Issue No 228 March 2018

Chemical Market Intelligence
CARBON BLACK
Issue 228 31st March 2018
Price Summary
North America
N234 Contract $1,043 - $1,043/mt 47.40 - 48.40cts/lb ex-works
N326 Contract $836 - $854/mt 38.00 - 38.80cts/lb ex-works
Central America
N339 Contract $900 - $950 mt delivered
N326 Contract $850 - $875 mt delivered
Western Europe
Domestic
N220 Contract $1,216 - $1,246 € 990 - € 1,015 mt delivered
N339 Contract $1,173 - $1,210 € 955 - € 985 mt delivered
Central Europe
Russian Exports
Asia
China Exports
N220 Market $1,200 mt fob China
N330 Market $1,100 mt fob China
Malaysia Imports
N220 Thailand $1,400 mt cif Thailand
N330 Thailand $1,300 mt cif Thailand
Currency $ Equivalent: € 0.813 £0.712 ¥106.52

Currency € Equivalent: $1.228 £0.875 ¥130.93
Chemical Market Intelligence

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Tel: +44 (0) 78 6659 6141
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Carbon Black Issue 228 – March 2018
Feedstock
Crude oil prices have been volatile in recent weeks which is often the case during the seasonal downturn
in demand for crude, but also reflecting concerns about a trade war between the US and China. An
escalating trade dispute between the world’s two largest economies would clearly undermine bullish
sentiment in the oil market.
Global oil demand is currently reported to be strong in most parts of the world, with supply expected to
tighten as refiners come out of seasonal maintenance. Demand for crude has been revised upwards for
2018 in the past month due to stronger than expected demand for oil in OECD developed economies.
Demand for crude in China is reported to have increased by 8% year on year to average 12.5mbpd in the
first two months of 2018.
Global oil supply increased year on year by 700,000bpd in February to 97.9mbpd, driven by increasing
non OPEC output. The increase in non OPEC output is due to higher US oil output from US shale oil
fields, which is projected to drive an increase by 1.3mbpd this year. Total non OPEC output is expected to
increase by 1.8mbpd in 2018, from an increase of 760,000bpd in 2017. The large increase in non OPEC
output in 2018 is clearly slowing the rate at which global inventories of crude are being depleted.
Crude oil output by the OPEC cartel declined by 90,000bpd from February to 32.19mbpd in March. The
decline in output was due to a further decline in output in Venezuela, outages in Libya, and declining oil
exports from Angola. As a result compliance to OPEC’s production cuts of 1.2mbpd increased to 159% in
March, with no indications that individual countries increased output to profit from higher crude oil prices.
Saudi Arabia is reported to cutting the price of its crude for May by 50-60cents for all grades to the lowest
price for six months, despite the cuts undermining the OPEC cartels objective of reducing global
inventories of crude. The Saudi Crown Prince has suggested that OPEC and Russia are considering an
agreement to greatly extend their production agreement into the longer term in order to address the issue
of oversupply in the crude oil market in the context of increasing US shale oil output. The cartel and its
allies have successfully reduced the glut of oil inventories from 340m barrels above their five year
average to under 50m barrels in a year. This has been underscored by Saudi Arabia which has
committed the most to the production cuts accepting a production quota reduction of 500,000bpd. Saudi
Arabia is determined to see oil prices stabilise above $60pb in order to achieve a successful public
offering for the Saudi national oil company Aramco.
The Iraqi Government has approved a plan to increase crude oil production capacity to 6.5mbpd by 2022,
from current capacity of around 5mbpd. Currently oil production output in Iraq is around 4.4mbpd in line
with the OPEC production agreement. Iraq is to award oil and gas development contracts in 11 new
th
blocks on April 15 2018. Clearly a significant ramping up of output by 1-2mbpd by Iraq in the next three
years will pose a particular challenge to the OPEC cartel which is seeking to limit increases in output.
US crude oil output increased by 6,000bpd to 9.96mbpd in January. The total number of oil rigs reached
993 in March, an increase of 169 rigs year on year. Recent research indicates capital spending plans of
around 60 oil exploration and production companies suggests intentions to increase capital investment by
11% in 2018 to an estimated US$80bn. Oil companies have been steadily increasing spending since mid
2016 as crude oil prices began their recovery. As a result the number of US oil rigs is projected to
increase from an average 1,015 rigs in 2018 to 1,128 rigs in 2019. Other forecasts suggest US oil output
will increase to a record 10.7mbpd in 2018, and to 11.3mbpd in 2019, up from 9.3mbpd in 2017.
Crude oil inventories at Cushing Oklahoma, which are considered an indicator of US crude inventories,
are close to minimum levels. US refiners are importing less crude from OPEC countries, bringing crude oil
imports to their lowest volume since 2010. OECD stocks of crude are approaching their five year average
levels.
Russian oil output increased marginally to 10.97mbpd in March from 10.95mbpd in February, the highest
volume of monthly output since April 2017. Under the production agreement with OPEC, Russia agreed
to reduce its crude output by 300,000bpd from a baseline of 11.247mbpd, which it produced in October
2016. The Russian Energy Ministry reported the production cut in March was around 280,000 below the
October 2016 level of output representing a compliance of 93.4%.
© Chemical Market Intelligence 1

Crude prices have failed to breach recent highs of US$71.28pb. Geopolitical factors including an
escalating trade dispute between the US and China and a possible initiative by the US Government to
renegotiate the nuclear agreement with Iran could drive crude prices higher in the coming weeks. The
short term outlook for oil prices is for prices to trade in a range US$70pb to US$75pb during the summer,
as OPEC maintains compliance to its production quotas.
The table below details carbon black feedstock export oil exports from the US for the months of January
and February 2018.
US Exports of Carbon Black Feedstock Oil

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

Barrels Mt US$/Barrel US$/mt
India 648,740 117,953 59.61 327.86
Thailand 391,846 71,245 66.21 364.16
Egypt 360,945 65,626 61.89 340.40
Singapore 307,667 55,939 52.54 288.97
Indonesia 253,000 46,000 67.00 368.50
Italy 134,208 24,401 60.00 330.00
South Korea 107,000 19,455 34.50 189.75
Canada 41,951 7,627 44.00 242.00
Total 2,245,357 408,247 59.53 327.42
Shipments for the month of February 2018 are detailed in the table below.
US Exports of Carbon Black Feedstock Oil

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

Barrels Mt US$/Barrel US$/mt
India 227,963 41,448 60.00 330.00
Egypt 177,902 32,346 60.00 330.00
Italy 134,208 24,401 60.00 330.00
South Korea 107,000 19,455 34.50 189.75
Thailand 103,846 18,881 64.00 352.00
Singapore 90,000 16,364 34.50 189.75
Canada 22,659 4,120 44.00 242.00
Total 863,578 157,014 54.20 298.10

North America
Current forecasts suggest the US economy will increase by around 2.6% in 2018, with strong job growth
underpinning buoyant consumer and business confidence. Job creation in the manufacturing sector
reached its highest level for four years in March. The prospects of a trade war look currently to have only
a very small impact upon the US economy with both the US and China, based upon current tariffs, but
could represent opening positions in negotiations between the two countries, while raising uncertainty in
the economy.
Light vehicle sales in the US increased year on year by 6% to 1.64m vehicles in March from 1.54m
vehicles in March 2017. The increase in sales volumes was supported by an additional selling day in
March 2018, increasing financial incentives by vehicle makers, and an increase in fleet sales volumes. On
a seasonally adjusted basis light vehicle sales reached 17.4m vehicles in March. As a result light vehicle
sales in the US increased 2% year on year in Q1 2018 or by 100,000 vehicles to 4.1m vehicles, driven by
strong demand for crossovers and light trucks. Sales of crossovers are assessed to have increased by
18% year on year in March, and by 15% in Q1 2018. Light truck sales also increased by 11% year on
year in Q1 2018. Sales of light trucks, crossovers and sports utility vehicles increased by almost 10% year
on year to 2.73m vehicles in Q1 2018 versus Q1 2017. By contrast sales of passenger cars declined year
on year by almost 11% in Q1 2018 to 1.37m vehicles.
Light vehicle sales to both retail and fleet buyers increased in March, with average financial incentives on
new vehicles increasing year on year by 5% in March. Rising employment in the US, and increasing
consumer confidence underlined by strong economic growth are underpinning consumer vehicle demand.
A recent forecast suggests light vehicle sales in the US will be around 16.7m vehicles in 2018, and will
stay in the range 16.5m to 16.7m in the years to 2020. Light vehicle sales reached 17.2m vehicles in
2017.
Light vehicle production across North America was unchanged from February 2017 volumes in
February 2018, with a 15% decline in passenger car output offset by an 8% increase in light truck output.
In the US vehicle makers cut output by 1% year on year in February, with cumulative output 2% below the
first two months of 2017 at 1.83m vehicles. In Canada light vehicle output declined by 5.6% year on year
in February to 176,000 vehicles driven by a 3% decline in passenger car output and a 6% decline in light
truck output year on year. Cumulatively light vehicle output in Canada declined by 9% year on year in the
first two months of 2018 to 344,000 vehicles. The table below details light vehicle production across North
America for the first two months of 2018 versus 2017.
Light Vehicle Production (North America) 2016 vs 2017 vs 2018 – Two Months only – 000’s
Vehicle 2016 2017 2018 % Change 2018

Passenger Car 1,113 999 846 -15
Light Truck 1,770 1,844 1,972 6
Total 2,883 2,843 2,818 -0.8
Lower vehicle output in the US and Canada in the first two months of 2018 was offset by a 7% increase in
light vehicle output in Mexico, equivalent to an increase of 42,500 vehicles to 633,000 vehicles in the first
two months of 2018.
Light vehicle output by General Motors is reported to have declined by over 40,000 vehicles year on year
in the first two months of 2018 to around 520,000 vehicles. Toyota is also assessed to have cut vehicle
output by around 20,000 vehicles in the first two months of 2018 to around 320,000 vehicles, and Nissan
by 20-30,000 vehicles to around 270,000 vehicles. By contrast Fiat Chrysler is assessed to have
increased its output by around 40,000 vehicles to just over 400,000 vehicles in the first two months of
2018, and Ford by around 10,000 vehicles to just over 500,000 vehicles in the two month period.
Nissan is reported to be slowing production at several assembly plants in response to weaker than
expected demand. The company reported a 2% increase in light vehicle sales in first two months of 2018
supported by generous financial incentives. Nissan held 60 days inventory of finished vehicles at the start
of March, and is seeking to reduce the level of inventory to 50 days supply until model changeovers start
in August.

