2016. The company is
forecasting a 4% increase in tyre production in the US to 69,500mt in 2018.

Market demand for carbon black in the US was assessed to have been flat in 2017 versus 2016 in the
last issue of this report. However, unit tyre production in the US has subsequently been published
indicating a reduction in both passenger car and light truck tyre output in 2017 versus 2016. Unit
passenger car tyre output declined by 2.4m tyres, and light truck tyre output by 2.2m tyres offset partially
by an increase in medium and heavy truck tyre output of 300,000 tyres. Unit passenger car tyre output in
the US has declined by 21m tyres in the past decade while light truck tyre output has increased by 1m
tyres to 26m tyres. The decline in passenger car and light truck tyre output is assessed to have led to a
reduction in market demand for carbon black from the tyre industry in the region 16,000mt in 2017, taking
into account a partial offset from the increase in heavy truck tyre output. With vehicle production in the US
also declining by almost 1m vehicles in 2017 it is estimated market demand for carbon black in the US
declined by up to 33,000mt in 2017. Both Goodyear and Cooper Tire reported reductions in tyre output in
2H 2017, which could have more than offset startup output at the three new tyre plants in the US in 2017.
With a lack of growth in the US consumer tyre markets projected for 2018, it remains to be seen whether
consumer tyre output will increase this year. Current reports indicates consumer demand for tyres in the
US was soft in January and February, but both Goodyear and Cooper Tire are projecting increases in
demand and output in Q2 and Q3 2018. There is an expectation that the downturn in demand for new
vehicles will support increased demand in the replacement consumer tyre market.
A decline in market demand for carbon black in the US is at odds with anecdotal reports, which suggest
demand was flat in 2017, or indeed increased. Reports of tight supply of some tread grades of carbon
black could reflect shifting production towards premium passenger car and light truck tyres. Reports
suggest that market demand for carbon black increased in some instances in Q4 2017, which supported
contract negotiations and the ability of the industry to implement base price increases for 2018 contracts.
Current reports suggest demand picked up in February following a relatively slow start to the year in
January.
Orion Carbons reported a 2.8% decline in carbon black sales volumes year on year in Q4 2017 to
272,900mt equivalent to a reduction of 7,700mt year on year. The decline in output was due to the
closure of the carbon black plant in France at the end of 2016, as well as lower rubber carbon black sales
volumes in the US caused in part by the closure of one production line at its plant at Orange Texas in Q4
2017. Also the conversion of production capacity at the company’s carbon black plants in South Korea to
specialty carbon black capacity caused some loss of sales volumes. Nevertheless Orion Carbons reports
industry demand for rubber blacks remained strong in Q4 2017. The company reports that technical
rubber grades of carbon black accounted for 36.5% or rubber grade sales volumes in Q4 2017, with
higher margin carbon black grades including specialty carbon blacks accounting for 51% of the
company’s global sales volumes in Q4 2017.
Orion Carbons reported a 4.9% decline in sales volumes year on year in the rubber blacks business to
210,300mt in Q4 2017, equivalent to a reduction 10,800mt year on year, due to the closure of standard
rubber grade production capacity in France and the US, and the conversion of standard rubber grade
capacity to specialty production capacity in South Korea.
Annually the company reported rubber blacks sales volumes of 826,000mt in 2017 down by 6% or by
60,000mt from output of 886,000mt in 2016. The reduction in output is assessed to have largely been due
to the closure of the rubber blacks plant in France at the end of 2016, which probably accounted for a
reduction in output of around 35-40,000mt in 2016.
Sales revenues in Orion Carbon’s rubber black business increased by €10.3m (US$12.7m) or by 5.7% to
€190.5m (US$235m) in Q4 2017, due to contract adjusted pricing, and base price increases in 2017
contract agreements. These increases more than offset lower sales volumes in the rubber blacks
business. Gross profit per ton declined year on year by 5% to €44.7m (US$55m) in Q4 2017, but by just
0.2% as measured in metric tonnes to €212.6/mt (US$262/mt) from €213.1/mt (US$263/mt) in Q4 2016.
The decline in gross profit was due to the impact of mix of product, and unfavourable regional feedstock
mix, as well as asset impairment charges related to Hurricane Harvey, and accelerated depreciation
charges related to the restructuring of production capacity in South Korea. Adjusted earnings per ton in
the rubber blacks business increased 17.7% year on year €134.9/mt (US$167/mt) from €114.6/mt
(US$141/mt) in Q4 2017, with adjusted earnings totalling €28.4m (US$35m) in Q4 2017 from €25.3m
(US$31m) in Q4 2016.
Orion Carbons reports globally demand for carbon black is improving across the globe, with demand
having strengthened towards the end of 2017. With demand increasing globally and only limited additions
to supply, the carbon blacks industry’s prospects look favourable. Orion Carbons reports its plant
utilisation rates in the US are in the mid to high 80% range and even higher in certain grades. In Europe
the company reports its utilisation rates are around 90%, and in Korea the company’s plant is full. As a

result of only a limited volume of new production capacity in the carbon black industry globally Orion
Carbons reports global utilisation rates are tightening. Focus on improving its margins and is aiming to
increase earnings as a percentage of sales revenues from 15% at present. One way the company will do
this is increase its focus upon technical rubber grades, which the company reports requiring capital
investment to make changes to its reactors, and to downstream equipment, as well as feedstock
adjustments. It is believed the company has converted one rubber grade production line to a technical
rubber blacks lines in Texas in 2017. Orion Carbons is also accelerating initiatives to improve efficiencies,
and is to increase technical rubber grade production capacity in China. Indeed the company is seeking to
increase its market share in China, while maintaining its market share elsewhere in the world. However,
improving prices for rubber grade carbon black globally are making it less imperative to convert existing
rubber black production lines to specialty carbon black. This could result in the company investing in
additional production lines for specialty carbon black grades in the future.
Orion Carbons reported a 5% increase in sales volumes in its specialty carbon black business to
62,600mt in Q4 2017 from 59,500mt in Q4 2016. The increase in sales volumes was driven by increased
demand in North America and South Korea as well as in China. Orion Carbons reports all geographical
regions experienced increased demand for specialty carbon black. Demand is also reported to have been
strong in all sectors of the specialty carbon black market including coatings, inks, polymers and special
applications. However, demand is reported to have been particularly strong for coatings in the automotive
and architectural sectors, and in the polymers markets for piping and synthetic fibres.
Sales revenues for the specialty carbon black business increased by 2% year on year to €98m
(US$121m) in Q4 2017, due to increased sales volumes; an increase in base selling prices and higher
feedstock adjusted contract prices. These increases were offset in part by a negative regional product
mix.
Gross profit per ton in Orion Carbons specialty carbon black business declined by 16% year on year to
€563/mt (US$695/mt) from €670.5/mt (US$828/mt) in Q4 2016 due to a lag in the recovery of higher
feedstock costs, regional mix of product sold, higher fixed costs and costs associated with the
restructuring of the Korean carbon black capacity, and costs associated with Hurricane Harvey. These
costs were offset by an increase in sales volumes and efficiency gains. As a result gross profits declined
by 11.7 to €35.2m (US$43m) from the specialty carbon black business in Q4 2017 from €39.9m
(US$49m) in Q4 2016.
Adjusted earnings in Orion Carbons specialty carbon black business declined by 8.8% year on year to
€27.6m (US$34m) in Q4 2017, due to a lower gross profit offset in part by savings from sales and general
administrative costs. Adjusted earnings per metric ton declined by 13% year on year to €441.4/mt
(US$545/mt) in Q4 2017 from €509/mt (US$628/mt) in Q4 2016. Orion Carbons is seeking to implement
prices to recapture margins following the sharp increase in feedstock costs towards the end of last year.
As a result the company is prioritising restoring profit margins this year and consolidating its specialty
business rather than seeking large increases in market share. Nevertheless the company is projecting a
mid single digit increase in specialty carbon black sales volumes for 2018.
Orion Carbons reports the company is experiencing favourable dynamics with demand strengthening,
and limited growth in supply. The company reports price increases for major supply contracts for 2018,
and reports seeing substantial improvements in specialty carbon black pricing, as the company is working
to catch up with feedstock price increases from 2017. Orion Carbons is confident that large investments
made by tyre customers in the US will result in a long awaited upturn in demand for carbon black.

Latin America
Argentina
The Argentine economy increased by 0.7% in Q4 2017 versus Q3 and by 4.2% year on year and
represented the fastest rate of growth for four years. For the full year of 2017 the economy increased by
2.9% up from 2.2% in 2016, driven by a strengthening of the domestic consumption which increased by
8.3% year on year in Q3 2017. Capital investment also increased by almost 14% year on year in Q3 2017
up from 7.7% in Q2 2017, driven by increased construction activity and transport equipment.
Passenger car sales in Argentina increased by an exceptional 29% year on year in January to 53,800
vehicles 24%. In 2017 passenger car sales in Argentina increased by 24% or by 124,000 vehicles to
642,000 vehicles in 2017. However, most of the increase in demand for new vehicles in Argentina in 2017
was met by an increase in the volume of imported vehicles. Demand for domestically produced vehicles
in Argentina declined by 8% or by 21,000 vehicles to 259,000 vehicles in 2017.
Commercial vehicle sales in Argentina increased by 19% to 241,000 vehicles in 2017 from 202,000
vehicles in 2016, but declined by 5% year on year in January 2018 to 10,500 vehicles. In 2017 light truck
sales increased by 27% to 199,000 vehicles in Argentina, while heavy truck sales increased by an
exceptional 52% year on year to 26,200 trucks from 17,200 trucks in 2016. Lower rates of inflation have
led to improved availability of vehicle financing.
Fiat is forecasting light vehicle sales across Latin America will increase by 7% or by 300,000 vehicles to
4.4m vehicles in 2018 versus 2017, driven by an increase in sales of 200,000 vehicles in Brazil. General
Motors is forecasting passenger car sales will increase by 8% in Argentina in 2018 and by 17% in Brazil.
Longer term forecasts suggest vehicle sales in Argentina will reach 880,000 vehicles per annum in the
next five years.
Vehicle production in Argentina was unchanged from 2016 volumes in 2017 at 472,000 vehicles, as
detailed in the table below.
Vehicle Production (Argentina) 2015 vs 2016 vs 2017 – 000’s
Vehicle 2015 2016 2017 % Change 2017

Passenger Car 308 241 204 -15
Commercial Vehicle 218 231 268 16
Total 526 473 472 -
Passenger car output declined by 15% or by 37,000 vehicles in 2017, offset by a similar increase in
commercial vehicle output. Passenger car output in Argentina declined despite an increase in domestic
car sales of 124,000 vehicles in 2017, due to an increase in imports from Brazil where vehicle demand
remained depressed in 2017. The decline in passenger car output in Argentina was also driven in part by
a reduction in export sales of 21% to 55,000 vehicles in 2017, from 70,000 vehicles in 2016. By contrast
the increase in commercial vehicle output in Argentina was driven by an increase in vehicle exports of
28% or 35,000 vehicles to 154,000 vehicles in 2017. Total vehicle exports from Argentina increased by
19,500 vehicles to 209,000 vehicles in 2017, despite a marginal decline in exports to the largest export
market of Brazil, by 1,700 vehicles to 135,900 vehicles. Vehicle exports to Mexico also declined by 6,500
vehicles, however exports to other Central American markets increased by 15,400 vehicles to 17,800
vehicles in 2017 accounting for most of the increase in vehicle exports from Argentina in 2017.
Most recent vehicle production data for January 2018 indicates an 18% decline in output year on year to
21,800 vehicles from 26,700 vehicles in January 2017. The decline in output was due to a near 8%
decline in sales of domestically produced vehicles in Argentina into the domestic market, while export
sales increased by 6% year on year to 10,400 vehicles.
With passenger car demand in Brazil projected to increase by 200,000 vehicles per annum in 2018, the
upturn in demand in Argentina’s largest export market should drive an increase in vehicle output in
Argentina in 2018. In addition an improving agricultural and mining industries across Latin America in
2018, should support further increases in exports of light trucks from Toyota, and Renault Nissan from
their Argentinean plants this year.

The Chinese car maker Dong Feng is to invest in a new plant in Argentina to produce electric vehicles.
The company announced in 2017 it would invest US$300m to build an assembly plant to produce electric
vehicles in Argentina, although it is not clear whether these will be buses, light commercial vehicles or
passenger cars.
Toyota reported record vehicle output of 125,000 trucks in Argentina in 2017, and accounted for 40% of
vehicle exports from Argentina as 70% of its Hilux one tonne trucks were exported in 2017, equivalent to
86,400 vehicles. The company has been seeking to diversify its export markets to become less reliant
upon the Brazilian market. In 2018 Toyota has an objective of producing 140,000 vehicles in Argentina for
its Hilux one tonne truck, driven in part by a recovery in the Brazilian market. Toyota’s export sales to
Colombia also increased following the signing of a free trade agreement between the two countries. 40%
of the components for the Toyota Hilux are sourced in Argentina. In 2017 Toyota invested US$100m at its
Argentinean plant to produce the Innova mini van, which it currently imports from Thailand.
The Renault Nissan partnership has invested over US$800m in Argentina in the past four years, and in
2018 starts the production of its first pickup truck in the country. The Renault Nissan partnership has
invested in a pickup truck production line at a cost of US$600m. The new production line will produce
Nissan trucks in Argentina for the first time and will also produce Daimler pickup trucks under contract by
2020. The new production line has an annual production capacity of 70,000 vehicles. The investment
underlines Argentina’s position as the centre of pickup truck manufacturing in Latin America. Renault is
also shifting the production of two of its low priced Dacia models from Brazil to Argentina.
In December 2017 Fiat started the production of a new compact passenger car, the Cronos at its plant in
Argentina, following an investment of US$500m by Fiat at its Argentinean plant. The company has an
objective of producing 100,000 units of the new model per annum with 80% to be exported to other Latin
American markets, and with more than 50% of components sourced domestically. Fiat reported a 34%
increase in vehicle sales in Argentina to 105,000 vehicles in 2017. Across Latin America Fiat reported
vehicle sales of 513,000 vehicles in 2017 up from 473,000 vehicles in 2016.
In October 2017 General Motors announced an investment of US$500m to upgrade its vehicle plant at
Alvear in Sante Fe province in order to be able to be to produce the new Chevrolet Cruze and increase
production capacity at the plant. 80% of the output of the new model will be exported to Brazil, with
General Motors forecasting a 17% increase in vehicle demand in Brazil in 2018.
In 2017 Daimler announced an investment of US$150mt to produce the new Sprinter light commercial
vehicle at its plant in Argentina, with production expected to start in 2019. The investment underlines
Argentina’s increasing position as a centre of pickup trucks and light commercial vehicles.
Unit tyre production in Argentina is assessed to have increased marginally by 0.9% or 100,000 tyres to
12.8m units in 2017 versus 2016, as detailed in the table below.
Estimated Unit Tyre Production (Argentina) 2015 vs 2016 vs 2017 – 000’s
Vehicle 2015 2016 2017 % Change 2017

Passenger Car 12,300 11,600 11,600 -
Truck 1,210 1,100 1,220 10
Total 13,500 12,700 12,800 0.9
Unit passenger car tyre output in Argentina is assessed to have been unchanged from 2016 volumes of
output at 11.6m tyres in 2017, as detailed in the table below.
Estimated Unit Passenger Car Tyre Production & Demand (Argentina)

2015 vs 2016 vs 2017 – 000’s
Vehicle 2015 2016 2017 % Change 2017

Production 12,300 11,600 11,600 -
Imports 2,900 3,300 3,900 18
Exports 2,300 2,700 2,900 7
Apparent Demand 12,900 12,200 12,300 0.8

A decline in passenger car tyre output was driven by a reduction in demand for car tyres from the OE
sector of around 15%, reflecting a similar decline in passenger car output in Argentina in 2017. This is
assessed to have been offset by a recovery in demand in the replacement market. Pirelli reports demand
for passenger car tyres across Latin America increased by 15% year on year in the first nine months of
2017. In Brazil the passenger car tyre replacement market is reported to have increased by 15% in 2017
versus 2016.
A recovery in demand for passenger car tyres in the replacement market in Argentina is reflected in an
18% increase in passenger car tyre imports in 2017, to 3.9m tyres. Indeed passenger car tyre imports to
Argentina increased by almost 600,000 tyres to 3.9m tyres in 2017, driven by an increase in imports from
Brazil of 400,000 tyres to 2.5m tyres, and from China by 140,000 tyres to 475,000 tyres in 2017 versus
2016.
Passenger car tyre exports from Argentina increased by 7% or by just under 200,000 tyres to 2.9m tyres
in 2017, driven by an increase in exports to the US of 190,000 tyres; to Canada of 47,000 tyres and to
Brazil of 32,000 tyres to 2m tyres in 2017.
Bridgestone is investing US$195m at its tyre plant in Argentina to diversify its production base, and is
seeking to increase its market share in the Latin American tyre market. The new investment will be
spread over the years to 2020.
Unit truck tyre output in Argentina is assessed to have increased by around 10% or 100,000 tyres to an
estimated 1.2m tyres in 2017 versus 2016, as detailed in the table below.
Estimated Unit Truck Production & Demand (Argentina) 2015 vs 2016 vs 2017 – 000’s
Vehicle 2015 2016 2017 % Change 2017

Production 1,210 1,100 1,220 10
Imports 570 800 900 10
Exports 80 220 220 -
Apparent Demand 1,700 1,700 1,800 6
The increase in truck tyre output is assessed to have been driven by a 16% increase in commercial
vehicle output in Argentina in 2017. The upturn in the Argentinean economy is also assessed to have
driven some recovery in demand in the domestic truck tyre replacement market. Indeed truck tyre imports
to Argentina increased by 10% or 100,000 tyres in 2017, driven by an increase in imports from Brazil of
72,000 tyres, and from Mexico of 6,000 tyres. Truck tyre imports from China increased only marginally by
700 tyres to 690,000 tyres in 2017.
Truck tyre exports from Argentina were largely unchanged from 2016 volumes in 2017 with exports to the
largest export market Brazil increasing by 13,000 tyres to 220,000 tyres in 2017.
Carbon black production data for Argentina in 2016 is now available and is reported to have been
52,000mt down sharply from output 63,700mt in 2015. It seems probable that a decline in both unit
passenger car and truck output in Argentina drove the decline in domestic carbon black output in 2016. A
recovery in both the domestic passenger car and truck tyre demand in Argentina in 2017 is assessed to
have largely been met by increases in both passenger car and truck tyre imports into the country. As a
result market demand for carbon black in Argentina is assessed to have increased marginally from 2016
volumes in 2017 based upon an increase in unit truck tyre output, as detailed in the table below.
Market Demand for Carbon Black (Argentina) 2016 vs 2017 – mt
Carbon Black 2016 2017 % Change 2017

Production 52,000 60,000 15
Imports 13,000 7,000 -46
Exports 21,000 22,000 4
Apparent Demand 44,000 45,000 2
No increase in vehicle output in Argentina in 2017, will have contributed to flat market demand for carbon
black in 2017. Investments by several vehicle makers in new models and production capacity should
drive a recovery in vehicle output in Argentina in 2018 and beyond. Meanwhile the tyre industry is
assessed to be operating well below available production capacity in Argentina. It remains to be seen
whether the domestic tyre industry is able to regain share of the domestic tyre market in Argentina as

both truck and passenger car tyre imports have increased significantly in the past two years, probably
caused by the relaxation of import controls following a change of Government two years ago. Unit
passenger car tyre capacity in Argentina is assessed to be in the region 15m tyres per annum. With
output assessed to be in the region 11m tyres per annum there is clearly potential for substantial
increases in market demand for carbon black in Argentina if the industry is competitive versus imports.
Carbon black output in Argentina is reported to have declined by 17% or by 11,000mt to 52,600mt in
2016 from 63,700mt in 2015. A reduction in carbon black imports to Argentina of 6,000mt, due to a lower
volume of imports from Brazil and China is assessed to have driven an increase in domestic carbon black
output of 7,000mt at the Cabot plant in Argentina in 2017. In 2013 Cabot debottlenecked its plant in
Argentina taking annual production capacity to an estimated 80-83,000mt per annum. Carbon black
output reached 76,000mt in 2013, but has subsequently declined to a low of 52,000mt in 2016. On this
basis it is estimated the carbon black plant in Argentina was operating at around 63% of nameplate
production capacity in 2016.
Carbon black exports from Argentina increased by 1,000mt to 22,200mt in 2017 versus 2016, as detailed
in the table below.
Carbon Black Exports (Argentina) 2016 vs 2017 – mt
Destination 2016 2017 Average Import Price

US$/mt 2017
Chile 14,499 14,114 887
Brazil 6,216 4,814 795
Peru 252 2,898 762
Uruguay 186 118 2,518
India 0 202 799
Paraguay 31 55 3,197
Belgium 0 23 707
Bolivia 17 6 2,694
Other 1 0 -
Total 21,202 22,230 865
The increase in carbon black exports was due to an increase in exports to Peru of 2,600mt in 2017, and
to India of 200mt, offset by a decline in exports to Brazil of 1,400mt. The increase in carbon black exports
to Peru in 2017 look to have replaced exports to Peru from Mexico, which declined by 2,200mt in 2017. It
is possible Cabot reduced exports from its plant in Mexico to Peru in 2017 due to increased demand in
Mexico in 2017.
Carbon black imports to Argentina declined by 5,700mt to 7,400mt in 2017 versus 2016, as detailed in the
table below.
Carbon Black Imports (Argentina) 2016 vs 2017 – mt
Source 2016 2017 Average Import Price

US$/mt 2017
Brazil 9,171 5,498 1,217
China 2,800 377 1,149
United States 254 330 2,356
France 247 192 3,197
Japan 173 136 3,069
Canada 127 99 1,651
Netherlands 90 224 1,314
Belgium 84 33 2,088
Egypt 63 86 934
Venezuela 53 128 866
Germany 35 34 2,356
South Korea 20 83 1,705
United Kingdom 20 40 1,132
Other 27 149 -
Total 13,164 7,409 1,361

Carbon black imports from Brazil declined by 3,600mt in 2017, and from China by 2,400mt.
The table below details estimated specialty carbon black imports to Argentina in 2017, based upon the
above table. High average import prices of carbon black and the source countries of imports have been
used to estimate specialty carbon black imports, as detailed in the table below.
Estimated Specialty Carbon Black Imports (Argentina) 2016 vs 2017 – mt

US$/mt 2017
France 247 192 3,197
Japan 173 136 3,069
Canada 127 99 1,651
Belgium 84 33 2,088
Germany 35 34 2,356
Total 940 907 -
Carbon black prices in Latin America are reported to be in the region US$850/mt–US$875/mt for tread
grade N326 and around US$900/mt for grade N339 on a delivered basis.
Western Europe
Netherlands
Passenger car sales in the Netherlands increased by 10% year on year in February to 35,400 vehicles,
and cumulatively by 6% to 57,800 vehicles in the first two months of 2018. Across West European
passenger car sales increased by 3.5% year on year to 1.05m vehicles in February 2018, driven by a 7%
increase in sales in Germany, a 13% increase in sales year on year in Spain and 4% increase in France.
Cumulatively passenger car sales have increased by 1.9% to 2.69m vehicles across Western Europe in
the first two months of 2018 versus 2017. Passenger car sales in Western Europe are forecast to
increase by 1.9% or by 270,000 vehicles to 14.57m vehicles in 2018 from 14.3m in 2017.
Vehicle production data is not available for the Netherlands for 2017, but is assessed to have increased
by 88,000 vehicles to an estimated 230,000 vehicles in 2017 versus 2016, as detailed in the table below.
Estimated Vehicle Production (Netherlands) 2016 vs 2017

Passenger Car 87,000 170,000 95
Light Truck 0 0 -
Heavy Truck 56,000 61,000 7
Total 143,000 231,000 61
Passenger car production is based upon on the single car assembly plant operated by VDL, which
produces Mini’s under contract for BMW. Since mid 2017 VDL has also been producing the BMW X1
sports utility vehicle under contract for BMW. Passenger car output at the former Nedcar plant has
increased in recent years from around 40,000 vehicles to a reported 170,000 vehicles in 2017. Passenger
car output is expected to increase further in 2018, and the company is hiring an additional 400 workers
and adding a production shift on Saturdays.
The single truck manufacturer DAF reported it produced 56,500 trucks in 2016. The company reports a
marginal loss in market share in the European heavy truck market in 2017 to a share of 15.3% from
15.5% in 2016, when it produced 46,800 heavy trucks, and 5,300 light trucks. DAF reports it exported
9,000 trucks to markets outside of the EU in 2017, up from 5,200 trucks in 2016. On this basis it is
estimated the company hiked output by around 4,000 trucks to an estimated 61,000 trucks in 2017. DAF
is forecasting the European market for heavy trucks will be in the range 290,000 trucks to 320,000 trucks
in 2018 from 306,000 trucks in 2017.
Apollo Tyres, the Indian tyre producer which acquired the Dutch tyre producer Vredestein in 2009. The
company reported an increase in tyre sales volumes of 3% at its Netherlands plant in 1H 2017, but a 5%
decline in sales volumes in Q3 2017 from its Netherlands and Hungarian plants combined year on year.