Honda is reducing output of its Accord model at its Marysville plant, Ohio due to inflated inventories of the
model which reached 104 days supply at the start of March. Sales of the Accord model declined by 13%
in 2018, reflecting a 15% decline in mid sized passenger car sales this year.
General Motors reported a 15% increase in vehicle sales in March to 296,000 vehicles in February, driven
by a 26% increase in sales of light trucks to 232,000 trucks, offset by an 11% decline in passenger car
sales to 63,000 vehicles. Sales to retail customers increased by 14% year on year. Cumulatively GM
reported a 3.8% increase in vehicle sales in Q1 2018 to 715,000 vehicles from 689,000 vehicles in Q1
2017, driven by an 11% increase in light truck sales to 568,000 vehicles, partially offset by an 18%
decline in passenger car sales to 146,000 vehicles.
Ford reported a 3% increase in vehicle sales to 243,000 vehicles in March, driven by a 7% increase in
light truck sales to 190,000 vehicles, offset in part by an 8% decline in passenger car sales to 52,000
vehicles. Cumulatively the company reported a 2% decline in sales to 596,000 vehicles in Q1 2018, with
light truck sales increasing 0.8% year on year to 468,000 vehicles, offset by a 13% decline in passenger
car sales to 128,000 vehicles.
Fiat Chrysler reported a 14% increase in vehicle sales year on year to 216,000 vehicles in March from
190,000 vehicles in March 2017. The company’s retail sales increased by 11% year on year to 162,000
vehicles, with fleet sales accounting for 25% of total sales volumes. The increase in vehicle sales was
driven by a 45% increase in sales of Jeep branded vehicles to 98,000 vehicles, representing the brand’s
best ever monthly sales volume. By contrast sales of Ram trucks declined by 13% to 44,800 trucks. Sales
of Chrysler branded vehicles increased by 15% to 19,500 vehicles driven by a 40% increase in sales of
the Pacifica minivan.
The German tyre and automotive component manufacturer Continental AG is forecasting vehicle output
across North America will decline by 5.9% or by around 1m vehicles to 16.55m vehicles in 2018 versus
2017, as detailed in the table below.
Vehicle Production (North America) 2016 vs 2017 vs 2018* - 000’s
Vehicle 2016 2017 2018* % Change

2018
Passenger Car & Light Commercial Vehicles 17,800 17,100 16,000 -6
Medium & Heavy Commercial Vehicles 475 513 559 8.9
Total 18,275 17,613 16,559 -5.9
* Forecast
The passenger car and light truck tyre market in North America has started the new year weakly.
Demand for tyres from the OE sector is reported to have declined by 3% year on year in February and
declined by 2% in the first two months of 2018. In the replacement market demand is reported to have
declined by 3% in February and by 3% in the first two months of 2018. Reports suggest demand for
premium passenger car and light truck tyres with a diameter of 18” or above in the replacement market
has increased by 7-8% in the first two months of 2018, but this has been offset by a reduction in demand
for tyres with a diameter of less than 17” of 4% year on year.
Demand for truck tyres in the OE sector across North America remained exceptionally strong in February
increasing by 22% year on year and by 22% in the first two months of 2018 versus 2017. However,
replacement truck tyre demand remains weak declining by 5% year on year in February and by 7% in the
first two months of 2018.
Continental AG is forecasting a pickup in replacement tyre demand across North America in 2018 versus
Passenger Car and Commercial Vehicle Replacement Tyre Demand (North America)
2016 vs 2017 vs 2018* – millions
Tyre 2016 2017 2018* %

Change
2018
Passenger Car & Light Commerical Vehicle Tyres 285 285 290 1.7
Medium & Heavy Commercial Vehicle 23.6 24.5 25.3 3
Total 308.6 309.5 315.3 1.8

Continental AG is forecasting replacement tyre demand for passenger cars will increase by around 5m
tyres to 290m tyres in 2018, and medium and heavy truck replacement demand will increase by 3% or by
800,000 tyres to 25.3m tyres. However, reports for the first two months of 2018 suggest declines in
replacement consumer and commercial vehicle tyre demand.
The US Department of Commerce has lowered antidumping duties on some manufacturers producing
passenger car and light truck tyres in China. Giti Tire has had its antidumping rate lowered from 30.74%
to 1.5%. Giti Tire also had its countervailing duty reduced to 20.6% from 36.7%, resulting in its overall
duty rate declining to 22% from 60.8%. Qingdao Sentury has had its dumping duty reduced to 4.4% from
25.30%. It remains to be seen whether the reductions in duties will be sufficient to lead to an increase in
passenger car and light truck tyre exports to the US from China this year.
Tyre manufacturers are urging the US President not to impose a 25% tariff on imported steel, as it argues
the domestic industry does not have the capacity to produce sufficient steel cord for the US tyre industry.
Continental Tire reported in produced 11m passenger car and light truck tyres at its Mount Vernon plant
in 2017 unchanged from 2016 output volumes. However the company increased output at its Sumter
plant to 3m tyres in 2017 up from an output of 2m tyres in 2016. The company also produced 6m
passenger car and light truck tyres at its plant at San Luis Potosi in Mexico in 2017, down by 1m units
from the 7m tyres it produced at the plant in 2016.
Continental AG produced 3.1m truck tyres at its Mount Vernon plant in 2017, up by 100,000 tyres from
the 3m truck tyres produced at the plant in 2016.
Continental AG is to increase passenger car and light truck tyre production capacity at its Mount Vernon
plant by 2m tyres per annum and truck tyre capacity by 400,000 tyres per annum by 2020/21. The
company will also increase production capacity for passenger car tyres at its plant at Sumter by 7m tyres
per annum by 2020/21 as part of its global plan to increase production capacity by around 37m tyres per
annum by 2020/21.
Sumitomo Rubber is to start producing Sumitomo branded medium truck tyres at its plant at Tonawanda,
NY.
Michelin estimates there was a 5% increase in mining activity globally in 2017, with several commodities,
and in particular coal, supported by higher commodity prices. While commodity prices are not expected to
reach their peak in 2018, prices are expected to be supportive of further increases in mining activity. This
should drive increases in demand for mining tyres in 2018. However, in the US, coal output is forecast to
decline by 2% by the Energy Information Agency following a 6% increase in output in 2017. Production of
coal in the Western US and Appalachia regions is forecast to decrease due to lower export sales, but
these could be offset by increases in output in other regions. A projected 10% increase in crude output in
the US in 2018 should also drive increased demand for off road tyres from the oil industry. Michelin is
forecasting strong demand across its range of mining tyres and for its giant 63” diameter tyres, which are
used in mining reflecting a desire to optimise mining production. By contrast small scale mining is
believed to becoming increasingly uncompetitive, which should result in less demand for smaller sized
mining tyres. Michelin has yet to restart production at its off road tyre plant at Starr, SC, which has been
idled for a third year.
Pirelli has a target of doubling the share of renewable materials in its tyres and reducing fossil based
materials by 30% from 2017 to 2025, as part of its corporate sustainability plan. The company reports the
average rolling resistance of its tyres has been reduced by 15% since 2009, and it is seeking to reach a
20% reduction in rolling resistance by 2020 versus 2009.
Pirelli is forecasting the volume of prestige and premium light vehicles in the NAFTA region will increase
from 38m vehicles in 2016 to 43m vehicles in 2020. This will drive an increase in replacement demand for
18” diameter tyres and above to an estimated 131m tyres per annum by 2020 from 95m tyres in 2016,
presenting an annual average growth rate of 8%. Pirelli reports that NAFTA represents the largest global
market for 18” and above passenger car tyres accounting for 55% of the global market for these sizes of
tyre.
Market demand for carbon black is reported to have been strong in March, with projections for April also
expected to be very strong. Increasing tyre output from new tyre plants in the US is contributing to the
upturn in market demand for carbon black. Despite relative weakness in demand in North American tyre
markets, tyre producers with new tyre plants in the US are believed to be ramping up tyre output,
supported by strong demand for high performance tyres with a diameter of 17” or more, demand for which

continues to increase at a rate of 7-8% this year. It seems probable that Korean tyre producers and Giti
Tire will be reducing the volume of tyre imports to accommodate increased tyre production in the US.
Reports suggest the Korean tyre producers are also reducing the volume of carbon black being imported
from South Korea this year.
Supply of tread grade carbon black is reported to be very tight with some producers operating plants at
full operating rates, with supply of carcass grades also reported to be getting tight. This situation is being
caused in part by a number of carbon black plant outages, which combined with an upturn in demand for
product is causing tight supply conditions. Carbon black buyers are reported to be concerned about the
availability of product as several factors are inhibiting supply. As the carbon black industry ramps up
output there are suggestions that this is causing technical problems for plants, which have not been run
full for sometime or a number of years. As a result the industry is encountering a number of unplanned
outages. A second issue of concern is carbon black inventories which are reported to have started the
year relatively low. As a result there has not been an opportunity to build inventories. This is causing
problems for buyers seeking volume to cover planned outages in Q2 2018. Thirdly logistical problems are
causing delays with carbon black deliveries as the availability of hopper trucks is also tightening. Delays
to hopper trucks are becoming a serious issue for the industry as shipments are being delayed to due to
late hopper truck arrivals and delays in shipping. Freight rates for standard deliveries of sacks or big bags
are also increasing as economic activity in the manufacturing sector in the US picks up. Lastly, the
decline in carbon black imports to North America has contributed to the tightening supply situation for
carbon black this year.
Unplanned outages in the US carbon black industry combined with increasing demand is creating
concern amongst buyers as to continuity and security of carbon black supply. The shifting dynamics in the
market from an over supplied market towards a tightening supply situation in part reflects years of low
carbon black pricing in North America. Carbon black prices have been below a level that could justify
reinvestment in plant and equipment for many years. Indeed the large amount of capital being invested in
the tyre industry in North America has not been matched by reinvestment in plant and equipment by the
carbon black industry as it has not been economically justifiable. Some buyers are reported to believe
that the large capital investments required by the Environmental Protection Agency in the US will
contribute towards improving existing plant capabilities or efficiencies. Clearly this is not the case. As
carbon black producers reflect upon upcoming supply negotiations with customers for 2019 contracts,
unplanned plant outages this year underline the necessity for a more sustainable carbon black industry if
it is to meet the substantial increases in market demand for carbon black from the tyre industry in the next
four to five years. This issue is clearly becoming more pressing as the industry struggles to meet
increasing demand for product and plants are being operated at very high levels of utilisation. Changing
market fundamentals in the North American carbon black market will require a change in mindset on
behalf of major buyers, who need to appreciate the pressing need for more capital reinvestment in the
carbon black industry, as well as well publicised investments in reducing environmental emissions under
agreements with the EPA. These two issues equate to the necessity for substantial price increases in the
carbon black industry in North America. Price increases to meet the costs of the EPA agreements are
assessed to be at least in the region 6cts/lb to 7cts/lb. Adding the necessity for plant capital reinvestment,
then carbon black pricing in North America could require a price hike of 9cts/lb to 10cts/lb for 2019. The
industry has been able to implement such increases in the past when supply/demand fundamentals are
supportive. It remains to be seen whether current market conditions will be sustained through 2018 to
support initiatives that properly address the exceptional cost issues the North American carbon black
industry is currently facing.