In Q4 2017 the company reported an upturn in sales revenues from its Netherlands plant to €121m, from
€118m in Q4 2016, due to the seasonal upturn in demand, with profit margins increasing to 12% in Q4
2017 from 8.5% in Q4 2016, most probably due to the increase in sale of winter tyres. The company
reports it has been operating its tyre plant in the Netherlands at high rates of available capacity. The
plant in the Netherlands is largely a passenger car tyre plant but also produces a small number of
agricultural tyres, with a daily production capacity of between 18,000 tyres and 19,000 tyres per day. In
2014 Apollo Tyres is reported to have increased annual passenger car tyre production capacity at the
plant in the Netherlands from 6m to 6.5m tyres per annum.
Apollo Tyres is projecting its daily production capacity at its plants in the Netherlands and in Hungary will
have a combined production capacity of up to 35,000 tyres per day at its two plants combined by 2020,
with the Hungarian tyre plant producing 7,000 tyres/day by April 2018 and expected to reach around
14,000 tyres/day by April 2019. In addition the plant will produce almost 2,000 radial truck tyres per day
by 2020, which should take daily production capacity at the plant to around 250mt of tyres per day, from
120mt of tyres per day when only producing passenger car tyres.
Truck tyre imports into the EU from China have reached record volumes in the past year, according to
tyre producers. The EU has started registering imports of truck tyres and retreaded truck tyres from
China, following the initiation of anti dumping proceedings in August 2017. Should the case of dumping
be found to be the case, the EU will now be able to retroactively apply dumping duties to tyres now being
imported from China. It has been alleged by complainants that an anti dumping margin of between 74%
and 152% should be applied to Chinese truck tyres, with an average underselling margin of between 26%
and 37%. Chinese truck tyre companies are alleged to have almost doubled the volume of truck tyres
exported to the EU from 2.3m tyres in 2013 to 4.4m tyres in 2016, which has resulted in Chinese
produced truck tyres accounting for 20.9% of the European truck tyre market in 2016 from 13.2% in 2013.
Passenger car and truck tyre imports to the five largest West European markets, Germany, France, Italy,
Spain and the UK from China are detailed in the table below.
Passenger Car and Truck Tyre Imports from China (Five Largest West European Markets
2013 – 2017* – 000mt
Tyre 2013 2014 2015 2016 2017* % Change

2013/ 2017
Passenger Car 286 304 334 369 379 32
Truck 91 121 136 150 169 86
Total 377 425 470 519 547 45
* Estimated based upon eleven months trade data
Passenger tyre imports from China increased by 32% or by 93,000mt to 379,000mt in the years 2013 to
2017, with imports to the UK accounting for 43% of the total volume of imports for the five countries.
Truck tyre imports to the five West European markets from China increased by 86% in the years 2013 to
2017 or by 78,000mt, with imports almost doubling to most of the five markets but increasing threefold to
the Spanish market. It seems probable that truck tyre imports from China have accounted for most if not
all of any increase in heavy truck tyre demand in Europe in recent years.
Michelin reported a 2.2% increase in global tyre sales volumes year on year in Q4 2017, as demand
picked up after a strong half of the year when sales were pulled forward ahead of price increases.
Michelin reported demand for its passenger car tyres increased by 1% year on year in Q2, Q3 and Q4
2017 following a 4% increase in Q1 2017. The company reported demand for its 18” diameter tyres and
above increased by 19% globally in 2017, compared to a market, which increase by 13%. Michelin
reports that 18” diameter tyres and above account for almost all of its fitments of OE vehicles, and
account for one third of the company’s passenger car tyre sales globally. The company estimates
demand for 18” diameter and above passenger car tyres account for around 15% of the global passenger
car tyre market. For 19” diameter tyres Michelin reported a 34% increase in demand in 2017 from a
market which increased by 16% globally. In the past the company has had a shortage of production
capacity for these premium tyres but new production capacity has not enabled the company to fully
benefit from strong demand for these premium tyres.
In Europe, Michelin reported there was a return to long term growth rates in the passenger car tyre
replacement market in Q4 2017, although the market remains amongst the most competitive globally at
present. Globally the company reported a 2% increase in passenger car tyre sales volumes in Q4 2017,
from a 1% increase in Q3, in part due to good demand for winter tyres. Across Europe demand from the

OE sector increased by 2%, and in Western Europe by 1%, while demand in the replacement market
increased by 4% in Western Europe driven by a 5% increase in Spain and a 3% increase in France and a
1% increase in Germany offset by an 8% decline in the UK. Michelin is forecasting demand for its
passenger car tyres will increase globally by between 1.5% and 2.5% in 2018, a slower rate than in 2017
as strong demand in mature markets stabilises, and is partially offset by weaker OE demand.
In the truck tyre replacement market Michelin reported a 3% decline in sales volumes in Q2, Q3 and Q4
2017 following a 3% increase in Q1 2017, when sales were pulled forward by price increases. In 2017 the
European truck tyre market increased by 4% led by demand from the construction industry and increased
freight volumes. Demand in France increased by 7% and in Turkey by 9%, offset by flat demand in
Germany and a 2% decline in Italy and a 3% decline in Spain. In the European OE truck tyre market
demand increased by 8%, while in Eastern Europe demand increased by 14% in 2017.
Michelin has new truck tyre products and the re-launch of the BF Goodrich brand in Europe are expected
to drive an increase in demand for its truck tyres in 2018. However, it reports there is a structural
imbalance in the global truck tyre market caused by a large over supply of production capacity and supply
in China. This is creating highly competitive markets globally, and particularly in Europe, with truck tyre
imports at record volumes. Michelin will take further steps to address high costs, in order to improve
profitability in its truck tyre business. Globally the company is forecasting zero growth or at best a 1%
increase in its truck tyre sales volumes in 2018.
In the specialty tyre sector Michelin reported a 19% increase in demand year on year in Q4 2017,
following a 13% increase in Q3 and a 17% increase in Q2 2017. The increase in demand was led by
strong demand from the mining sector which increased by between 5-10% in 2017, and steady growth in
the OE agricultural and earthmoving sectors. The company has added to its workforce for specialty tyres
to be able to deliver tyres in a timely manner. Michelin is forecasting demand for mining tyres will increase
by 30% in the years 2016 to 2020, having increased by around 15% in 2017. Michelin is forecasting a 5%
to 7% increase in demand for its specialty tyres in 2018, driven by a 5% to 10% increase in global
demand and a strong global economy.
As part of its competitiveness programme Michelin reported savings of €315m in 2017, including €51m of
raw material savings. The company is investing in research in new materials as one its strategic priorities.
Market demand for carbon black in the Netherlands is assessed to have increased by around 2,000mt to
an estimated 39,000mt in 2017 versus 2016, as detailed in the table below.
Estimated Market Demand for Carbon Black (Netherlands)

2016 vs 2017 – Eleven Months only - mt
Carbon Black 2016 2017 % Change 2017

Production 65,000 88,000 35
Imports 40,000 30,000 -25
Exports 68,000 79,000 16
It is possible that the single Vredestein tyre plant operated by Apollo Tyres increased its output in 2017
based upon reported increases in demand in 1H 2017, and a strong end to the year in Q4 2017 probably
driven by demand for winter tyres. The increase in passenger car production in the Netherlands due to
the startup of production of the BMW X1 model at the Nedcar car plant in Eindhoven in mid 2017 could
also have driven an increase in demand for carbon black in the mechanical rubber goods sector if
suppliers for this model of the BMW X1 are also located in the Netherlands. A further ramping up of
output of the BMW model in 2018 is expected in the Netherlands.
A decline in carbon black imports to the Netherlands in 2017 of 10,000mt, combined with an increase in
carbon black exports from the Netherlands of 11,000mt is assessed to have driven an increase in carbon
black output at the single carbon black plant in the Netherlands operated by Cabot. The plant has a
nameplate production capacity of 70,000mt per annum but it seems probable the company has
debottlenecked the plant in recent years.
Cabot Corp reported a 31% increase in sales revenues year on year in Q4 2017 to $387m. The company
reported a 3% increase in sales volumes year on year due to increases in Europe and in the Americas.
However, volumes declined by 2% from Q3 2017 due to seasonally lower volumes in the Americas and
Asia. In Europe, the Middle East and Asia Cabot reported a 13% increase in carbon black sales volumes

in Q4 2017 versus Q4 2016, and a 3% increase from Q3 2017. Cabot is also anticipating solid demand
growth for carbon black in almost all regions of the world in 2018.
Carbon black imports to the Netherlands declined by 10,000mt to 29,600mt in the first eleven months of
20117 versus 2016, as detailed in the table below.
Carbon Black Imports (Netherlands) 2016 vs 2017 – Eleven Months only - mt

€/mt Nov 2017
Germany 7,723 11,510 3,200
Poland 3,626 3,914 958
Belgium 2,346 2,714 6,650
Russia 1,462 1,772 724
India 3,392 1,822 1,235
Italy 29 1,581 986
China 1,030 1,420 1,149
France 91 878 1,330
Japan 400 774 4,814
UK 25 466 -
Hungary 803 377 1,146
Egypt 16,126 0 -
Spain 415 0 -
Other 2,245 2,382 -
Total 39,713 29,610 -
The decline in imports was due to a decline in imports from Egypt to zero from imports of 16,100mt. It is
possible this exceptional decline in volume reflects a change in sourcing policy by Apollo Tyres at the
Vredestein tyre plant in 2017. Carbon black imports to the Netherlands from Germany increased by
3,800mt in the first eleven months of 2017, and from Italy by 1,500mt in the first eleven months of 2017
versus 2016.
Carbon black exports from the Netherlands increased by 10,800mt to almost 79,000mt in the first eleven
months of 2017 versus 2016, as detailed in the table below.
Carbon Black Exports (Netherlands) 2016 vs 2017 – Eleven Months only - mt
Destination 2016 2017 Average Export Price

€/mt Nov 2017
Belgium 20,249 19,909 1,767
Germany 11,425 14,330 1,655
France 4,790 8,426 1,705
Saudi Arabia 5,454 6,535 945
Suppressed Country 441 4,933 2,057
US 2,825 3,406 2,871
Spain 1,423 2,589 1,798
Sweden 3,098 2,422 1,659
Italy 1,228 2,378 4,030
India 951 1,584 927
China 2,568 1,388 2,271
Japan 817 1,255 2,150
Australia 1,187 937 1,575
UAE 1,986 634 263
Brazil 690 624 2,118
Norway 108 282 5,782
Malaysia 262 207 2,891
Austria 134 200 1,852
UK 1,754 0 -
Other 6,156 6,046
Total 68,102 78,933

Carbon black exports to a ‘suppressed country’ increased by 4,500mt to almost 5,000mt in the first eleven
months of 2017 versus 2016. Carbon black exports to France increased by 3,600mt; to Germany by
2,900mt; to Italy by 1,150mt and to Spain by 1,160mt in the first eleven months of 2017 versus 2016. By
contrast exports to the UK declined by 1,750mt and to the UAE by 1,300mt in the first eleven months of
2017 versus 2016.
High average export values of carbon black exports from the Netherlands and shipments to Asia and
Latin America suggests that Cabot is producing and exporting speciality grades of carbon black from its
plant in the Netherlands.
Monthly adjusted contract prices for carbon black in Europe are assessed to have declined by around
€5/mt in February based upon a reduction in 1% sulphur prices to around €51.20/mt in December from
€51.70/mt in November taking into account exchange rate adjustments.
Central Europe
Poland
The Polish economy increased by 4.6% in 2017, the fastest rate of increase since 2011 driven by strong
domestic consumption, and improved exports to EU markets. Consumer consumption increased by 4.7%
in 2017, the highest rate of increase for almost ten years driven by generous social spending by the
Polish Government and higher wages. Capital investment also picked up in 2017 increasing by 5.4% due
to increased funding from the EU. With unemployment levels at their lowest levels for many years there
are concerns that the economy will overheat, with economists suggesting Poland’s sustainable growth
rate is in the range 2-3% over the long term.
Passenger car sales in Poland reached a record 486,000 vehicles in 2017, increasing by 14% from
416,000 vehicles sold in 2016, supported by a strong economy and falling unemployment. The increase
in passenger car sales was driven by a 20% increase in sales to business customers, which increased by
20% year on year to 339,000 vehicles, while private consumer sales increased by 9% to 147,000 vehicles
in 2017. The Czech car maker Skoda controlled the largest share of the Polish market with a near 20%
market share selling 62,000 vehicles, followed by Toyota selling 51,000 vehicles. Most recent data for
January 2018 indicates a 21% increase in sales year on year to 46,000 vehicles from 38,000 vehicles in
January 2017.
Commercial vehicle sales in Poland increased only marginally by 1.9 to 60,900 vehicles in 2017, with
heavy truck sales increase by 3.9% year on year to 27,600 trucks. In January 2017 light commercial
vehicle sales increased by 28% to 4,900 vehicles from 3,800 vehicles in January 2017.
Vehicle production in Poland increased by 1% or by 8,000 vehicles to 689,000 units in 2017 versus
2016, as detailed in the table below.
Vehicle Production (Poland) 2016 vs 2017