Canada
The Canadian economy increased by 3% in 2017, the fastest rate of increase in 2011, and significantly
faster than the 1.6% increase in 2016. However, the rate of economic growth slowed in 2H 2017,
increasing at an annualised rate of 1.7% in Q4 2017. Increased consumer spending was the largest
contributor to economic growth in 2017, followed by increased business investment. Exports from Canada
also increased for the second consecutive year in both goods and services. Economic uncertainty with
regards Canada’s trading relationship with the US could dampen an already slowing economy in 2018.
Passenger car and light truck sales in Canada declined by 0.6% year on year to 186,400 vehicles in
March, driven by a 12% decline in sales of passenger cars to 53,900 vehicles, offset by a 5% increase in
light truck sales volumes. On an annualised basis light vehicle sales were 2.08m vehicles, similar to the
previous two months. Cumulatively light vehicle sales increased by 1.8% to 429,000 vehicles in Q1 2018
versus Q1 2017, with passenger car sales declining by 8% to 121,000 vehicles, and light truck sales
increasing by 6% to 308,000 vehicles.
Light vehicle sales in Canada increased by 4% in 2017 versus 2016 reaching a record 2.03m vehicles,
the fifth consecutive year in which sales volumes have reached a new record. The increase in sales was
driven by an increase in sales of light trucks and sports utility vehicles equivalent to an increase of
112,000 vehicles to 1.39m vehicles partially offset by a 3% decline in passenger car sales to 639,000
vehicles. Demand for new vehicles has been particularly strong in Canada’s Western Provinces, which
had driven the increase in light vehicle demand. General Motors reported the largest increase in volume
of vehicle sales in Canada in 2017 increasing year on year by 13% to 302,000 vehicles. Ford remained
the largest vehicle seller in Canada reporting a 1% increase in sales to 308,000 vehicles in 2017, with
sales of its F Series truck reaching 155,300 vehicles.
Current forecasts suggest light vehicle sales in Canada will decline marginally by around 38,000 vehicles
to 2m vehicles in 2018, from a record 2.03m vehicles in 2017. Light truck sales are projected to increase
by 7,000 vehicles to 1.39m vehicles in 2018, offsetting a decline in passenger car sales of around 30,000
vehicles to around 600,000 vehicles.
Vehicle production in Canada declined by 8% or by 30,000 vehicles to 347,000 vehicles in the first two
months of 2018 versus 2017, driven by declines in both passenger car and light truck output.
Vehicle Production (Canada) 2017 versus 2018 – Two Months only - 000’s
Vehicle 2017 2018 % Change 2018

Passenger Car 123 116 -7
Light Truck 252 231 -8
Medium/Heavy Truck 2 N/a
Total 377 347 -8
Vehicle production in Canada declined by 7% or by 176,000 vehicles to 2.17m vehicles in 2017 versus
Vehicle Production (Canada) 2015 vs 2016 vs 2017 – 000’s
Vehicle 2015 2016 2017 % Change 2017

Passenger Car 888 802 749 -6
Light Truck 1,380 1,555 1,430 -8
Medium/Heavy Truck 14 15 20 33
Total 2,283 2,355 2,179 -7.5
Canada’s largest vehicle producer Toyota produced 571,000 vehicles in Canada in 2017, down by 30,000
vehicles from the 601,000 vehicles it produced in 2016. Most of the decline in output was due to a
reduction in production of the Corolla, which declined by 27,000 vehicles to 210,000 vehicles in 2017.
Output of the Rav4 sports utility model also declined by around 3,000 vehicles to 247,000 vehicles in
2017.
The decline in vehicle output in Canada in 2017 was largely due to the shift in the production of General
Motors’s Equinox model from its Oshawa plant in Canada to two plants in Mexico. GM’s decision to shift
production of its Equinox model to its Mexican plants prompted industrial action by GM’s workers in
Canada in October, which also contributed to the decline in vehicle output in Canada in 2017. As a result

vehicle output by GM in Canada looks to be in decline into the medium term. The company has
committed to sending the 2018 GMC Sierra model and Chevrolet light truck models to its Oshawa plant in
Canada for assembly and finishing, but it is not clear whether replacement 2019 models will also be
assembled at the plant. GM’s Chief Executive is reported to have suggested that the Oshawa plant will
produce 60,000 of the 2018 trucks per annum, while other of GM’s plants will build the 2019 equivalent
model. GM has invested US$310m to upgrade a production line at the Oshawa plant to a flex line to
produce multiple different vehicles at the same time.
The uncertainty surrounding the future of General Motors operations in Canada in the next few years will
have a major impact upon light vehicle production in the country. In recent years GM has been more
active in closing unprofitable operations in other parts of the world. The uncertainty surrounding the
NAFTA trade agreement, which is to be renegotiated, could also lead car makers such as GM to defer
long term decisions until the future of the NAFTA agreements is settled. In the meantime light vehicle
production in Canada looks set to decline from 2017 volumes in 2018, with output largely influenced by
market trends in the US market.
GM halted the production of the Cadillac XTS and Chevrolet Impala passenger cars in Canada for three
weeks in January, and only restarted one of two production lines when it did restart production. The single
production shift is expected to last until the end of May. The reduction in output reflects weak demand for
passenger cars across North America. However, GM is expected to increase light truck production in
Canada from June or July 2018.
In February 2018 GM also reduced production of passenger cars in Canada into April and May 2018 at
the Oshawa plant. A second shift is expected to start in 2H 2018.
In 2019 Toyota will cease production of the Corolla model at the Cambridge plant, and the plant will
produce Rav4 sports utility vehicles.
Unit passenger car and truck tyre output in Canada is assessed to have declined significantly in 2017
versus 2016, due to a surge in passenger car and truck tyre imports into Canada in 2017. The table
below details estimated unit passenger car and truck tyre output in Canada for 2016 versus 2017.
Estimated Unit Tyre Production (Canada) 2015 vs 2016 vs 2017 – 000’s
Vehicle 2015 2016 2017 % Change 2017

Passenger Car 15,500 12,600 7,900 -37
Truck 11,900 12,800 11,600 -9
Total 27,400 25,400 19,500 -23
Unit passenger car tyre output in Canada is assessed to have declined significantly in 2017, due to a
reduction in demand from the light vehicle OE tyre market of around 900,000 tyres, and an exceptional
increase in passenger car tyre imports of 4.7m tyres to 29.4m tyres, as detailed in the table below.
Estimated Unit Passenger Car Unit Tyre Output & Demand (Canada) 2016 vs 2017 – 000’s

Passenger Car 12,600 7,900 -37
Imports 24,700 29,400 19
Exports 11,100 11,400 2
Apparent Demand 26,200 25,900 -1
While passenger car tyre output is unlikely to have declined as significantly as suggested in the table
above, the surge in the volume of passenger car tyre imports to record volumes in 2017 probably had a
negative impact upon passenger car tyre output in Canada in 2017.
Michelin reports there was a 7% increase in demand in the consumer replacement tyre market in Canada
in Q4 2017, following flat demand across North America for most of 2017. This would suggest an overall
increase in the Canadian replacement tyre market of around 500,000 tyres in 2017, insufficient to offset a
reduction in OE demand of around 900,000 tyres. The increase in tyre sales in Q4 2017 was probably
driven by increased demand for winter tyres. Reports indicate demand for winter tyres in Canada have
increased at an annualised rate of 4% over the past five years. Winter tyre use is compulsory in Quebec
Province and fitted on 60% of light vehicles outside of Quebec.

Passenger car tyre imports to Canada increased by an exceptional 4.7m tyres to a record 29.5m tyres in
2017, with imports from the US increasing by almost 1.7m tyres to 9.3m tyres in 2017. Passenger car tyre
imports from China increased by 1.4m tyres to 6.6m tyres, and from Thailand by 470,000 tyres to 1m
tyres in 2017. The increase in imports from the US could reflect weaker than expected demand in the US
market in 2017, and an increase tyre production capacity as new tyre plants come on stream in south
eastern US states in 2017. In addition Chinese tyre producers are probably targeting the Canadian
market as high tariffs prevent them from profitably supplying passenger car tyres to the US market.
Passenger car tyre exports from Canada increased by 300,000 tyres to 11.4m tyres in 2017, driven by an
increase in exports of 340,000 tyres to the US to 11.3m tyres. Unit passenger car tyre exports from the
state of Ontario, where Goodyear operates a tyre plant, declined by 4% or by 300,000 tyres to 7.5m tyres
in 2017. Unit car tyre exports from the state of Nova Scotia where Michelin operates a tyre plant
increased by 4% or by 120,000 tyres to 2.8m tyres in 2017. This follows the decision by Michelin to
significantly reduce passenger car and light truck tyre production at its plant at Pictou County in Nova
Scotia in 2014. Unit passenger car tyre exports from Quebec from where Bridgestone operates a tyre
plant, increased by 75% or by 475,000 tyres to 1.1m tyres in 2017. It seems probable that tyre producers
in Canada switched production to produce more passenger car tyres instead of light trucks tyres in 2017.
Traced imports of passenger car tyres from Canada to the US increased by 1% or 100,000 tyres to 9.6m
tyres in 2017 versus 2016, as detailed in the table below.
Traced US Passenger Car Tyre Imports from Canada by Tyre Diameter 2016 vs 2017 – 000’s
Tyre Diameter 2016 2017 % Change 2017

13” or less 0 0 -
>13”<14” 0 0 -
>14”<15” 140 90 -37
>15”<16” 1,300 1,400 10
>16”<17” 3,500 4,000 11
>17”<18” 2,000 1,700 -15
>18” 750 900 20
Other 1,850 1,500 -18
Total 9,500 9,600 1
Passenger car tyre imports from Canada to the US declined in most diameter sizes in 2017. A lack of
production capacity for high performance passenger car and light truck tyres could have limited the
increase in the volume of exports of larger diameter tyres from Canada to the US market in 2017.
Alternatively an oversupplied US market for premium passenger car tyres could have limited the volume
of tyres being shipped from Canadian plants to the US in 2017.
Bridgestone is increasing tyre production capacity by 3,000 tyres/day to 20,000 tyres/day by 2023 at its
passenger car and light truck tyre plant in Joliette, Quebec. The investment will be spread over five years
and increase the plant’s production capacity for larger diameter tyres for pickup trucks and sports utility
vehicles, and increase the plants productivity.
Unit truck tyre output is assessed to have declined by around 800,000 tyres to an estimated 11.6m tyres
in 2017 versus 2016, as detailed in the table below.
Estimated Unit Truck Unit Tyre Output & Demand (Canada) 2016 vs 2017 – 000’s
Truck Tyres 2016 2017 % Change 2017

Production 12,800 11,600 -9
Imports 7,500 8,700 16
Exports 10,000 8,700 -13
Apparent Demand 10,300 11,600 13
The decline in truck tyre output is assessed to have been driven by an increase in imports of 1.2m tyres
to 8.7m tyres in 2017, probably driven by strong demand in the Canadian truck tyre market. Medium and
heavy truck output in Canada increased by an exceptional 33% or by 5,000 trucks in 2017. The OE truck
tyre market in North America is reported by Michelin to have increased by 10% or by 500,000 tyres to
5.8m tyres in 2017, with demand increasing throughout the year. The replacement truck tyre market in
North America is reported to have increased by 4% or by 900,000 tyres to 25.4m tyres.

Truck tyre exports from Canada also declined by 12% or by 1.2m tyres to 8.7m tyres in 2017, due to a
similar increase in the volume of shipments to the US market in 2016. The decline in truck tyre exports
from Canada in 2017 probably reflects strong domestic truck tyre demand in Canada in 2017.
Truck tyre exports from Ontario where Goodyear operates a tyre plant declined by 11% or by 260,000
tyres to 2.2m tyres in 2017. Unit truck tyre exports from Quebec, from where Bridgestone operates a tyre
plant declined by 14% to 4.2m tyres in 2017 from 5m tyres in 2016. Truck tyre exports from Nova Scotia
where Michelin operates a truck tyre plant declined by 11% or by 300,000 tyres to 2.2m tyres in 2017.
Unit truck tyre output in Canada should increase over the next four years as Michelin invests US$73m at
its medium and heavy truck tyre plant at Waterville in Nova Scotia to increase production capacity for
wide base truck tyres.
Truck tyre imports to Canada increased by 15%, or by an exceptional 1.1m tyres to 8.7m tyres in 2017,
driven by an increase in imports from the US of 760,000 tyres to 4m tyres and an increase in imports from
China of 18% or 300,000 tyres to almost 2m tyres in 2017.
Assessing market demand for rubber grades of carbon black in Canada is complicated in 2017 by the
exceptional volumes of passenger car and truck tyre imports into the country. Passenger car tyre imports
increased by almost 20% or by 4.8m tyres to a record 29.5m tyres in 2017, far outpacing the rate of
increase in domestic passenger car tyre demand in Canada. It is probable that as new tyre production
capacity has come on stream in the US in 2017, and US passenger car demand remained flat, that US
tyre producers have sought to increase sales volumes in the Canadian market. This will probably have
had some impact upon domestic passenger car tyre production in Canada. Simple arithmetic suggests a
sharp decline in unit passenger car tyre production of up to 4.7m tyres of output in 2017. However,
passenger car tyre exports from Canada, which typically represent around 80% of car tyre output in
Canada, were unchanged from 2016 volumes in 2017. Unit truck tyre imports to Canada also increased
by an exceptional 1.2m tyres to a record 8.7m tyres in 2017. In the most pessimistic scenario market
demand for carbon black in Canada could have declined by around 20,000mt to around 150,000mt in
Estimated Market Demand for Carbon Black* (Canada) 2015 vs 2016 vs 2017 – mt
Carbon Black 2015 2016 2017 % Change 2017

Production 197,000 203,000 208,000 2
Imports 81,000 77,000 62,000 19
Exports 105,000 111,000 121,000 9
Apparent Demand 173,000 169,000 149,000 -11
*Rubber Grades only
The sharp decline in market demand for carbon black in Canada is underlined by the reduction in carbon
black imports to 62,000mt in 2017, the lowest volume of imports since the financial crisis in 2009. Rubber
grade carbon black exports from Canada also reached a record 121,000mt in 2017. Increasing
passenger car and light truck tyre production capacity in the US in 2017 looks set to continue to put
pressure upon Canadian tyre producers in 2018, unless there is a significant upturn in consumer tyre
demand in the US tyre market in 2018. It seems high volumes of tyre inventories in Canada at present
could depress passenger car and light truck tyre output in 2018.
Despite a projected sharp decline in market demand for carbon black in Canada in 2017, rubber grade
carbon black output is assessed to have increased by around 5,000mt to an estimated 208,000mt. This
would suggest the two rubber grade carbon black plants in Canada were operating at close to available
production capacity in 2017, due in part to the increase in exports of 10,000mt to a record 121,000mt.
Carbon black imports to Canada declined by an exceptional 15,000mt to 61,700mt in 2017 versus 2015,
the lowest volume of imports since the global financial crisis in 2009, as detailed in the table overleaf.
Carbon black imports to Canada from the US declined by almost 5,000mt to 54,000mt in 2017. Carbon
black imports from Russia and China, historically priced lower than domestic carbon black producers in
the Canadian market declined by almost 12,000mt to 3,900mt in 2017. Imports from Russia declined by
7,300mt and from China by 4,500mt. The decline in the overall volume of carbon black imports into
Canada in 2017, suggests the reduction in imports from these two countries probably reflected reduced
market demand for carbon black as well as a lack of price competitiveness from producers in these two
countries in 2017. Sustained higher oil prices above US$60pb could lead to a recovery in carbon black
from Russian producers into the Canadian market in 2018.

Carbon Black Imports (Canada) 2016 vs 2017 – mt
Source 2016 2017 Average Import Price

US$/mt 2017
United States 59,593 54,615 1,051
Russia 10,914 3,604 825
Venezuela 0 1,365 837
India 551 644 1,420
China 4,856 327 805
Germany 367 273 2,600
Italy 90 245 2,049
Mexico 284 165 1,260
Japan 60 154 2,371
Belgium 43 90 1,228
Sri Lanka 31 84 1,063
Netherlands 97 34 1,201
Poland 60 21 1,032
Ukraine 49 19 1,112
Serbia 0 19
Total 77,152 61,728 1,053
All of the decline in carbon black imports to Canada in 2017 is accounted for by a decline in imports to
Quebec Province by 14,500mt to 5,500mt. By contrast carbon black imports to the Province of Ontario
were unchanged at 38,500mt in 2017, while imports to New Brunswick Province increased by 1,000mt to
17,000mt in 2017 versus 2016.
Carbon black exports from Canada increased by 14,500mt to a record 164,000mt in 2017 versus 2016,
as detailed in the table below.
Carbon Black Exports (Canada) 2016 vs 2017 – mt
Destination 2016 2017 Average Export Price

US$/mt 2017
United States 116,362 127,228 1,085
China 6,769 6,048 1,436
Belgium 4,434 5,667 908
South Korea 3,353 3,651 1,348
Japan 2,096 2,991 1,415
Italy 2,170 2,675 1,290
France 1,886 2,107 1,233
United Kingdom 1,834 2,015 1,278
Germany 1,790 1,766 1,308
Taiwan 1,534 1,596 1,604
Singapore 1,010 1,357 1,188
Austria 920 1,347 1,344
India 1,093 1,223 1,271
Thailand 1,248 1,108 1,645
Spain 593 510 1,183
Malaysia 409 462 699
Brazil 213 368 586
Hong Kong 129 319 1,595
Turkey 316 314 1,419
Vietnam 262 312 1,785
Indonesia 191 186 1,553
Argentina 134 177 1,206
Denmark 123 142 1,123
Sweden 134 75 1,350
Other 133 217
Total 149,492 164,043 1,129

Carbon black exports to the US increased by 10,800mt to a record 127,000mt in 2017. Exports of rubber
blacks from Canada are assessed to have increased by 8,000mt to 120,000mt in 2017, probably largely
driven by an increase in exports to the US market. Thermal grade carbon black exports from Canada are
assessed to have increased by 7,000mt to 44,000mt in 2017 from 37,000mt in 2016, based upon carbon
black exports from the Canadian Province of Alberta where the Tokai thermal carbon black plant is
located, with an average export price of US$1,490/mt in Q4 2017.
It seems probable that most of the rubber black exports from Canada were to the US with exports to
markets in other continents largely representing thermal blacks. Carbon black exports from Canada to
Belgium increased by 1,200mt to 5,600mt in 2017, and to Japan by 900mt. However, most of the
increase in thermal carbon black exports from Canada are assessed to have been shipped to the US
market, with exports assessed to have increased by 2,000mt to an estimated 6,700mt in 2017.
Central America
Mexico
The Mexican economy increased by 0.8% in Q4 2017 from the previous quarter, and by 1.5% year on
year from Q4 2016. Political uncertainty regarding trading relations with the US could impact economic
growth in Mexico in 2018, which is currently projected to increase by around 2%. There is concern there
will be a slowing of capital investment in Mexico until renegotiated trading relations with the US are
completed. Government spending on infrastructure following the earthquakes, which damaged parts of
the country in 2017, should contribute to economic growth in 2018.
Light vehicle sales in Mexico declined by 7% year on year in February to 109,300 vehicles, from a high
base comparison of 117,800 vehicles in February 2017. Passenger car sales declined year on year by
12% to 67,000 vehicles, partially offset by a 3% increase in light truck sales to 41,800 vehicles.
Cumulatively passenger car sales in Mexico declined by 9% or by 22,000 vehicles to 218,000 vehicles in
the first two months of 2018 versus 2017.
Light vehicle sales in Mexico declined by 4% or by 73,000 vehicles to 1.53m vehicles in 2017, driven by a
7% decline in passenger car sales to 984,000 vehicles, offset by a 1.6% increase in light truck sales to
546,000 vehicles in 2017.
Light vehicle production in Mexico increased by 6% or by 37,000 vehicles to 632,000 vehicles in the
first two months of 2018 versus 2017, as detailed in the table below.
Light Vehicle Production (Mexico) 2017 vs 2018 – Two Months only - 000’s

Passenger Car 324 262 -19
Light Truck 270 369 36
Total 595 632 6
The increase in light vehicle output was driven by an 8% increase in export sales to 507,000 vehicles
equivalent to an increase of 40,000 vehicles year on year. The increase in output was driven by an
increase in output of 20,000 vehicles year on year by Kia; by 19,500 vehicles by Fiat Chrysler, and
13,000 vehicles by General Motors. By contrast Volkswagen reported a decline in output of 24,000
vehicles year on year, and Nissan a decline of 13,700 vehicles year on year in the first two months of
2018.
Vehicle production in Mexico is projected to reach 4m vehicles in 2018 and 5m vehicles by 2020.
Mercedes is expected to start vehicle production in Mexico this year at its new plant built at Aguasalientes
as a joint venture with Nissan. In 2019 BMW is to start production at its new plant, which is currently
under construction at San Luis Potosi.
Vehicle production in Mexico increased by 13% or by 468,000 vehicles to a record 4.06m vehicles in
2017 versus 2016, as detailed in the table overleaf.