Passenger Car 554,000 517,000 -7.2
Light & Heavy Truck 122,000 170,000 39
Bus 5,000 5,300 0.3
Total 681,000 689,000 1
Poland’s largest car maker Fiat reported it produced 263,000 vehicles at its Tychy plant in 2017 down
marginally from output of 273,000 vehicles in 2016, but well below annual production capacity of around
500,000 vehicles. Production at Fiat’s Tychy plant in Poland is dominated by the Fiat 500 model, of which
175,000 were produced in 2017. There is a possibility Fiat will transfer production of its sub compact
Panda model from its plant in southern Italy to its Tychy plant in Poland from 2019 or 2020. This will
depend upon the success of Fiat’s Alfa Romeo brand, which is launching a number of new models over
the years 2016 to 2020. If sufficiently successful then Fiat will dedicate its plant in Pomigliano d'Arco,
southern Italy to Alfa Romeo vehicles and shift the Fiat Panda model to the Tychy plant which is currently
under-utilised. Fiat is forecasting output at the Tychy plant will be similar to 2017 volumes depending
upon the passenger car market in 2018.

The increase in vehicle output has been driven by an increase in light truck output as Volkswagen ramps
up output at its new Polish plant. In October 2016 Volkswagen started production of its Crafter light truck
at its new plant in Poland. The new plant is located adjacent to the existing vehicle plant and has an
annual production capacity of 100,000 vehicles per annum. Volkswagen reported a 6.8% increase in
vehicle output at its older Polish plant in 2017 to 197,800 vehicles from 185,000 vehicles in 2016.
Meanwhile output at the company’s second light commercial vehicle plant reached over 40,000 vehicles
in 2017. The plant is expected to reach full operating rates in 2018 of around 100,000 vehicles. It is also
producing a MAN branded variation of the Crafter light truck and is expected to produce 20,000 MAN
branded trucks a year. Volkswagen is to produce a new camper van model based upon the Crafter light
truck at its plant in Wrzesnia in Poland starting in 2019. In 2018 the company will produce 18,000
converted recreational vehicles based upon the Crafter and Caddy models produced in Poland.
Volkswagen will produce a new electric version of its Crafter light commercial vehicle, with production
starting in Poland later in 2018. Volkswagen is aiming to become the world leader in electric cars by
2025.
Passenger car output at the Opel plant in Poland is not available for 2017, but it seems probable output
declined in 2017. As the second car plant in Poland it is estimated output declined by around 30,000
vehicles based upon total passenger car output in 2017. In 2016 General Motors reported an 18%
increase in vehicle output to 200,000 vehicles at its plant in Gliwce, Poland in 2016 up from the 169,000
vehicles it produced in 2015. The acquisition of Opel by Peugeot Citroen (PSA Group) is expected to lead
to up to three plant car assembly plant closures across Europe, although low wages in Poland will
probably ensure the Polish plant remains viable. PSA has produced a strategic plan for the integration of
Opel within its operations, and is seeking to reduce Opel’s breakeven to around 800,000 vehicles per
annum compared to sales of 984,000 vehicles in 2017, and produce profits by 2020. PSA is reported to
be planning to modernise all of Opel’s plants, and seeking to reduce the cost of manufacturing each car
by €700 by 2020.
In 2017 the Polish Government introduced a new law on electro mobility and alternative fuels, following
the EU directive on alternative fuels infrastructure. The law provides incentives for drivers who choose
electric vehicles, and gives them preference in bus lanes. The Polish Government is aiming for electric
vehicles to account for 10% of its vehicle fleet by 2020 eventually increasing to 50%. 6,000 electric
charging stations are to be built in Poland by 2020, plus 400 fast charging ones.
The passenger car tyre market in Poland is reported to have increased by 5% year on year in 2017.
The table below details estimated passenger car tyre demand in Poland for 2016 versus 2017.
Estimated Passenger Car Tyre Market (Poland) 2016 vs 2017 – 000’s

OE 2,700 2,600 -7
Replacement 11,000 11,800 7
Total 13,700 14,400 5
Demand for tyres in the OE car tyre market is assessed to have declined by around 200,000 tyres to an
estimated 2.6m tyres in Poland in 2017, based upon passenger car output. The European tyre
manufacturers association reports an increase in demand for its member’s passenger car tyres to an
estimated 11.8-12m tyres in 2017. Light truck tyre demand in Poland is reported to have increased by 4%
year on year in 2017, while heavy truck demand is reported to have declined by 1% according to the
Polish tyre association.
Unit tyre production in Poland increased by 4.8% or by 1.75m tyres to 37.6m tyres in 2017 versus 2016,
as detailed in the table below.
Unit Tyre Production Poland 2015 vs 2016 vs 2017 – 000’s
Tyre 2015 2016 2017 % Change 2017

Passenger Car 31,000 31,500 33,000 4
Truck and Bus 4,400 4,080 4,300 4
Agricultural Vehicles 300 300 330 10
Total 35,700 35,880 37,630 4.8

The increase in output was driven by an increase in unit passenger car tyre output of 1.5m tyres to 33m
tyres in 2017. Unit truck tyre output also increased by 4% or by 220,000 tyres in 2017, while output of
tyres for agricultural vehicles increased by 10% to 330,000 tyres.
Passenger car tyre output as measured in metric tonnes increased by 4% or by 12,000mt to 287,000mt in
2017, largely in line with the volume of passenger car tyres produced. The average passenger car tyre
weight declined marginally 8.69kg in 2017 down from 8.72/kg in 2016. Total tyre output as measured in
metric tons increased by 4.9% from 2016 volumes in 2017 to 527,200mt, as detailed in the table below.
Tyre Production Poland 2015 vs 2016 vs 2017 – mt
Tyre 2015 2016 2017 % Change 2017

Passenger Car 266,000 274,900 287,000 4
Truck and Bus 199,000 200,000 209,000 5
Agricultural Vehicles 27,000 27,500 31,200 13
Total 492,000 502,400 527,200 4.9
Unit tyre production in Poland declined by 56,000 tyres to 3.15m tyres in the first months of 2018 versus
2017, as detailed in the table below.
Unit Tyre Production Poland 2017 vs 2018 – One Month only - 000’s
Tyre 2017 2018 % Change 2018

Passenger Car 2,840 2,770 -2
Truck and Bus 346 360 4
Agricultural Vehicles 28 28 -
Total 3,214 3,158 1.7
Unit passenger car tyre output declined by 2% or by 70,000 tyres to 2.77m tyres in the first month of
2018, while unit truck tyre output increased by 4% or by 14,000 tyres to 360,000 tyres in January 2018
versus 2016.
Tyre exports from Poland increased by 3% or by 13,000mt to 474,000mt in the first eleven months of
2017 versus 2016, as detailed in the table below.
Tyre Exports (Poland) 2017 vs 2018 – Eleven Months only - mt
Tyre 2017 2018 % Change 2018

Passenger Car 285 292 2
Truck 176 182 3
Total 461 474 3
Exports of passenger car tyres increased by 2% driven by exports to other EU markets and to markets
outside of the EU equally. Truck tyre exports from Poland increased by 3% to 182,000mt in the first
eleven months of 2017, largely driven by an increase in exports to markets outside of the EU, while
exports to EU markets increased only marginally.
Goodyear’s Polish subsidiary Goodyear Debica reported a 17% increase in sales revenues to ZL1,963m
(€467m) in 2017. Operating profits increased by 136% year on year to Zl122m (€29m) in 2017 and net
profits by 92% to Zl124m (€29m). The increase in earnings was due in part to a reduction in sales and
general management costs which declined by Zl21.8m (€29m) from 2016. However, average unit
production costs increased by 7.5% year on year due to higher raw material costs. The company invested
Zl98.2m (€47m) in 2017 to adapt tyre production lines to produce high and ultra high performance tyres,
and the production of tyres with a diameter of 17” and above, which are the most profitable sectors of the
tyre market.
Bridgestone is investing a proportion of an announced investment of €266m to increase tyre production

capacity at its tyre plants at Poznan and Stargard over the five years to 2022. The investment will include
optimisation of existing equipment and the installation of new equipment in order to produce a richer mix
of brands and tyre sizes. The company expects the new production capacity to increase tyre production
output by around 20%.

Bridgestone reported tyre output in its European operations increased by 16% year on year to 70,000mt
in Q4 2017 from 60,000mt in Q4 2016. Cumulatively output increased by 8% or by 20,000mt to
270,000mt in 2017 versus 2016. It seems probable the opening of Bridgestone’s new tyre plant in Russia
contributed to the increase in tyre output in Europe in 2017. Bridgestone reported its passenger car tyre
sales in Europe increased by 10% in the OE market in 2017, but were flat year on year in the
replacement market. Bridgestone reported sales to the European truck tyre market increased by 7% to
the OE market and by 3% in the replacement market in 2017. The company is forecasting a 6% to 10%
increase in passenger car tyre sales to the replacement market in Europe in 2018, with sales to the OE
market unchanged from 2017 volumes. Bridgestone is forecasting a 5% increase in truck tyre sales to
both the OE and replacement markets in 2018. As a result Bridgestone is forecasting its European tyre
output will increase by 14% or by 40,000mt to a record 310,000mt in 2018, suggesting the company’s
output in Europe will have increased by 47% or by 100,000mt per annum in the five years 2014 to 2018.
LG Chemicals is to invest US$1.69bn in Europe’s largest lithium-ion battery factor in Wroclaw in southern
Poland in 2019 to supply the electric car industry. Volkswagen also operates a light commercial vehicle
plant in Wroclaw and is investing €20bn (US$24bn) to produce zero emission vehicles and produce
3million electric vehicles a year by 2025. LG Chemicals is to produce up to 100,000 electric batteries
annually from 2019 at the Polish plant. Initially LG Chemicals will import lithium and other raw materials
but hopes to source from Polish suppliers in the future. Battery costs are estimated to have declined from
over US$1,000 per kilowatt hour in 2010 to US$227 in 2016.
The Swiss engineering company ABB is also to construct a larger lithium battery plant in Sweden, called
Northvolt, with an annual cell production equivalent to 32 gigawatt hours by 2023.
Market demand for carbon black in Poland is assessed to have increased by 3-4% or by 6,000mt to an
estimated 160,000mt in 2017 versus 2016, as detailed in the table below.
Estimated Market Demand for Carbon Black (Poland) 2016 vs 2017* – mt
Source 2016 2017* % Change 2017

Production 45,000 4,000 -
Imports 284,000 300,000 5
Exports 174,000 143,000 -17
Apparent Demand 155,000 161,000 3.8
* Trade data has been estimated based upon eleven months data
The increase in market demand for carbon black in Poland is assessed to have been driven by an
increase in tyre output of 25,000mt to 527,000mt of tyres in 2017. Unit passenger car tyre output
increased by 1.5m tyres to 33m tyres in 2017, and unit truck tyre output increased by 4% or by 220,000
tyres to 4.3m tyres in 2017. Investments by Bridgestone at its two tyre plants in Poland will lead to an
increase in its tyre production capacity of 20% in the next five years, which should drive further increases
in market demand for carbon black. Vehicle production in Poland was largely unchanged from 2016
volumes in 2017, with increased light commercial vehicle output by Volkswagen offsetting lower
passenger car production in 2017. A further increase in production by Volkswagen of up to 60,000
vehicles per annum could drive some growth in light commercial vehicle output in Poland in 2018. The
prospects for increased passenger car output are less clear, as Peugeot Citroen has not made clear what
its plans for the former General Motors plant in Poland are, particularly when the existing Astra model
produced at the plant comes to an end in 2020. Meanwhile increases in output in Poland’s largest car
plant operated by Fiat at Tychy are dependent upon Fiat’s decision as to whether it will shift production of
its Panda model from southern Italy to Poland in the next two years.
Assessing carbon black output in Poland is complicated by the large volumes of Russian production
imported into Poland and largely re-exported to Central and West European markets. Carbon black
imports to Poland increased year on year by 26,000mt in 2H 2017 to 160,000mt, with imports for the full
year increasing by 16,000mt to 300,000mt. It seems unlikely that this increase in imports reflects a similar
volume of increase in domestic demand for carbon black in Poland. However, the large increase in the
volume of imports is not reflected in a similar increase in exports of carbon black from Poland in 2017.
Indeed carbon black exports from Poland declined by an exceptional 31,000mt to 143,000mt in 2017. In
part the decline in exports in 2017 could reflect changes in sourcing arrangements by tyre companies,
however it is unclear why imports to Poland would increase to such a large extent in 2017, suggesting a
large inventory build by Polish carbon black distributors last year.

The large net changes in carbon black suggest a sharp decline in carbon black output in Poland in 2017,
and therefore do not reflect carbon black output which was probably unchanged from 2016 volumes of
output in 2017. Indeed Orion Carbons, which operates the single carbon black plant in Poland reports its
European plants are operating at around 90% of production capacity, which would probably suggest its
Polish carbon black plant was operating at that level in 2017.
The table below details carbon black imports to Poland for the first eleven months of 2017 versus 2016.
Carbon Black Imports (Poland) 2016 vs 2017 – Eleven Months only - mt

€/mt Nov 2017
Russia 187,613 187,613 671
Ukraine 20,913 25,139 667
Czech Rep 14,857 17,255 930
Hungary 18,084 13,290 740
Germany 7,014 10,772 983
Italy 4,069 5,921 906
China 161 2,468 3,262
Venezuela 0 2,278 -
Mexico 2,497 2,114 1,476
US 0 2,172 667
Sweden 2,192 1,993 926
France 1,325 1,061 1,596
Belgium 196 303 3,379
Other 632 3,361 -
Total 259,535 275,308 -
Carbon black imports to Poland increased by 15,700mt to 275,000mt in the first eleven months of 2017
due to an increase in imports from the Ukraine of 4,200mt; from Germany of 3,700mt; from Venezuela of
2,200mt; from the Czech Republic of 2,300mt and from China of 2,300mt in the first eleven months of
2017. By contrast carbon black imports to Poland from Hungary declined by 4,800mt in the first eleven
months of 2017.
Carbon black exports from Poland declined by 29,000mt to 137,000mt in the first eleven months of 2017
versus 2016, as detailed in the table overleaf.
Export shipments from Poland, which largely represent Russian produced carbon black, shipped via
Poland to other European markets largely declined by an exceptional 29,000mt in the first eleven months
of 2017 versus 2016.
Carbon black exports from Poland to the Slovak Republic declined by 20,000mt in the first eleven months
of 2017. It is possible that the single tyre producer in the Slovak Republic, Continental AG, has changed
the source of its supply of Russian produced carbon black in 2017. Carbon black exports from Poland to
Germany declined by 12,000mt; to France by 7,000mt and to Romania by 6,600mt in the first eleven
months of 2017 versus 2016. By contrast carbon black exports from Poland to the Czech Republic
increased by an exceptional 14,000mt and to Serbia by 2,700mt in the first eleven months of 2017 versus
2016.
Carbon black tread grade N326 is reported to be priced in the region €890/mt to €900/mt in Central
Europe. Lower transport costs from Russia to Poland would suggest delivered prices are lower in the
Polish market. Reports suggest Russian carbon black prices are currently around €10/mt to €30/mt below
those of other European producers.

Carbon Black Exports (Poland) 2016 vs 2017 – Eleven Months only - mt
Destination 2016 2017 Average Export Price

€/mt Nov 2017
Czech Rep 18,724 33,716 740
Germany 39,329 27,150 720
Luxembourg 17,104 17,734 632
Netherlands 10,410 8,907 845
Slovenia 6,020 6,862 -
Romania 12,861 6,226 758
Italy 6,659 6,115 1,070
Hungary 4,710 5,193 852
France 11,833 4,387 860
Serbia 0 2,752 842
Spain 762 2,171 961
USA 2,443 1,946 943
Belgium 354 1,789 791
Israel 598 1,433 790
Sweden 1,338 1,312 902
Austria 903 1,230 873
Turkey 0 1,214 753
Finland 1,244 887 1,007
Greece 342 307 922
Vietnam 0 255 653
Slovakia 20,499 173 785
China 623 40 -
India 450 85 -
Other 9,517 5,291 -
Total 166,723 137,175 -
Middle East
Turkey
The Turkish economy is assessed to have increased by an exceptional 6.5% in 2017, following an 11%
increase in growth year on year in Q3 2017. Government stimulus measures drove the rapid rate of
increase in economic growth in Q3 2017, which encouraged borrowing and spending through tax cuts.
The economy is expected to slow to a rate of 4% in 2018.
Passenger car sales in Turkey declined by 8% or by 8,400 vehicles to 99,700 vehicles in December.
Cumulatively passenger car sales declined by 5% or by 34,000 vehicles to 722,000 vehicles in 2017.
Demand for passenger cars in Turkey picked up in 2H 2017 following a 7% decline in demand in 1H
2017. However, sales volumes declined year on year in November and December 2017 contributing to
the annual decline in demand. The depreciation of the Turkish Lira has negatively impacted new
passenger car sales in Turkey this year as 70% of new passenger cars sold in Turkey in 2017 were
imported.
Sales of commercial vehicles in Turkey recovered in 2H 2017, following a 7% declines in sales volumes
year on year to 104,000 vehicles in the first six months of 2017. For the full year commercial vehicle sales
increased by almost 3% to 257,500 vehicles. Sales of light commercial vehicles increased by 3% or by
7,000 vehicles to 233,000 vehicles in 2017, while sales of medium trucks increased by 1% to 21,000
trucks in 2017. Heavy truck sales declined marginally to 24,000 trucks in 2017, having peaked at almost
40,000 trucks in 2012.
Vehicle production in Turkey increased by 14% or by 213,000 vehicles to reach a record 1.74m vehicles
in 2017 versus 2016, as detailed in the table overleaf.

Vehicle Production (Turkey) 2016 vs 2017 – 000’s

Passenger Car 950 1,142 20
Pick Up Truck 461 462 -
Light Truck 2 4 ++
Medium/Heavy Truck 14 19 31
Bus 55 66 20
Tractor 51 54 6
Total 1,536 1,749 14
Passenger car production in Turkey increased by 20% or by an exceptional 192,000 vehicles to reach a
record 1.14m vehicles in 2017. The increase in output was supported by a reduction in the volume of
passenger cars imported into Turkey of 10%, or 57,000 vehicles, to 505,000 vehicles in 2017. However,
passenger car exports from Turkey increased by an exceptional 24% or 176,000 vehicles to 921,000
vehicles in 2017. As a result passenger car exports from Turkey accounted for 80% of output in Turkey in
2017.
Toyota accounted for most of the increase in passenger car production in Turkey in 2017, as detailed in
the table below.
Passenger Car Production by Manufacturer (Turkey) 2016 vs 2017 – 000’s
Manufacturer 2016 2017 % Change 2017

Oyak Renault 340 365 7
Tofas 190 216 13
Toyota 151 280 ++
Hyundai 230 227 -1
Others 39 54 38
Total 950 1,142 20
In 2017 Toyota started the production of its C-HR crossover model, which has driven the increase in
production output for the company in Turkey. The company had a target of producing 280,000 vehicles in
Turkey in 2017 up 90% from an output of 155,000 vehicles in 2016. With the start of the production of the
C-HR crossover model the company is exporting to the North American market, rather than concentrate
upon traditional European and Middle Eastern markets. 20% of the exports were to North America in
2017 with 74% of vehicles exported to Europe. As a result the Turkish plant has become Toyota’s largest
vehicle plant in Europe. With the plant now operating at around full operating rates Toyota is expecting
output to be similar in 2018 to the 280,000 vehicles produced in 2017.
Turkey’s largest car maker Oyak Renault reported record vehicle output of 365,000 vehicles in 2017,
exporting 287,000 vehicles. Oyak Renault also reported a 7% increase in vehicle sales in the domestic
Turkish market in 2017 to 130,000 vehicles, despite the 2.8% decline in domestic car demand, driven in
part by the success of its Megane passenger car.
Production of commercial vehicles increased by 3% to 553,000 vehicles in 2017, with production of heavy
trucks increasing by 26% or 4,000 trucks to 19,000 trucks in 2017, remaining well below the peak of
33,000 trucks in 2011. Commercial vehicle exports from Turkey increased by 4% to 411,000 vehicles in
2017, driven by a 40% increase in truck exports of 2,300 trucks to 7,800 trucks in 2017, while pickup truck
exports increased by 1% to 350,000 trucks in 2017. Toyota reported a more than doubling of vehicle
exports from Turkey to 246,000 vehicles in 2017. Ford Otsan reported a 15% increase in vehicle exports
from Turkey to 296,000 vehicles and Renault a 6% increase to 287,000 vehicles.
Without further investment by existing vehicle makers in Turkey, the pace of growth in vehicle output in
the country is expected to slow in the medium term. Manufacturing costs in Turkey are reported to be 10-
15% below those in Europe. The Turkish Government is seeking to encourage research and development
in the automotive industry by subsidizing 1% of any expenditure, but as yet no major capital investments
by major vehicle makers in Turkey have been made. Currently the automotive industry has an installed
production capacity of almost 2m vehicles per annum, which would suggest output from existing plants
can increase by a further 200,000 vehicles per annum to close to 2m vehicles per annum with new plant
being installed. Others suggest that political tensions and economic risks are increasing in the country
and this could be dissuading major new investments by global vehicle makers. Turkey continues to
operate under a Government state of emergency, in place since a political coup attempt in July 2016.

Ford Otsan is investing US$52m to increase production capacity for its transit light commercial vehicle in
Turkey by 12%, which would lead to an annual production capacity of 330,000 vehicles per annum. The
new production capacity is due on stream in September 2018. The company reported output of 287,000
commercial vehicles in Turkey in 2017.
In the past month Qatar has announced it is investing in a Turkish company in which it holds a stake,
which with a consortium of five companies will seek to produce Turkey’s first domestically designed car.
Production of the new car could be as early as 2019 or 2020, although few details of production plans
have been announced.
Unit passenger car tyre output in Turkey is assessed to have increased by 22% or by up to 4m tyres to
an estimated 23.6m tyres in 2017 versus 2016, as detailed in the table below.
Estimated Passenger Car Tyre Production, Imports, Exports and Apparent Demand (Turkey)
2016 vs 2017 – 000’s

Production 19,300 23,600 22
Imports 11,100 11,500 3
Exports 11,000 13,700 24
The sharp increase in passenger car tyre output is assessed to have been driven by a 20% increase in
passenger car output in Turkey in 2017, which is estimated to have led to an increase in demand for car
tyres of 950,000 tyres. Michelin reports demand for passenger car tyres in the Turkish replacement
market increased by 12% in 2017, equivalent to an increase in demand of around 1m tyres.
Passenger car tyre exports from Turkey also increased by an exceptional 2.7m tyres to 13.7m tyres in
2017. Passenger car tyre exports to Germany increased by 980,000 tyres to 2.78m tyres making it the
largest export market for Turkish car tyre producers; passenger car tyre exports to Belgium increased by
300,000 tyres and to Spain by 250,000 tyres and to the Netherlands by 260,000 tyres to 900,000 tyres in
2017.
Passenger car tyre imports to Turkey increased by 440,000 tyres to 11.5m tyres in 2017, driven by an
increase in imports from Romania of 490,000 tyres to 2.6m tyres. Passenger car tyre imports to Turkey
from Serbia also increased by 460,000 tyres in 2017, and from South Korea by 520,000 tyres to 940,000
tyres. By contrast passenger car tyre imports from China declined by an exceptional 1.1m tyres to
300,000 tyres in 2017.
Sumitomo Rubber Industries reported a 54% increase in tyre sales volumes in the European replacement
tyre market in 2017, and is forecasting a further 11% increase in 2018. In 2015 Sumitomo Rubber
Industries opened its new tyre plant in Cankiri Province in Turkey. The plant had a monthly production
capacity of 450mt/month or 5,400/mt per annum in 2015, which increased to 900mt/month in 2016 and
increased to 1,700mt/month or 20,400mt per annum in 2017. The company is projecting an increase in
tyre production capacity in Turkey to 2,250mt/month or 27,000mt per annum in 2018.
The Turkish tyre manufacturer Petlas is to increase passenger car and truck tyre production capacity, and
has invested in new production capacity in 2H 2017. The company now has an annual production
capacity for almost 9m passenger car and light truck tyres for 2018. It is also to invest in a large scale
investment in truck and bus tyre production capacity.
Petlas is a market leader in the agricultural tyre market in North Africa, the Middle East and Eastern
Europe but is seeking to increase its presence in the passenger car tyre market.
The ramping up of output by Sumitomo Rubber and Petlas in Turkey and the construction of a new tyre
plant by the BRISA tyre joint venture company with Bridgestone is expected to lead to an increase in tyre
production capacity of over 15m tyres per annum in Turkey in the years to 2022. BRISA’s new tyre plant
at Aksaray in Anatolia will have an initial annual production of 4m tyres per annum in Turkey, and is due
on stream in 2018.
Turkey’s largest tyre producer BRISA, reported its tyre sales to the OE tyre market in Turkey increased by
6% as measured in metric tonnes in the first nine months of 2017. The company reported a 13% increase
in unit passenger car tyre sales to the OE market in Turkey in the first nine months of 2017 versus 2016,