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

Light Truck 1,463 2,001 36
Medium/Heavy Truck 143 167 16
Total 3,600 4,068 13
The increase in vehicle output was driven by a 36% increase in light truck production reflecting US
consumers shift in taste towards crossovers, sports utility vehicles and light trucks. Mexican made light
vehicles are estimated to have accounted for 15% of US light vehicle sales in February.
Light vehicle output in Mexico increased by 8.9% or by 308,000 vehicles to 3.77m vehicles in 2017 versus
2016. The increase in output was driven by an increase in vehicle output by Fiat Chrysler of 180,000
vehicles, or 39% year on year to 638,000 vehicles in 2017, as detailed in the table below.
Light Vehicle Production by Manufacturer (Mexico) 2016 vs 2017 – 000’s

Nissan 848 829 -2
General Motors 703 805 14
Fiat Chrysler 459 638 39
Volkswagen 414 461 11
Ford 390 315 -19
Kia 107 221 ++
Honda 253 208 -17
Toyota 139 151 8
Mazda 149 141 -7
Total 3,465 3,773 8.9
Kia reported an increased in vehicle output of 114,000 vehicles in Mexico in 2017, and General Motors a
20% increase in output equivalent to an increase of 102,000 vehicles in 2017.
Vehicle exports from Mexico reached a record 3.1m vehicles in 2017, representing a 12% on the previous
year, as detailed in the table below.
Light Vehicle Exports (Mexico) 2016 vs 2017 – 000’s

Light Truck 1,289 1,658 28
Total 2,768 3,102 12
75% of vehicle exports from Mexico went to the US market in 2017, with Mexican produced vehicles
accounting for 13% of light vehicle sales in the US in 2017, equivalent to 2.4m vehicles.
Fiat Chrysler is forecasting more growth in vehicle output in Mexico in 2018 and 2019, despite a decision
to shift production of Ram heavy duty pickup trucks from Mexico to Michigan in 2020. This is seen as a
precautionary measure in case the US withdraws from the NAFTA free trade agreement. Pickup trucks
produced in Mexico would attract a 25% import tax under President Trump’s initial proposals. Fiat
Chrysler exported 276,000 Ram pickup trucks in 2017, 88% of them to the US market. Fiat will invest
US$1bn in the Michigan plant, while its plant in Mexico will be reconfigured to produce commercial
vehicles. The company operates five plants in Mexico, which it reports is a good base for vehicle exports
outside of North America as well as within.
General Motors reported a 14% increase in vehicle output in Mexico in 2017 equivalent to an increase of
100,000 vehicles, due to the moving of production of the Chevrolet Equinox and GMC Terrain from its
plants in Canada to Mexico. General Motors is preparing a plant in Silao in Mexico to construct a new
generation of pickup trucks.
Toyota and Mazda are to construct a new joint venture plant in Alabama at a cost of US$1.6bn, which will
have an annual production capacity of 300,000 vehicles per annum. Toyota will produce the Corolla
model at the plant and Mazda a crossover model in 2021.

The increase in vehicle output in Mexico was also supported by the ramping up of output by Kia at its
plant near the northern city of Monterrey in the past year, and Audi’s Q5 crossover plant in the Central
Mexican city of Puebla where the company produced 158,000 Q5 sports utility vehicles in 2017.
Unit passenger car and light truck tyre output in Mexico was forecast to increase by around 5% in
2017 to around 31.3m tyres from 29.8m tyres produced in 2016, according to the Mexican tyre
association as detailed in the table below.
The table below details passenger car and light truck tyre production in Mexico together with net trade
and apparent demand.
Passenger Car and Light Truck Tyre Production & Apparent Demand (Mexico) 2014 – 2017 – 000’s
Passenger Car Tyre 2014 2015 2016 2017 % Change

2017
Production 20,000 21,600 29,800 31,300 5
Imports 18,700 20,400 20,500 23,100 13
Exports 14,000 15,800 16,600 18,000 8
Apparent Demand 24,700 26,200 33,700 36,400 8
Mexican tyre production statistics indicate a large increase in passenger car and light truck tyre output of
8.2m tyres per annum to 29.8m tyres in 2016. This would suggest a significant increase in market
demand for carbon black in Mexico in that year. The startup of tyre output by Goodyear of tyre production
at its new Mexican tyre plant in mid 2017 and Pirelli at its second Mexican tyre plant was projected to
drive an increase in unit passenger car tyre output of 1.5m tyres to 31.3m tyres in 2017. However, weaker
than expected demand in Mexico, and in the US tyre market, led to some reductions in tyre output in
Mexico in 2017. Nevertheless the increase in passenger car tyre exports of 1.4m tyres to 18.8m tyres in
2017 probably indicates some increase in unit car tyre output.
Continental AG reported unit passenger car and light truck tyre output at its Mexican tyre plant at San
Luis Potosi declined by 1m tyres from an output of 7m tyres in 2016 to 6m tyres in 2017. The company is
not planning to increase tyre production capacity in Mexico in the years to 2021. Rather it will increase
passenger car tyre production capacity in the US by 9m tyres, and truck tyre production capacity by
700,000 tyres in the US in the years to 2021.
Cooper Tire reported a decline in unit tyre production at its Mexican plant in Q3 2017 due to weak
demand and the earthquake and hurricane, which occurred in Mexico. However, Cooper Tire reported it
performed better than the industry as a whole in Mexico where the market declined by 15% year on year
in Q3 2017. The company also reports the volatile economic and political environment in Mexico also
contributed to the decline in demand, which contrasted to recent history where demand for tyres has been
increasing.
Pirelli reported a 5% increase in sales revenues in the NAFTA region to €984m (US$1.21bn) in 2017 from
€935m (US$1.15bn) in 2016. The increase in sales revenues came in spite of a decline in demand from
the OE market. Sales of high value added tyres increased by 5.9% year on year due to increased
penetration of the retail network. At the start of 2017, Pirelli projected its tyre output in Mexico would
reach an annualised rate of 7.5m tyres by the end of 2018 from 5m tyres per annum. Pirelli is constructing
a second tyre plant next to its existing one at Siloa, with production expected to start this year. The
company is expecting to reach an output of 7.5m tyres per annum by the end of 2018, from a current
production output of 5m tyres per annum.
Michelin is expecting to start production at its new plant at Leon in late 2018. The plant will have an
installed production capacity of between 4m and 5m tyres, most of which will be for 18” diameter tyres
and above.
The Indian tyre manufacturer JK Industries operates three tyre plants in Mexico under the JK Tornel
name, with a total annual production capacity of 5.2m radial passenger car tyres, 300,000 bias truck tyres
and capacity for 2.4m ‘other’ types of tyre. In total production capacity equates to 300mt of tyres per day.
The company has implemented a labour restructuring programme in the past year, which it expects will
improve its financial performance going forward. JK Tournel reported a 10% increase in sales revenues in
the year ending April 2017 to Rs12.1bn (US$187m) supported by an increase in passenger car tyre
production capacity in the past year.

The table below details actual tyre passenger car tyre output in Mexico for the years 2014 to 2016, with
the projected increase for 2017, combined with net trade in passenger car tyres and apparent demand.
Passenger Car and Light Truck Tyre Production & Apparent Demand (Mexico) 2014 – 2017 – 000’s
Passenger Car Tyre 2014 2015 2016 2017 % Change

2017
Production 20,000 21,600 29,800 31,300 5
Imports 18,700 20,400 20,500 23,100 13
Exports 14,000 15,800 16,600 18,000 8
Apparent Demand 24,700 26,200 33,700 36,400 8
The Mexican tyre association reported 39.4m tyres were sold in Mexico in 2016, however illegal imports
of used low quality tyres from China and the US reached 2m tyres. These imported tyres are dampening
domestic demand for new tyres in Mexico. 60% of the commercial tyre market in Mexico are accounted
for by low priced imported used tyres.
Passenger car tyre imports to Mexico increased by 2.7m tyres to 23.2m tyres in 2017 versus 2016, driven
by an increase in imports from South Korea of 900,000 tyres; from Thailand of 670,000 tyres and from the
US of 450,000 tyres to 3.85m tyres in 2017. Passenger car tyre imports from China also increased by
240,000 tyres to 6.6m tyres in 2017.
Passenger car tyre exports from Mexico increased by almost 1.5m tyres to 18m tyres in 2017, driven by
an increase in exports to Brazil of 900,000 tyres, and 480,000 tyres to an unidentified country. Exports to
the US market increased by 300,000 tyres to 14.2m tyres in 2017, accounting for almost 80% of
passenger car tyre exports from Mexico in 2017.
Passenger car tyre output in Mexico is projected to increase by 10-12m tyres per annum in the next three
years as new tyre production comes on stream at Goodyear, Pirelli at Michelin.
Traced imports of passenger car tyres to the US from Mexico indicate unchanged volumes of imports in
the first six months of 2017 versus 2016, as detailed in the table below.
Traced Passenger Car Tyre Imports to the US from Mexico

By Tyre Diameter 2016 vs 2017 – 000’s
Source 2016 2017 % Change 2017

<13” 100 60 -46
>13”<14” 500 480 -3
>14”<15” 2,500 1,900 -23
>15”<16” 2,200 2,400 7
>16”<17” 2,600 2,500 -2
>17”<18” 1,200 1,600 26
>18” 2,300 2,800 22
Total 11,500 11,800 2
Unit truck tyre output in Mexico is assessed to have increased in 2017, based upon a 16% increase in
demand from the OE sector as heavy truck output increased to 167,000 trucks in 2017. Truck tyre export
data suggests an exceptional increase in truck tyre exports of 20m tyres to 47m tyres in 2017 versus
2016. Truck tyre exports from Mexico increased by 20m tyres to 47m tyres in 2017 versus 2016, driven by
an increase in exports to the US market of 5.8m tyres to 19m tyres and to Brazil of 5.5m tyres to 6.6m
tyres in 2017. This seems erroneous as traced imports truck tyres imports to the US from Mexico were
unchanged from 2016 volumes in 2017 at 1m tyres. Meanwhile the Mexican truck tyre replacement
market is reported to be dominated by low priced imports which account for an estimated 60% of truck
tyre sales with a diameter of 20” or above according to the Mexican Tyre Association.
Market demand for carbon black in Mexico is assessed to have increased by around 10,000mt to an
estimated 150,000mt in 2017 versus 2016, as detailed in the table overleaf.