Unit Passenger Car Tyre Sales Volumes in Turkey (BRISA) 2016 vs 2017 – 9 Months only – 000’s
Passenger Car 2016 2017 % Change 2017

OE 5,100 5,450 13
Total 14,350 16,450 14
BRISA reported sales of passenger car tyres to the domestic replacement market increased by an
exceptional 33% year on year in Q3 2017 to 3.3m tyres, and cumulatively by 19% to just under 11m tyres
in the first nine months of 2017 versus 2016. Strong demand for passenger car tyres in Q3 2017 was due
to a strong ‘sell in’ of winter tyres to dealers, and increasing demand for larger diameter passenger car
tyres.
BRISA reported unit truck tyre sales increased by 10% or by 165,000 tyres year on year to 1.77m tyres in
the first nine months of 2017 versus 2016, as detailed in the table below.
Unit Truck Tyre Sales Volumes in Turkey (BRISA) 2016 vs 2017 – Nine Months only – 000’s
Truck Tyre 2016 2017 % Change 2017

OE 255 270 6
Total 1,605 1,770 10
Most of the increase in BRISA’s truck tyre sales were driven by increased demand for low end truck tyres
in Turkey in 2017. BRISA’s total tyre production increased by 6% to 121,000mt in the first nine months of
2017 versus 2016.
BRISA is continuing to construct its second tyre plant in Turkey in Aksaray Province. Construction of the
plant is on schedule and the company expects to start tyre production in 2018.
Unit truck tyre output in Turkey is estimated to have increased by 1% or by 50,000 tyres to just over 5m
tyres in 2017 versus 2016, as detailed in the table below.
Estimated Truck Tyre Production, Imports, Exports and Apparent Demand (Turkey) 2016 vs 2017 –
000’s
Truck Tyre 2016 2017 % Change 2017

Production 5,000 5,050 1
Imports 3,200 3,300 3
Exports 6,000 5,900 -1
The increase in medium and heavy truck output of 5,000 trucks should have driven an increase in
demand for truck tyres from the OE sector, while demand in the replacement market demand is reported
by Michelin to have increased by 9% in 2017.
Truck tyre exports from Turkey declined by 120,000 tyres to 5.9m tyres in 2017, led by a decline in
exports to Belgium of 180,000 tyres, and by 50,000 tyres to the UK partially offset by an increase in
exports to France of 64,000 tyres and to the Netherlands of 57,000 tyres in 2017 versus 2016.
Truck tyre imports to Turkey increased by 100,000 tyres to 3.3m tyres in 2017, with imports from the
Slovak Republic increasing by 165,000 tyres to 890,000 tyres. It seems probable that truck tyre imports
from the Slovak Republic are coming from the Continental truck tyre plant in that country and making it by
far the largest source of imported truck tyres to Turkey. Truck tyre imports from Poland also increased by
115,000 tyres, and from Serbia by 145,000 tyres to 278,000 tyres in 2017.
Market demand for carbon black in Turkey increased by 8% or by 15,000mt to 202,000mt in 2017 versus
2016, as detailed in the table overleaf.

Market Demand for Carbon Black (Turkey) 2016 vs 2017 – mt
Source 2016 2017 % Change 2017

Production 0 0 -
Imports 187,000 202,000 8
Exports 0 0 -
The increase in market demand for carbon black in Turkey is assessed to have been driven by an
increase in vehicle production of 200,000 vehicles to a record 1.749m vehicles in 2017. Unit passenger
car tyre output is assessed to have increased by up to 4m tyres in 2017, driven by an increase in demand
from the OE sector reflecting a 20% increase in passenger car output, and a reported 12% increase in
demand in the passenger car tyre replacement market. Unit truck tyre output in Turkey is assessed to
have increased modestly in 2017, with domestic demand met a decline in truck tyre exports from Turkey
and an increase in imports of 100,000 tyres in 2017.
A new tyre plant is due on stream operated by Turkey’s largest tyre producer BRISA in 2018, which
together with increased tyre passenger car tyre production capacity by Sumitomo Rubber Industries and
the Turkish tyre producer Petlas in 2018, should drive further increases in demand for carbon black for
passenger car tyre production. In 2018 BRISA will open its new tyre plant with an initial production
capacity of 4m tyres per annum, increasing the company’s total unit tyre production capacity to 14m tyres
per annum.
Vehicle output in Turkey is not expected to increase as significantly in Turkey in 2018, as in 2017, when
the ramping up of output by Toyota largely drove the increase in output driven the launch a new model
and an increase in vehicle production capacity at the company’s Turkish plant.
Carbon black imports to Turkey increased by 7% or by 14,600mt to 201,000mt in 2017 versus 2016, as
Carbon Black Imports (Turkey) 2016 vs 2017 - mt

US$/mt 2017
Russia 59,733 61,237 865
Egypt 42,525 45,742 987
Italy 27,240 31,720 1,184
Iran 6,213 12,944 868
Hungary 9,869 12,131 1,056
Ukraine 8,956 9,576 836
China 10,735 8,545 1,126
India 10,642 4,376 875
Germany 3,383 4,231 1,943
Saudi Arabia 0 1,684 738
Japan 723 1,615 1,631
Czech Republic 280 1,373 1,345
South Korea 1,187 1,227 942
Venezuela 1,855 1,076 862
Poland 156 873 987
Thailand 649 738 1,472
Spain 536 436 1,643
Netherlands 772 382 1,904
United Kingdom 153 331 395
Sweden 530 310 1,127
Belgium 242 276 568
Other 489 731
Total 187,204 201,853 1,006
Carbon black imports to Turkey increased by 14,600mt to almost 202,000mt in 2017 versus 2016, with a
surge in imports increasing by 17,000mt year on year to 96,000mt in 2H 2017. This followed a decline in
imports year on year of 3,000mt to 96,000mt in 1H 2017. The increase in imports in 2H 2017 was met by
an increase in imports from Iran of 6,700mt to almost 13,0000mt in 2017; from Italy of 4,500mt and from

Egypt of 3,200 to 45,000mt in 2017. Carbon black imports from Russia also increased by 1,500mt to
61,000mt in 2017; from Hungary by 2,200mt and from the Czech Republic by 1,100mt. Almost 1,700mt of
carbon black was also imported from Saudi Arabia in 2017, most probably from the new carbon black
plant at Jubail. The low import price of product from Saudi Arabia probably underlines low feedstock costs
for the new Saudi plant. By contrast carbon black imports from India declined by 6,200mt in 2017.
Contract prices for N220 series carbon black in the Middle East are currently reported to be in the region
US$1,170/mt-$1,250/mt, and US$1,050/mt for grade N330 on a cif basis.
Asia
South Korea
The South Korean economy slowed to an increase of 3% in Q4 2017, down from 3.8% in Q3, increasing
by 3.1% for the full year. Lower export sales and a slower rate of capital investment led to the slowdown
in growth in Q4 2017. Early indicators for Q1 2018 suggest a strong upturn in exports, with improving
domestic and export sales supporting an upturn in manufacturing output. Current forecasts suggest the
economy will increase by 2.8% in 2018.
Light vehicle sales in South Korea by the country’s five major car makers increased by 5% year on year
or by 6,000 vehicles to 112,450 vehicles in January 2018. Hyundai reported a 14% increase in sales year
on year to 51,400 vehicles and Kia an 11% increase to 39,000 vehicles, support by the launch of new
models. By contrast General Motors Korea reported an exceptional 32% decline in sales to just 7,800
vehicles in January, albeit from a high base comparison in January 2017.
Light vehicle sales for South Korea’s five car makers declined by 2.4% or by 38,000 vehicles to 1.55m
vehicles in 2017 versus 2016, reflecting a decline in consumer confidence and the effect of the end of
consumption tax cuts on passenger cars. Hyundai reported a 4% increase in vehicle sales to 688,900 in
Korea in 2017, however Kia reported a 2% decline in sales to 521,000 vehicles. General Motors Korea
reported a 26% decline in domestic car sales to 132,000 vehicles in 2017, equivalent to a decline of
48,000 vehicles. Indeed globally General Motors Korea reported a near 6% decline in vehicle sales to
416,000 vehicles in 2017 equivalent to a decline of 107,000 vehicles. Vehicle sales were impacted by
industrial action by workers at Hyundai in December 2017.
Korean car makers are to launch a number of new models to drive an increase in demand in the domestic
vehicle market in 2018, with up to 65 new or refreshed models expected to be launched this year.
Hyundai is also to launch a new electric vehicle in Korea in March 2018.
Light vehicle production in South Korea declined by 33% year on year in December 2017 or by
147,000 vehicles to 287,000 vehicles, with all vehicle makers reporting large reductions in output. The
decline in output was due in part by industrial action by workers at Hyundai Motors.
Cumulatively vehicle production in South Korea declined by 2.6% or by 110,000 vehicles to 4.11m
vehicles in 2017 versus 2016, as detailed in the table below.
Vehicle Production, Domestic Sales and Exports (South Korea) 2016 vs 2017 – 000’s

Domestic Vehicle Sales 1,600 1,560 -2.5
Vehicle Exports 2,621 2,530 -3.4
Vehicle Production 4,228 4,114 -2.6
The decline in vehicle output in South Korea was driven by a decline in domestic vehicle sales of 40,000
vehicles to 1.56m vehicles in 2017, and a 3% decline in vehicle exports from South Korea, equivalent to a
reduction of 91,000 vehicles to 2.53m vehicles. Vehicle exports have been adversely affected by a
political dispute between China and South Korea, which resulted in a reduction in vehicle exports to
China, and a lack of sport utility models, which have become an increasingly important part of the North
American vehicle market. Nevertheless sports utility vehicles accounted for more than 50% of total car
exports, while exports of eco cars more than doubled in 2017 to 176,000 vehicles, representing 7% of
vehicle exports. Exports to the EU increased by more than 30% in part due to the removal of tariffs under
the Korea EU trade agreement. By contrast exports to the US market declined by 8%.

In addition the depreciation of the Japanese Yen is expected to make Japanese produced vehicles more
price competitive in the Chinese and US markets compared to Korean produced vehicles in the coming
months. Indeed the price gap between Japanese and Korean vehicles is reported to have declined in
some instances to just 2% this year compared to a 10% difference three years ago.
A current forecast indicates vehicle sales in South Korea will increase by around 2% or by 300,000
vehicles to 1.78m vehicles in 2018, driven by a 2% increase in passenger car sales to 1.58m vehicles,
and a 0.4% increase in light commercial vehicle sales to 203,000 vehicles.
South Korea’s largest car producer Hyundai reported a 1.7% decline in output to 1.65m vehicles in 2017
in South Korea down by 28,000 vehicles, and Kia a 2% decline in output to 1.52m vehicles. Kia reported
a 2% decline in domestic vehicle sales in South Korea in 2017. A recent report suggests Hyundai Motor
Group is planning a major capital investment programme of US$22bn in the next five years in South
Korea.
Hyundai reported a 4.6% increase in vehicle sales including commercial vehicles of 689,000 vehicles in
South Korea in 2017. Vehicle sales from its Korean plants increased by 1.8% or by 29,000 vehicles to
1.69m vehicles in 2017. The company is forecasting a 1.8% increase in domestic sales to 701,000
vehicles in 2018. Globally the company is forecasting a 3.7% increase in vehicle sales to 4,675m
vehicles, an increase of 168,000 vehicles, driven by a 14% increase in sales in China equivalent to an
increase of 115,000 vehicles, and a 3% increase in sales in the Americas to 1.22m vehicles equivalent to
an increase of 37,000 vehicles. The company is also forecasting a global increase in commercial vehicle
sales of 6.6% to 64,000 vehicles in 2018.
Hyundai and its affiliate Kia are forecasting weaker demand for their vehicles in the US and China in
2018, as they have set a global vehicle sales target of 7.55m vehicles, from combined sales of around
7.3m vehicles in 2017 from a sales target of 8.25m vehicles in 2017. The lower than expected sales
target for 2018 reflects a slow recovery in demand for Korean made vehicles in China, and a lack of a
suitable range of sports utility vehicles for the North American market.
The largest decline in vehicle output in 2017 was reported by General Motors Korea, which reported a
10% decline in output, equivalent to a reduction of 60,000 vehicles to 519,000 vehicles. A lack of new
models contributed to a 27% decline in domestic vehicle sales for GM Korea to 132,000 vehicles in 2017
from 180,000 vehicles in 2016. The company is launching several new models in Korea in 2018, including
the electric Chevrolet Bolt in 2018, in an effort to stem the decline in its sales volumes. However, in the
past month GM Korea has announced it will close one of its Korean plants at Gunsan May, as part of a
global downsizing by the company. The Gunsan plant accounted for only 7% of the 520,000 vehicles
produced by GM Korea in 2017, from a capacity of 758,000 vehicles. The company operates three other
plants in Korea, which have traditionally been an important export base for General Motors. GM reports
the closure of the Gunsan plant is a ‘first step’ in a broader restructuring, as GM’s Korean plants are too
costly to operate successfully. GM Korea’s export sales volumes have also been affected by the sales of
GM’s European subsidiary in 2017 to Peugeot Citroen, as Peugeot is no longer intending to import
models from GM Korea to Europe. As a result Peugeot Citroen is projected to import almost 200,000
vehicles less per annum into Europe by 2020. GM Korea has exported the Opel Karl and the Mokka
subcompact sports utility vehicle to Europe, with European exports accounting for 20% of GM Korea’s
total production.
Renault Samsung reported an 8% increase in vehicle output to 264,000 vehicles in 2017 versus 2016,
driven by a 20% increase in export sales to 176,000 vehicles offsetting a 9% decline in domestic sales to
100,000 vehicles.
Heavy truck sales and production data is not yet available for 2017, however, Hyundai reported a 31%
increase in truck sales to 28,400 trucks in 2017 from 21,600 trucks in 2016.
Unit passenger car and truck tyre production in South Korea declined by 3% or by 2.5m tyres to
93.6m tyres in 2017 versus 2016, as detailed in the table overleaf.
Passenger car tyre output declined by 3% or by 2.2, tyres to 74.6m tyres in 2017 versus 2016, due to a
decline in domestic demand for passenger car tyres particularly from both the OE sector and replacement
markets in 2016. The decline in domestic demand for passenger car tyres in South Korea was offset only
partially by a 1% increase in car tyre export sales equivalent to an increase of 400,000 tyres to 52.8m
tyres in 2017. The ramping up of passenger car and light truck tyre output by both Hankook and Khumo
at their new plants in the US has probably dampened the volume of tyres required for export to the US
market in 2017.

Unit Tyre Production (South Korea) 2014 - 2017 – 000’s
Tyre 2014 2015 2016 2017 % Change 2016

Passenger Car 78,650 76,955 76,800 74,600 -3
Light Truck 15,460 14,556 14,900 14,800 -1
Heavy Truck 5,030 4,267 4,400 4,200 -5
Total 99,140 95,778 96,100 93,600 -3
Light truck tyre output declined by 1% or by 100,000 tyres probably due to lower domestic demand. In
addition unit truck tyre exports from South Korea declined by 6% or by 700,000 tyres to 10.2m tyres in
2017.
Unit passenger car and truck tyre exports from South Korea declined by 0.5% or by 300,000 tyres to 63m
tyres in 2017 versus 2016, as detailed in the table below.
Unit Tyre Exports (South Korea) 2015 vs 2016 vs 2017 – 000’s
Vehicle 2015 2016 2017 % Change 2017

Passenger Car 50,400 52,400 52,800 1
Truck 9,600 10,900 10,200 -6
Total 60,000 63,300 63,000 -0.5
Passenger car tyre exports from South Korea increased by 1% or by 400,000 tyres to 52.8m in 2017
versus 2016, despite a decline in exports to the largest export market the US of 2.3m tyres. Car tyre
exports to Iran also declined by by 600,000 tyres to 1.1m tyres in 2017. By contrast passenger car tyre
exports to Russia increased by 800,000 tyres to 2.9m tyres; to the UK by 690,000 tyres and to Turkey by
550,000 tyres in 2017.
Truck tyre exports from South Korea declined by 6% or by 700,000 tyres to 10.2m tyres in 2017, due to a
decline in exports to the US market of 430,000 tyres and to Mexico of 170,000 tyres in 2017.
Hankook Tire reported a 4.5% increase in global tyre sales revenues to KRW16,828bn (US$1.58bn) in
Q4 2017. However, operating profits declined by 41% year on year to KRW1,398bn (US$1.3bn). The
company reported sales of high performance tyres with a diameter of 17” or more accounted for 48% of
its passenger car tyres sales in 2017, up from 32% in 2012, and is targeting more than 50% of its
passenger car tyre sales will be for 17” or great diameter tyres in 2018.
In South Korea, Hankook Tire reported sales by 0.8% year on year in Q4 to KRW250bn (US$234m). The
company reported sales to the replacement market improved year on year but that slow market
conditions resulted in lower sales year on year. Meanwhile sales to the OE market were weak in Q4 2018
due to industrial action in the automotive industry. Annual sales revenues for Hankook Tire were
KRW984bn (US$923m) for 2017 down almost 13% from KRW1,131bn (US$1.06bn) in 2016.
Globally Hankook Tire is forecasting an 8.6% increase in sales revenues in 2018 to KRW74,000
(US$6.9bn) with a recovery in operating profits which are projected to increase by 28% to KRW10,200bn
(US$950m).
Khumo Tire reported net losses of KRW88.56bn (US$81m) for 2017. Higher raw material prices and the
strength of the Korean Won against the US Dollar led to the decline in operating profits to a loss of
KRW156.69bn (US$143m) in 2017.
Khumo Tire reported a 2% increase in tyre sales revenues in South Korea in the first nine months of 2017
versus 2016 to KRW695bn (US$653m). The company reported sales increased despite sluggish demand
in the replacement market, but that it was able to secure new business from major OE customers. In
South Korea the company reported operating profits declined sharply to KRW60bn (US$56m) in Q3 2017
from KRW131bn (US$123m) in Q3 2016. 33% of the company’s unit tyre sales volumes in Q3 2017 were
for high performance tyres compared to 31.9% in Q3 2016. The company is forecasting high performance
tyres will reach 46% of unit tyre sales volumes by 2020.
Nexen Tire reported tyre sales revenues of KRW526.9bn (US$494m) in Q3 2017 up from KRW470.2bn
(US$441m) in Q3 2016. The increase in sales was driven by increased sales in Europe and in particular
for winter tyres. In South Korea the company reported declining passenger car production and stagnant
demand in the passenger car tyre replacement market led to limited sales growth, but tyre imports also
impacted domestic demand. For the first nine months of 2017 Nexen Tire reported sales revenues were

unchanged from 2016 at KRW166.6bn (US$156m) although sales of high performance tyres increased by
2% year on year to KRW63.9bn (US$60m).
Hyundai Motor has entered into a technical partnership with Michelin to develop tyres for electric vehicles
and luxury vehicles.
Market demand for carbon black in South Korea is assessed to have declined by around 3% or
14,000mt to an estimated 404,000mt in 2017 versus 2016, as detailed in the table below.
Estimated Market Demand for Carbon Black (South Korea) 2015 vs 2016 vs 2017 – mt
Carbon Black 2015 2016 2017 % Change 2017

Production 539,000 553,000 569,000 2.8
Imports 71,000 56,000 42,000 -25
Exports 185,000 189,000 197,000 4
Apparent Demand 423,000 418,000 404,000 -3
The decline in market demand for carbon black was driven largely by a reduction in unit passenger car
tyre output, which declined by 2.2m tyres to 74.6m tyres in 2017. Weak domestic demand for passenger
car tyres from both the OE and replacement markets in South Korea was only partially offset by a small
increase in passenger car tyre exports in 2017. With both Hankook Tire and Khumo Tire starting tyre
production in new plants in the US in 2017, it seems probable that the two companies were unable to
increase passenger car tyre exports to the US. Indeed passenger car tyre exports from South Korea to its
largest export market, the US declined by 2.3m tyres to 16.3m tyres in 2017. The effective shifting of tyre
production from Korean plants to the new ones in the US probably accounted for much of the decline in
market demand for carbon black in South Korea in 2017. Unit light truck tyre output declined by 100,000
tyres in 2017, while heavy truck tyre output declined by 200,000 tyres. Vehicle production in South Korea
also declined by 114,000 vehicles in 2017.
Carbon black output in South Korea is assessed to have increased by 16,000mt to an estimated
569,000mt in 2017, supported by a decline in carbon black imports of 14,000mt and an increase in
exports of 8,000mt. The addition of a new production line in 2013 by Orion Carbons has probably been a
factor driving carbon black exports by 28,000mt in the past three years to a record 198,000mt in 2017
from 170,000mt in 2014. The increase in carbon black exports combined with a decline in carbon black
imports of 14,000mt due a decline in imports from China of 16,000mt is assessed to have supported the
increase in domestic carbon black output in South Korea in 2017. It seems probable the carbon black
industry in South Korea is operating at close to full operating rates, assisted in export markets by higher
priced carbon black from China in 2017. Indeed the imposition of high tariffs upon Chinese carbon black
in India has supported an increase in carbon black exports from South Korea to India of 7,600mt to a
record 34,000mt in 2017. Very tight supply of carbon black in India at present could drive further
increases in exports to the Indian market in 2018 from South Korea.
Orion Carbons reported it is operating its South Korean capacity at full operating rates at present. The
company is aiming to close its smaller carbon black plant at Inchon with an estimated annual production
capacity of 45,000mt by mid 2018. Orion Carbons is believed to be shifting production capacity to its
Yeosu carbon black plant in southern Korea, where it is consolidating its Korean production. If the
company added all of the production capacity from the Inchon site to its larger plant at Yeosu annual
production at the plant could increase to around 230,000mt per annum when the move has been
completed. In November 2017 Orion Carbons completed the construction of a new carbon black line at its
plant in Yeosu in November 2017. The line will produce specialty carbon black grades for automotive
coatings, engineered plastics, printing inks, and adhesives and sealants. The new specialty production
line is part of Orion carbons strategy to shift production and sales towards higher value added products.
The Yeosu plant has also completed a major upgrade to a technical rubber carbon black production line.
Specialty grade carbon black production capacity at Orion Carbon’s Yeosu plant is estimated to be in the
region 60,000mt per annum or three production lines. Orion Carbons reports that increasing profit
margins for rubber blacks globally means there is less imperative to convert more existing rubber grade
lines to specialty carbon black capacity.
OCI Co Ltd reported sales revenues from its Petrochemicals and Carbon Materials business increased by
50% to KRW1,319bn (US$1.2bn) in 2017, with earnings increasing by 94% year on year to KRW247bn
(US$225m). However, in Q4 2017 OCI reports the increase in oil prices negatively affected the
profitability of its carbon black business due to the time lag between selling price adjustments and
feedstock costs. Carbon black production capacity for OCI will increase in South Korea by 100,000mt to
370,000mt this year as the company opens its new joint venture carbon black plant with the Korean oil

refiner Hyundai Oilbank, to establish Hyundai OCI Carbon. The new plant has an initial production
capacity of 100,000mt per annum to be increased to 150,000mt in the future. Recently the company
reported it is considering increasing production capacity in both the new plant in Korea and its plant in
Shandong Province China, which currently has an annual production capacity of 80,000mt per annum,
and is reported to have reached full operating rates in Q3 2017. The addition of the new Hyundai OCI
Carbon plant in Korea will allow the company to optimise its product mix and lower manufacturing costs.
It is unclear what proportion of OCI’s carbon black production capacity is for specialty grade carbon black.
In 2016 the company reported a 40% increase in specialty carbon black sales volumes due to the
development of new grades by the company.
Carbon black exports from South Korea increased by 7,400mt to a record 198,00mt in 2017 versus 2016,
Carbon Black Exports (South Korea) 2015 vs 2016 vs 2017 – mt
Destination 2015 2016 2017 Average Export