Estimated Market Demand for Carbon Black (Mexico) 2016 vs 2017 – mt
Carbon Black 2016 2017 % Change 2017

Production 140,000 137,000 -2
Imports 31,000 41,000 32
Exports 31,000 28,000 -10
The increase in demand for carbon black is assessed to have been driven by an exceptional increase in
vehicle output of 468,000 vehicles in 2017, as light truck output increased by 538,000 vehicles year on
year. Unit passenger car tyre output is also assessed to have increased by up to 1.5m tyres in 2017,
driven by an increase in demand from the OE sector of over 2m tyres, and an increase in exports of 1.4m
tyres to 18m tyres. These increases will have been partially offset by weaker domestic demand for tyres
in the consumer tyre replacement market in Mexico in 2017, with Continental AG reporting a decline in
passenger car tyre output of 1m tyres and Cooper Tire also reporting a decline in output in Q3 2017.
The ramping up of tyre output by Goodyear and Pirelli at their new plants in Mexico this year and the
startup of production by Michelin at its new Mexican plant in Q4 2018 should drive an increase in market
demand for Mexico in 2018 and beyond. Indeed unit passenger car and light truck tyre production
capacity in Mexico will increase by 12m to 13m tyres per annum in the next year as Goodyear, Michelin
and Pirelli bring new production capacity on stream. Current weak volumes of demand for consumer tyres
in the US could be slowing the rate at which new tyre plants are ramping up output.
The increase in market demand for carbon black in 2017, was largely met by an increase in carbon black
imports of 10,000mt, largely from the US of 11,000mt to 34,000mt, as detailed in the table below.
Carbon Black Imports (Mexico) 2016 vs 2017 – mt

US$/mt 2017
United States 23,753 34,792 1,241
Colombia 1,614 2,795 827
Canada 1,570 1,119 1,577
Russia 248 777 759
Germany 321 654 3,395
Japan 153 421 2,197
China 1,375 162 1,494
Korea South 63 129 3,269
United Kingdom 20 60 1,030
Belgium 42 36 4,573
India 10 17 2,708
Czech Republic 9 9 15,447
Venezuela 1392 0
Total 30,878 41,017 1,274
Carbon black imports from the US increased by 9,000mt to 16,800mt in the first six months of 2017.
Carbon black imports from Colombia increased by 2,500mt in the first six months of 2017. It is possible
that tighter supply of carbon black in Mexico resulted in Cabot importing some product from its plant in
Colombia in 1H 2017.
Carbon black exports from Mexico declined by 3,000mt to 28,000mt in 2017 versus 2016, as detailed in
the table overleaf.
Carbon black exports from Mexico to the US increased by 1,100mt in 2017; to Brazil by 990mt and to
India by 650mt. By contrast exports to Ecuador from Mexico declined by 1,900mt; to Peru by 1,800mt and
to Costa Rica by 1,450mt in 2017 versus 2016. It seems probable that Cabot plant in Mexico lost sales
volumes to the Venezuelan carbon black producer Negroven in the Andean region in 2017.

Carbon Black Exports (Mexico) 2016 vs 2017 – mt

US$/mt 2017
United States 15,743 16,841 1,575
Spain 3,938 4,020 1,449
Brazil 2,145 3,138 1,968
Poland 2,584 2,326 1,546
India 120 776 878
China 0 260 1,221
Guatemala 106 187 2,216
Hungary 0 122 1,788
Canada 262 112 1,191
Ecuador 2,059 99 786
United Kingdom 64 88 1,076
Peru 1,920 45 778
South Korea 82 40 770
Indonesia 30 30 1,240
Belgium 44 20 1,316
Germany 0 19 1,052
Costa Rica 1,477 19 2,414
Other 492 31
Total 31,066 28,173 1,573
Western Europe
Germany
The German economy increased at its fastest rate since 2011 in 2017 increasing by 1.9%, as growth
momentum has picked up across the EU. The German Government has forecast the economy will
increase by 2.4% in 2018, driven by a 5.3% increase in exports, and an increase in employment of
490,000 to reach a record high of 44.8m people. Indeed increasing consumer spending has become the
main driver of economic growth in Germany, due to increasing employment and higher wages.
Passenger car sales in Germany declined by 3.4% or by 12,000 vehicles to 347,000 vehicles in March
2018. Cumulatively passenger car sales in Germany increased by 4% or by 34,000 vehicles to 878,000
vehicles in the first three months of 2018 versus 2017. Passenger car sales in Germany increased by
2.7% or by 89,000 vehicles to 3.44m vehicles in 2017 versus 2016, the highest volume of sales since
2009.
Across Western Europe passenger car sales declined by 6% or by 108,000 vehicles in March 2018 to
1.7m vehicles, largely driven by a 15% decline in passenger car sales in the UK, equivalent to a decline
of 88,000 vehicles. Passenger car sales in Italy also declined year on year by 13,000 vehicles in Italy.
Cumulatively passenger car sales across Western Europe declined by 0.4% or by 14,000 vehicles to
3.9m vehicles in the first three months of 2018, due to a 12% decline in new car sales in the UK,
equivalent to a decline of 100,000 vehicles offset by increases in sales volumes in Germany and France.
Light commercial vehicle sales in Germany increased by 9% in the first two months of 2018, and by 6.8%
across the EU to 297,000 vehicles. Meanwhile heavy truck sales in the EU increased by 6% to 48,000
trucks in the first two months of 2018, driven by a 14% increase in sales in France; and a 20% increase in
Italy. By contrast heavy truck sales in Germany declined by 3% and in the UK by 12% in the first two
months of 2018 versus 2017.
Passenger car production in Germany declined by 1% or by 100,000 vehicles to a record 5.6m vehicles
in 2017 versus 2016, as detailed in the table overleaf.

Light Vehicle Production (Germany) 2015 vs 2016 vs 2017 – 000’s
Vehicle 2015 2016 2017 % Change 2017

Passenger Car 5,707 5,746 5,645 -1
Light Truck 325 315 N/a -
Total 6,032 6,061 5,645 -
The decline in passenger car production was driven in part by a 0.7% decline in export sales, equivalent
to a reduction of 33,000 vehicles to 4.37m vehicles in 2017. Most recent data for the first two months of
2018 indicates a decline in passenger car production of 4% to 905,000 vehicles, driven by a decline in
passenger car exports to 704,000 vehicles.
Production data for medium and heavy trucks in Germany is no longer available however, commercial
vehicle sales in Germany increased by 3% or by 12,000 vehicles to 369,000 vehicles in 2017. Sales of
commercial vehicles with a weight of between 6 tonnes and 16 tonnes declined by around 1% to 21,600
trucks in 2017, while sales of trucks with a weight over 16 tonnes increased by 900 trucks to 64,700
trucks in 2017.
Across the EU commercial vehicle sales increased by 3.9% or by 65,000 vehicles to 1.99m vehicles in
2017. Sales of medium and heavy trucks in the EU with a weight of over 16 tonnes increased by 1% or by
900 trucks to 64,700 trucks in 2017 versus 2016.
Volkswagen reported record global sales of 6.23m vehicles in 2017, an increase of 4.2% year on year.
The company has not published its output in Germany for the full year of 2017, following a 3.8% decline
in output in 1H 2017. VW’s sales in Germany declined by 4.7% to 531,000 vehicles in 2017. VW is
seeking to increase productivity at its German plants by 7.5% this year and in the next two years. In
addition it is seeking cost savings of €500m in an effort to improve its competitiveness. In total VW is
seeking to reduce its annual costs by €3.7bn by 2020, of which €3bn will come from its German
operations.
By 2020 Volkswagen will have 19 sports utility vehicles available globally, representing 40% of the total
range of passenger cars the company produces. From 2020 Volkswagen is to build a range of electric
vehicles and is aiming to sell one million electric vehicles globally by 2025. To meet this objective
Volkswagen is reorganising its German car plants in order to become a leader in electric vehicle
production. The company is investing €34bn on electric vehicles and autonomous driving by the end of
2022. Production of electric cars will be focussed at Volkswagen’s plant in Zwickau in Germany. The
company will start to produce the ‘I.D’ electric car range from 2019, and will also produce battery powered
models for Audi, Seat and Skoda at the plant. Volkswagen is projecting its electric vehicle production will
be 100,000 vehicles in 2020.
Production of the Golf and Passat models will be moved from the Zwickau plant to its plants at Wolfsburg
and Emden. VW is investing €2.9bn at the Wolfsburg plant to focus on the production of the new Golf
model, with the Passat model to be concentrated at the Emden plant with an investment of €1bn.
Volkswagen’s Audi brand reported output of 583,000 vehicles at its German plant at Ingolstadt in 2017,
down by 9,000 vehicles from the 592,300 vehicles produced in 2016.
Volkswagen reported record global commercial vehicle output in 2017 of 495,000 vehicles, representing
an increase of 3.8% year on year. The company reported output at its plant in Hannover increased by
5.9% to 200,800 vehicles, the highest volume of output for 44 years.
BMW reported a 4.2% increase in sales of BMW branded vehicles to 2.08m vehicles in 2017, largely
driven by an increase in sales of sports utility vehicles. Globally BMW Group reported output increased to
2.3m vehicles in 2017, from 2m vehicles in 2016. BMW is launching 40 new models or model variants in
the next two years in order to increase its share of the luxury vehicle market. It is planning to increase its
annual production capacity by around 27% to produce 3m vehicles per annum by 2020. However, much
of the increase in production capacity will be in North America, where annual output is to increase to
750,000 vehicles per annum from 410,000 vehicles.
BMW is preparing its vehicle plants for mass production of electric vehicles by 2020. The company is
aiming to offer 25 electrified vehicles by 2025, 12 of which will be fully electric with a range of up to
700km.

Mercedes reported a 9.9% increase in global vehicle sales to reach a record 2.28m vehicles in 2017, with
sales in Europe increasing by 6% year on year to 955,000 vehicles, driven by strong demand for the new
‘E’ Class model and sports utility vehicles. The company reports vehicle output has recorded new record
production volumes for seven consecutive years with all of its plants globally operating at or near full
capacity. Globally Mercedes reported vehicle output increased by 8% to 2.41m vehicles in 2017, from
2.23m vehicles in 2016. The company is increasing production in Hungary, Mexico and China, but has
not announced any increases in production capacity in Germany. Mercedes is forecasting a slight
increase in sales in 2018 driven by increased demand in Central Europe, and Russia.
Mercedes reported a 10% increase in van production to 405,000 units in 2017, from 368,000 vans in
2016, driven in part by a 9% increase in sales in Europe to 273,000 to record volumes in some markets
including Germany.
Daimler trucks reported a 13% increase in unit sales globally to 470,000 trucks in 2017, with sales in
Europe increasing by 3% to 82,300 trucks. The company reported a global increase in truck output of
16% or 65,000 trucks to 476,000 trucks in 2017 versus 2016.
Across Europe, including Russia and Turkey, Continental AG reports medium and heavy commercial
vehicle production increased by 54,000 trucks to 660,000 trucks in 2017 from 606,000 trucks in 2016, as
detailed in the table below.
Vehicle Production (Europe) 2016 vs 2017 vs 2018* - 000’s

2018
Passenger Car & Light Commercial Vehicles 21,400 22,100 22,500 1.8
Medium & Heavy Commercial Vehicles 606 660 673 1.9
Total 22,000 22,760 23,170 1.8
* Forecast
Continental AG is forecasting an increase in vehicle production in Europe of 1.8% or 413,000 vehicles to

23.17m vehicles in 2018, with medium and heavy truck output increasing by 1.9% or by 13,000 trucks to
673,000 trucks.
The European passenger car tyre replacement market declined by 1% year on year in February, but
increased by 1% in the first two months of 2018 versus 2017. Demand for passenger car tyres from the
OE sector was flat year on year in February but increased by 5% in the first two months of 2018.
Demand for truck tyres from the European OE truck tyre market is reported to have increased by 6% in
February, and by an exceptional 10% in the first two months of 2018. In the truck tyre replacement market
demand increased by 4% in the first two months of 2018.
Continental AG reported it produced a total of 17m passenger car tyres at its two German tyre plants in
2017, 8m passenger car and light truck tyres at its Aachen plant and 9m at its Korbach plant, unchanged
in volume from 2016. Across Europe Continental AG reported a 2% increase in passenger car and light
truck tyre output to 103m tyres equivalent to an increase of 2m tyres, with output at its plant in Slovakia
increasing by 1m tyres to 15m tyres and increasing by 1m tyres in Romania to 18m tyres in 2017.
Continental AG reported that demand for passenger car and light truck tyres in the replacement market in
Europe increased by 3% or by 11m tyres to 351m tyres in 2017 versus 2016, as detailed in the table
below.
Replacement Tyre Demand (Europe) 2016 vs 2017 vs 2018* - 000’s

2018
Passenger Car & Light Commercial Vehicles 340 351 358 2
Medium & Heavy Commercial Vehicles 24.4 25.3 25.8 2
Total 364.4 376.3 383.8 2
* Forecast

Continental AG’s truck tyre production in Europe increased by 5% or by 200,000 tyres to 4.1m tyres in
2017 versus 2016, with output in the company’s Czech plant increasing by 100,000 tyres to 1.3m tyres,
while output in Slovakia increased by 100,000 tyres to 2.8m tyres in 2017. Continental AG is increasing
unit tyre production capacity at its plant in the Czech Republic by 800,000 tyres per annum and in
Slovakia by 500,000 tyres per annum by 2021. Continental AG reported replacement truck tyre demand
in Europe increased by 3% or by 900,000 tyres to 25.3m tyres in 2017.
Continental AG reports labour costs at its Germany plants are the highest globally, with those in the US
around 30% less and those in China around 80% lower than in Germany.
Demand for passenger car and light truck tyres from European tyre makers in Germany is estimated to
have declined by 0.5% or by 400,000 tyres to an estimated 76.8m tyres in 2017 versus 2016, as detailed
in the table below.
Estimated Passenger Car & Light Truck Tyre Demand (Germany) 2015 - 2017 – 000’s
Passenger Car 2015 2016 2017 % Change 2017

Tyre
OE 28,500 28,700 28,300 -1
Replacement 48,000 48,500 48,500 -
Total 76,500 77,200 76,800 -0.5
The table below details passenger car tyre imports and exports to Germany for 2016 versus 2015.
Passenger Car Tyre Imports, Exports and Net Trade (Germany) 2015 vs 2016 vs 2017 – 000 mt

Tyre
Imports 797 853 866 1
Exports 698 735 733 -
Net Trade 99 118 133 12
The volume of passenger car tyre imports into Germany increased by 1% in 2017, but imports from
outside of the EU increased by 6% year on year accounting for 25% of imports in 2017 up from 20% in
2015. By contrast passenger car tyre exports from Germany declined to 733,000mt in 2017. The increase
in net imports of passenger car tyres into Germany in 2017, probably suggests a loss of market share for
European tyre producers operating in the German passenger car tyre market in 2017.
Demand for truck tyres in the replacement market in Germany is assessed to have declined by around
2%, or by an estimated 30,000 tyres to an estimated 1.41m truck tyres in 2017 versus 2016, as detailed
in the table below.
Estimated Truck Tyre Replacement Demand (Germany) 2015 vs 2016 vs 2017 – 000’s
Truck Tyre 2015 2016 2017 % Change 2016

OE N/a N/a N/a -
Replacement 1,350 1,440 1,410 -2
Total 1,350 1,440 1,410 -2
Replacement truck tyre demand is reported graphically by the European tyre association and is assessed
to have declined by around 30,000 tyres to an estimated 1.4m tyres in Germany in 2016. As in the
passenger car tyre market truck tyre imports into Germany increased at a faster rate than exports in
recent years, but the trend reversed in 2017 versus 2016, as detailed in the table below.
Truck Tyre Imports, Exports and Net Trade (Germany) 2015 vs 2016 vs 2017 – 000 mt

Tyre
Imports 385 424 417 -1
Exports 262 278 298 7
Net Trade 123 146 119 -18

Truck tyre imports from outside of the EU increased by 5% in 2017 accounting for 27% of truck tyre
imports into Germany in 2017. Truck tyre exports from Germany increased by 7% in 2017, largely driven
by an increase in exports to other EU markets.
Passenger car and truck tyre export volumes from Germany increased by 1.8% or by 19,000mt to 1.03m
mt in 2017 versus 2016, as detailed in the table below.
Tyre Exports (Germany) 2015 vs 2016 vs 2017 – 000 mt
Vehicle 2015 2016 2017 % Change 2017

Passenger Car 698 735 733 -
Truck 262 277 298 7
Total 960 1,012 1,031 1.8
Passenger car tyre exports from Germany were unchanged from 2016 volumes in 2017, with an increase
in exports to markets outside of the EU, offset by lower exports to EU markets.
Truck tyre exports from Germany increased by 7% to 298,000mt in 2017, driven largely by an increase in
exports to other EU markets reflecting a 2% increase in demand for truck tyres in European replacement
markets in 2017.
Michelin closed its small retreading plant, the Pneu Laurent in Oranienburg, Germany at the end of 2016
with the operations shifting to the company’s Avallon site in France. The closure reflects overcapacity and
a downturn in demand in the European treading industry.
The mechanical rubber goods sector in Germany reported sales volumes stagnated in 2016, with output
declining by 0.6% in 2016, as the industry is becoming less price competitive due to high energy costs in
Germany. The table below details rubber goods production as measured in metric tons in Germany for
the years 2011 to 2016 with an estimate for 2017.
Rubber Goods Production (Germany) 2011- 2017* - mt
Germany 2011 2012 2013 2014 2015 2016 2017*

Rubber Goods 830 800 785 800 785 780 775
*Estimated
Market demand for carbon black in Germany is assessed to have declined by around 10,000mt in 2017
versus 2016 to an estimated 276,000mt, as detailed in the table below.
Estimated Market Demand for Carbon Black (Germany) 2016 vs 2017 – mt

Production 213,000 173,000 -19
Imports 273,000 307,000 12
Exports 200,000 204,000 2
Apparent Demand 286,000 276,000 -3
The decline in market demand for carbon black was driven by the closure of a Goodyear tyre plant in
Germany, and a reduction in passenger car output of 100,000 vehicles in 2017 versus 2016.
In July 2017 Goodyear closed its passenger car tyre plant at Philippsburg in Germany. The plant had an
annual production capacity of 6m tyres and largely produces passenger car tyres with a diameter of less
than 17”. Assuming the plant was not operating close to production capacity when it closed it is estimated
the plant probably produced 1m to 2m tyres in the first seven months 2017. On this basis the closure of
the plant will have caused a decline in unit tyre production output in Germany in 2017 in the region 2m
tyres in 2017. The German rubber association forecast no increase in tyre output in Germany in 2017 at
the start of last year, and has yet to report output volumes for last year. With passenger car output
declining and demand for passenger car tyres declining marginally year on year in 2017 in Germany it
seems probable that the 1% increase in passenger car tyre exports probably offset lower domestic
demand in 2017. Truck tyre output in Germany could have increased in 2017, driven by a 7% increase in
demand from the European OE truck tyre market in 2017. However, this was probably offset by a
marginal reduction in demand for truck tyres from European tyre makers in the German replacement

market in 2017. In addition it seems probable that any increase in truck tyre output will have been offset
by reduced output from Goodyear’s closed tyre plant at Philippsburg.
The closure of the Birla Carbon carbon black plant in Germany at the end of Q1 2016, will probably have
caused the 12% increase in imports of carbon black to Germany in 2017, equivalent to an increase of
34,000mt. With market demand for carbon black in Germany assessed to have declined or at best been
unchanged from 2016 volumes in 2017, the increase in imports will have replaced output lost from the
Birla Carbon carbon black plant. On this basis the two remaining carbon black plants are assessed to
have produced 173,000mt of carbon black in 2017, from a nameplate production capacity in the region
280,000mt. Given that Orion Carbons reports it has been operating its European carbon black plants at or
close to full operating rates, it seems probable that a total carbon black output of 173,000mt probably
understates carbon black output in Germany in 2017. Nevertheless, it seems probable the substantial
increase in carbon black imports to Germany in 2017 will have negatively impacted domestic carbon
black output in Germany in 2017.
The startup of the Omsk carbon black plant in Belarus in Q2 2018, will probably lead to further increases
in carbon black imports to Germany starting in Q3 or Q4 2018. The new plant is expected to reach full
operating rates by 2020/21. Assuming this means the company is operating all production lines from a
nameplate production capacity of 120,000mt, this will have a substantial impact upon carbon black supply
in Europe. Russian carbon black output increased by an exceptional 74,000mt to 959,000mt in 2017,
with both of the two largest carbon black producers Omsk Carbon and Yaroslavl increased production
output by a combined 57,000mt, driven largely by an increase in carbon black exports to Europe of
50,000mt. Increasing tyre production output as new capacity comes on stream in Central Europe will
drive further increases in carbon black output in Russia in the next two to three years.
Carbon black imports to Germany increased by 12% or by almost 33,000mt to 307,000mt in 2017 versus
Carbon Black Imports (Germany) 2016 vs 2017 – mt

€/mt Dec
2017
Poland 58,381 56,490 666
Russia 70,480 85,042 695
Italy 29,044 29,179 919
Czech Rep 21,803 32,684 891
France 15,949 13,270 914
Belgium 11,637 14,044 1,478
Hungary 19,915 24,573 867
Netherlands 20,896 20,914 1,064
Ukraine 10,656 9,280 699
USA 4,182 3,430 2,232
Sweden 3,845 4,832 1,103
UK 2,914 1,275 1,014
Spain 922 4,092 916
Canada 0 1,530 1,342
South Korea 1,356 1,523 2,485
Austria 216 104 -
Other 1,150 4,927 -
Total 273,346 307,189 -
Carbon black imports from Russia increased by 14,500mt; from the Czech Republic by 10,800mt; from
Hungary by 4,600mt and from Spain by 3,100mt 2017 versus 2016. By contrast imports from France
declined by 2,600mt and from Poland by 1,900mt in 2017.
Carbon black exports from Germany increased by 4,800mt to 204,000mt in 2017 versus 2016, as detailed
in the table overleaf.