Price US$/mt
2017
Indonesia 48,913 63,166 62,975 899
India 28,585 26,449 34,042 952
Japan 26,420 23,801 24,861 946
Vietnam 14,565 13,448 16,512 1,013
China 20,425 17,270 13,880 1,873
Thailand 10,709 12,695 12,421 966
Taiwan 8,440 6,482 6,957 1,274
US 527 2,214 4,351 1,174
Malaysia 4,002 3,556 4,290 1,666
Philippines 10,858 9,489 4,156 857
UAE 1,128 1,096 2,555 903
Singapore 2,524 2,831 2,205 1,169
Italy 1,781 1,334 1,633 953
Germany 664 1,567 1,270 2,438
Turkey 2,088 1,119 1,203 858
Pakistan 1,055 1,019 1,058 1,410
Bangladesh 35 79 742 927
Saudi Arabia 770 287 478 1,424
Brazil 126 317 472 1,293
Kenya 203 242 282 1,064
Hungary 93 143 255 -
Sri Lanka 1,485 818 237 -
Other 1,475 1,612 1,637
Total 186,871 191,034 198,472 1,058
Carbon black exports to India increased by 7,600mt to 34,000mt in 2017 and to Vietnam by 3,000mt to
16,500mt in 2017. Carbon black exports from South Korea to the US increased by 2,100mt and to the
UAE by 1,450mt to 2,500mt. By contrast carbon black exports to the Philippines declined by 5,300mt to
4,100mt in 2017 and to China by 3,400mt to 13,800mt.
Specialty carbon black exports from South Korea are estimated to have been in the region 35,000mt in
2017, based upon the destination and high average unit value of carbon black exports from South Korea
in 2017, with China probably being the largest market with exports of 13,800mt in 2017.
Carbon black imports to South Korea declined by 14,200mt to 41,000mt in 2017 versus 2016, as detailed
in the table overleaf.
The decline in carbon black imports was due to a decline in imports from China of 15,900mt to 10,000mt
in 2017. Carbon black imports from China have declined by 33,000mt in the past two years, due in part to
increasing coal tar feedstock costs in China.
Reports from the tyre industry indicate the average price paid for carbon black in South Korea was
US$684/mt in 2016, down from US$893/mt in 2015 and US$1,242/mt in 2014, and probably increased to
average in the range US$850-US$900/mt in 2017 driven by higher feedstock costs.

Carbon Black Imports (South Korea) 2015 vs 2016 vs 2017 – mt
Source 2015 2016 2017 Average Import

Price US$/mt
2017
India 13,409 14,352 14,926 779
China 43,238 26,179 10,263 1,357
Canada 3,204 3,081 3,670 1,596
US 2,808 3,635 3,459 3,757
Thailand 2,924 2,609 2,936 832
Japan 1,510 2,188 2,333 6,377
Germany 949 1,050 1,325 7,134
Singapore 1,709 1,094 982 4,832
Netherlands 404 605 839 3,598
Belgium 320 305 397 4,467
Russia 327 209 246 1,189
Czech Rep 160 163 123 4,374
UK 43 52 73 1,191
Mexico 0 82 40 770
Italy 145 274 31 2,059
Other 94 36
Total 71,255 55,972 41,679 1,965
Export prices of carbon black in South Korea are reported to be priced in the range US$1,100-
US$1,200mt for 300 series grades excluding delivery.
Sri Lanka
Sri Lanka’s largest tyre producer Ceat Sri Lanka has recently announced an investment of Rs3bn
(US$46m) to construct a new tyre plant in Kelaniya to manufacture radial truck and bus tyres. In addition
the existing radial passenger car and light truck tyre plant will be expanded with production capacity being
increased from 500,000 tyres per annum to 850,000 tyres per annum. Motorcycle tyre production capacity
will also be doubled from existing capacity of 375,000 tyres per annum. These new investments form part
of Ceat Sri Lanka’s to rapidly increase sales revenues in Sri Lanka over the next three years from
Rs10.5bn (US$161m) in the fiscal year 2016/17. As part of the new investment the company will upgrade
its compound mixing technology, and is aiming to produce premium radial tyres for sports utility vehicles
and passenger cars at the new plant.
Ceat reports it has a 50% share of the truck and light truck tyre market in Sri Lanka; a 54% share of the
three wheeler market and a 23% share of the motorcycle tyre market in Sri Lanka. Ceat Sri Lanka also
reports it accounts for around one third of Sri Lanka’s tyre exports.
Unit passenger car tyre exports from Sri Lanka declined by 40% or by 67,000 tyres to 103,000 tyres in
2017, almost entirely due to a decline in exports to India. By contrast unit truck tyre exports from Sri
Lanka increased by 56% or by 56,000 tyres to 156,000 tyres in 2018 versus 2017, driven by an increase
in exports to India.
Tyre output volumes in Sri Lanka are expected to increase in 2018. The construction of a new solid tyre
plant by the Onyx Group is due on stream in Horana in Sri Lanka in mid 2018 at a cost of US$77m. The
new plant will utilise the tyre manufacturing equipment of Marangoni from its tyre plant in Italy, which was
closed in 2014. The aim is to become the largest tyre producer in Sri Lanka producing passenger car
tyres, but also solid tyres as Onyx Group will acquire a 49% stake in Marangoni Industrial Tyres Lanka.
Marangoni will continue to manufacture a large range of solid tyres under an off take agreement for the
Onyx Group at its plant in Italy. Passenger car tyre production is due to start in Q3 2018. The plant will
also produce radial medium truck tyres and is expected to employ 3,000 people when fully operational,
and is to trade under the name Rigid Tyres. It will also produce high density conveyor belts for the mining
industry, and high pressure hydraulic pipes.
In January 2018 Global Rubber Industries (GRI) brought a new radial agricultural and construction tyre
plant on stream at Badalgama in Sri Lanka, with a daily production capacity of 25/mt. The company
claims the new plant will be the largest in Sri Lanka dedicated to making specialty tyres, and the first to
produce agricultural tyres. The new plant is located next to GRI’s existing solid tyre plant in Sri Lanka.

A strategic review of the rubber industry in Sri Lanka in the past two years has resulted in the objective of
increasing natural rubber production in Sri Lanka in the medium term. While natural rubber quality is high,
supply is insufficient to meet domestic demand in periods of strong demand. A second objective is for the
tyre industry in Sri Lanka to diversify into the production of off road tyres, rather than concentrate only
upon the production of solid tyres, where it is assessed to control around 25% of the global market.
Domestic rubber consumption in Sri Lanka is reported to have been 130,000mt in 2017, with rubber
production increasing by 7% last year to 85,000mt. The Sri Lankan rubber industry is aiming to increase
its sales revenues to US$4.4bn by 2025, from US$1bn in 2017, under a national rubber plant. The
industry is aiming to invest over US$1.5bn to increase natural rubber production in Sri Lanka in the year
to 2025 in order to develop the country’s position as a global leader in solid tyre production.
In January 2017 The US Department of Commerce determined an import duty of 2.18% for the off road
tyre producer Camso Loadstar and all other tyre producers in Sri Lanka, following an anti dumping
investigation.
Market demand for carbon black in Sri Lanka declined by 12,800mt to 60,800mt in 2017 versus 2016, as
Carbon Black Imports (Sri Lanka) 2015 vs 2016 vs 2017 mt
Source 2015 2016 2017 Average Import

Price 2017
US$/mt
India 46,520 34,825 34,953 951
China 18,878 14,266 11,963 951
Thailand 11,808 13,491 9,963 888
Hong Kong 23 3,095 0 -
Canada 504 2,198 356 2,175
South Korea 4,213 1,711 740 974
Singapore 2,157 1,545 936 762
Other 134 2,511 11 -
Total 84,214 73,642 60,790 -
The reasons for the decline in market demand for carbon black in Sri Lanka are unclear, given that it is
probable the upturn in global economic growth in 2017 drove an increase in demand for solid tyres, and
for tyres for industrial vehicles. New investments by Ceat Sri Lanka and the opening of the a second tyre
plant by Global Rubber industries at the start of 2018 should drive an increase in market demand for
carbon black in 2018.
The decline in carbon black imports to Sri Lanka was driven by a decline in imports from Thailand of
3,500; from China of 2,300mt and from Canada of 1,800mt in 2017 versus 2016. Higher coal tar prices in
China probably drove the decline in carbon black imports from China in Sri Lanka in 2017, and the ending
of imports from Hong Kong.
In India current reports suggest carbon black supply is very tight with the industry unable to meet demand
in full particularly for small to medium sized customers. The Indian Tyre Association is calling upon the
Government to relax high import tariffs upon carbon black from China and Russia in an effort to increase
domestic supply. Buyers report that tight supply has led market carbon black prices in India to increase to
US$1,450/mt compared to an international average of around US$1,200mt.
A Swedish tyre pyrolysis company, Enviro has received an order for its recycled carbon black from a
glonal tyre manufacturer in Sri Lanka for use in industrial tyre manufacture. Enviro has the capacity to
recycle 6,500mt of used tyres per annum.
Carbon black tread grade N220 is reported to be priced in the range US$1,150/mt on a delivered basis in
South East Asia in March 2017; grade N330 priced in the range US$970-US$1,000/mt on a similar basis.

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Chemical Market Intelligence

Currency $ Equivalent: € 0.810 £0.721 ¥106.30

Chemical Market Intelligence

© Chemical Market Intelligence 1

US Exports of Carbon Black Feedstock Oil

Destination January 2018

US Exports of Carbon Black Feedstock Oil

Country 2012 2013 2014 2015 2016 2017 %

© Chemical Market Intelligence 2

Vehicle 2017 2018 % Change 2018

© Chemical Market Intelligence 3

Unit Tyre Production (US) 2015 vs 2016 vs 2017 – 000’s

Tyre 2015 2016 2017

Passenger Car Tyre 2016 2017 % Change 2017

© Chemical Market Intelligence 4

Bridgestone Tyre Production (Americas) 2010-2018* – 000 mt

2010 2011 2012 2013 2014 2015 2016 2017 2018*

© Chemical Market Intelligence 5

© Chemical Market Intelligence 6

© Chemical Market Intelligence 7

© Chemical Market Intelligence 8

Vehicle Production (Argentina) 2015 vs 2016 vs 2017 – 000’s

Vehicle 2015 2016 2017 % Change 2017

© Chemical Market Intelligence 9

Estimated Unit Tyre Production (Argentina) 2015 vs 2016 vs 2017 – 000’s

Vehicle 2015 2016 2017 % Change 2017

Estimated Unit Passenger Car Tyre Production & Demand (Argentina)

Vehicle 2015 2016 2017 % Change 2017

© Chemical Market Intelligence 10

Vehicle 2015 2016 2017 % Change 2017

Market Demand for Carbon Black (Argentina) 2016 vs 2017 – mt

Carbon Black 2016 2017 % Change 2017

© Chemical Market Intelligence 11

Carbon Black Exports (Argentina) 2016 vs 2017 – mt

Destination 2016 2017 Average Import Price

Carbon Black Imports (Argentina) 2016 vs 2017 – mt

Source 2016 2017 Average Import Price

© Chemical Market Intelligence 12

Estimated Specialty Carbon Black Imports (Argentina) 2016 vs 2017 – mt

Source 2016 2017 Average Import Price

Estimated Vehicle Production (Netherlands) 2016 vs 2017

Vehicle 2016 2017 % Change 2017

© Chemical Market Intelligence 13

Tyre 2013 2014 2015 2016 2017* % Change

© Chemical Market Intelligence 14

Estimated Market Demand for Carbon Black (Netherlands)

Carbon Black 2016 2017 % Change 2017

© Chemical Market Intelligence 15

Carbon Black Imports (Netherlands) 2016 vs 2017 – Eleven Months only - mt

Source 2016 2017 Average Import Price

Carbon Black Exports (Netherlands) 2016 vs 2017 – Eleven Months only - mt

Destination 2016 2017 Average Export Price

© Chemical Market Intelligence 16

Vehicle Production (Poland) 2016 vs 2017

Vehicle 2016 2017 % Change 2017

© Chemical Market Intelligence 17

Estimated Passenger Car Tyre Market (Poland) 2016 vs 2017 – 000’s