Carbon Black Exports (Germany) 2016 vs 2017 - mt

€/mt Dec 2017
France 26,644 32,837 1,082
UAE 16,878 3,417 1,323
Poland 15,905 4,888 1,338
Spain 15,062 10,317 1,080
Czech Rep 14,954 9,406 950
Belgium 14,841 11,555 1,239
Netherlands 9,683 18,494 1,098
Luxembourg 8,084 9,267 900
Slovakia 8,073 9,246 925
UK 6,979 7,584 979
Saudi Arabia 6,941 5,341 1,074
Italy 6,190 9,899 1,222
China 6,189 7,246 2,749
Portugal 6,083 15,601 1,338
Thailand 5,109 4,991 2,090
Switzerland 4,789 5,950 1,560
Turkey 3,292 4,225 2,083
Japan 3,120 3,203 4,868
USA 2,576 2,939 5,211
India 2,463 2,439 2,770
Sweden 2,583 7,768 1,399
Brazil 1,214 958 2,359
Austria 1,163 1,733 1,495
Denmark 1,619 1,619
Hungary 1,500 1,559
South Korea 1,078 1,343 4,939
South Africa 785 988 2,161
Slovenia 885 813 1,508
Greece 630 831 4,258
Finland 583 434 1,351
Malaysia 993 1,013 1,843
Other 6,038 6,803 -
Total 199,807 204,648 -
Carbon black exports from Germany to the Netherlands increased by 8,800mt; to Portugal by 9,500mt; to
France by 6,200mt, and to Sweden by 5,100mt in 2017 versus 2016. Offsetting these increases was a
decline in exports to the UAE of 13,400mt; to Poland by 11,000mt; to the Czech Republic by 5,500mt and
to Spain by 4,700mt in 2017.
Following the closure of its carbon black plant in South West France at the end of 2016, Orion Carbons
has probably sought to supply more product to the French and Portuguese markets from its plant in
Germany in 2017.
Monthly adjusted carbon black prices are reported to have increased by around €20/mt in March based
upon an increase in 1% sulphur fuel oil prices to around US$54.40/pb in January 2018 from US$51.20pb
in December 2017, taking into account exchange rate adjustments.

Carbon Black Imports to Western Europe
The table below details carbon black imports to Western Europe from countries outside of the region for
Q4 2016 versus Q4 2017.
Non West European Carbon Black Imports (Major West European Countries)
Q4 2016 vs Q4 2017 – mt
Source Eurozone Eurozone Germany France Italy Spain UK

* *
2016 2017
Russia 20,953 25,758 20,375 21 316 1,988
Hungary 10,726 13,454 6,083 3,977 2,054 1,019 93
Poland 19,528 21,254 13,815 1,104 3,594 28 604
Egypt** 18,404 20,401 4,062 2 9,011 3,370
Czech Rep 9,546 13,312 7,501 3,352 177 222 706
Ukraine 2,736 2,436 2,330 85
USA 4,139 4,404 935 7 138 15
Venezuela 2,347 2,260 991 1,269
Canada 2,218 2,808 385 553 648 138
Mexico 768 1,081 8 1,080
China 2,230 1,061 19 75 41
2016 93,600 48,056 13,144 6,469 13,051 5,362
2017 108,300 55,494 9,033 8,080 14,811 4,773
* Eurozone plus UK
** Egyptian imports calculated by adding imports from Suppressed Countries and Belgium from where the
company is believed to operate a distribution depot.
Carbon black imports to Western Europe from outside of the region are assessed to have increased by
14,000mt year on year to 108,000mt in the last three months of 2017 versus 2016. Imports from outside
of Western Europe to Germany are assessed to have increased by 7,400mt to 55,500mt in Q4 2017
versus Q4 2016. Imports to Italy are assessed to have increased marginally by around 1,600mt to
8,000mt in Q4 2017 and to Spain by 1,700mt. However, imports to France from outside of Western
Europe are assessed to have declined by 4,000mt year on year to 9,000mt in Q4 2017 versus Q4 2016.
Carbon black imports directly from Russia to Western Europe are assessed to have increased by 4,800mt
to an estimated 25,000mt in Q4 2017 versus Q4 2017. Imports from Poland are assessed to have
increased by 1,700mt to 21,000mt in Q4 2017 and from Hungary by 2,700mt.
Carbon black imports to Western Europe from Egypt are assessed to have increased by around 2,000mt
in Q4 2017 from Q4 2016 to an estimated 20,000mt in Q4 2017. Assessing the volume of imports from
Egypt is complicated as some product imported to the company’s distribution centre in Belgium is not
reported and traced exports from Belgium of carbon black are assumed to have originated from the
Egyptian carbon black producer. Imports of carbon black from Belgium to Germany increased by 1,700mt
year on year in Q4 2017 to 4,000mt. However, carbon black imports to France from Egypt, including
imports from Belgium declined by almost 6,400mt in Q4 2017 versus Q4 2016. This decline could reflect
an overall decline in market demand for carbon black in France in 2017.
Imports of carbon black from Hungary to Western Europe increased by 2,700mt to 13,500mt in Q4 2017
versus Q4 2016, driven by an increase in exports to France of 2,000mt and to Italy of 1,500mt in Q4
2017. Clearly this could represent either product from Russian carbon black producers shipped via the
Taurus rail terminal in northern Hungary or from the Birla Carbon, carbon black plant in Hungary or both.
Carbon black imports to Western Europe from the Czech Republic, probably representing product from
the Cabot plant in that country increased by 3,700mt to 13,300mt in Q4 2017 versus Q4 2016, driven by
an increase in exports to Germany of 2,300mt and to France of 800mt year on year in Q4 2017.
Carbon black imports to Western Europe from the Ukraine declined by 300mt to 2,400mt in Q4 2017
versus Q4 2016.
Carbon black imports into Western Europe from outside of the region are assessed to have increased by
60,000mt year on year to an estimated 510,000mt in 2017 versus 2016, as detailed in the table overleaf.

Non West European Carbon Black Imports (Major West European Countries) 2016 vs 2017 – mt
Source West West Germany France Italy Spain UK

Europe Europe
2016 2017
Russia 81,740 105,638 85,042 229 1,831 5,321
Hungary 41,425 95,952 24,573 16,120 7,683 9,045 1,236
Poland 93,772 86,614 56,490 5,250 12,674 440 2,242
Egypt** 124,704 107,538 14,044 27,595 2,904 35,330 18,787
Czech Rep 40,157 53,129 32,684 13,122 859 836 2,799
Ukraine 12,057 9,810 9,280 382 40
USA 18,282 17,603 3,430 61 635 73
Ven’zuela 14,929 15,262 4,931 10,330
Canada 9,777 11,008 1,530 1,913 2,410 494
China 9,422 3,983 160 426 266
Mexico 4,083 4,126 4,105
2016 450,300 197,487 57,428 26,465 58,528 17,962
2017 510,600 227,073 64,450 34,735 66,280 25,064
* Eurozone plus UK
Carbon black imports to Western Europe from Russia are assessed to have increased by 24,000mt to
105,000mt in 2017 versus 2016, accounting for most of the increase in imports to the region. Russian
carbon black imports to Germany increased by 14,500mt to 227,000mt in 2017, and to Spain by 4,500mt
to 66,300mt. However, imports of carbon black from Russia to the other largest West European carbon
black markets were small.
Imports of carbon black from Hungary to Western Europe increased by 54,000mt to 95,000mt in 2017,
with some of this product also probably Russian product shipped via Hungary. Following the closure of
the Birla Carbon carbon black plant in Western Europe in Q1 2016, it seems probable that Birla Carbon
has sought to increase exports to Western Europe from its Hungarian plant in 2017. Carbon black imports
to Germany from Hungary increased by 4,800mt to 24,500mt in 2017, and to France by almost 6,000mt
to 7,600mt in 2017.
Carbon black imports to Western Europe from the Czech Republic, most probably from the single Cabot
plant in that country, increased by 12,900mt to 53,000mt in 2017 versus 2016. Carbon black imports to
Germany from the Czech Republic increased by 11,000mt to 32,700mt in 2017, and into France by
3,400mt to 13,000. By contrast carbon black imports to the UK from the Czech Republic declined by
1,400mt to 2,800mt in 2017.
Carbon black imports to Western Europe from Egypt are assessed to have declined by 17,000mt to an
estimated 107,000mt in 2017 versus 2016. This takes into account exports from Belgium to other West
European markets from where the Egyptian producer operates a distribution point and suppressed
country imports to Western Europe, which are believed to be imports from Egypt. However, imports to
most large West European countries from Egypt are assessed to have increased in 2017. Traced imports
from Egypt to France are assessed to have increased by 7,300mt to 27,500mt in 2017, and to the UK by
10,700mt. Imports from Egypt to Spain are also assessed to have increased by 3,400mt to 35,300mt in
2017, while imports to Germany are assessed to have increased by 2,300mt to 14,000mt in 2017.

Eastern Europe
Russia
The Russian economy is assessed to have increased by 1.5% in 2017, from a contraction of 0.2% in
2016, driven by a 3.4% increase in consumer consumption and a 3.6% increase in capital consumption.
Exports increased by 5.4% in 2017 supported by higher oil and commodity prices. The economy is
expected to continue to increase moderately in 2018 by around 1.9%.
Passenger car and light commercial vehicle sales in Russia increased by 24% or by 26,300 vehicles
to 133,100 vehicles in February, with cumulative sales increasing by 27% in the first two months of 2018
to 235,600 vehicles. It seems unlikely that the exceptional rate of increase in demand for new vehicles in
the first two months of 2018 will be sustained throughout the year. The Russian automotive association is
forecasting is forecasting a 6.5% increase in passenger car sales in 2018 to 1.7m vehicles, with demand
dampened by increasing new car prices.
Passenger car sales in Russia increased by 12% or by 170,000 vehicles to 1.475m vehicles in 2017. The
increase in sales was driven by a 20% increase in sales of sports utility vehicles to 617,000 vehicles,
accounting for 42% of the passenger car market. Sales of ‘B’ class category small passenger cars
increased year on year by 8% to 587,000 vehicles in 2017. Collectively the automotive industry in Russia
is reported to have generated profits totalling R50.5bn (US$868m) in 2017.
Vehicle exports from Russia are targeted to reach 60-70,000 vehicles in 2018, but this could be exceeded
as new vehicle exports were over 100,000 vehicles in 2017. The Russian Government has pledged to
continue to support the automotive industry through a reduction in transport costs for vehicle exports as
well as incentives to vehicle makers via a system of tax credits. In total the Government has committed
R34.4bn (US$590m) to the automotive industry in 2018 with most of the funds being for the ‘First Car’
and ‘Family Car’ schemes, which provide subsidies to first time car buyers and Russian families.
Russia’s largest car producer AvtoVaz, which produces Lada vehicles, reported a 37% increase in vehicle
sales year on year, to 27,400 vehicles in February driven by the launch of the new Vesta station wagon,
and off road Vesta SW Cross in Q4 2017. AvtoVaz is forecasting a 10% increase in passenger car and
light truck sales in Russia in 2018, in line with the projected increase in the overall market. AvtoVaz sold
311,500 vehicles in Russia in 2017, representing an increase of 17% from the previous year. The
company reduced its financial losses in 2017, but still reported a loss of R9.7bn (US$166m) as it is having
to cover high restructuring costs. AvtoVaz‘s vehicle exports increased by 31% to 24,000 vehicles in 2017,
with Belarus and Kazakhstan being the company’s main export markets.
Renault which together with Nissan, which has an equity stake in AvtoVaz, reported a 17% increase in
vehicles sales in Russia in 2017 to 136,000 vehicles. The company produces all of the models it sells in
the domestic market in Russia. In 2017 it started production of a new sports utility vehicles in 2017, which
together with its Dacia models makes it the market leader in the Russian sports utility vehicle sector.
At the end of 2017 there were 26m foreign branded cars on the roads in Russia, accounting for 61% of
the total number of passenger cars, compared to 16.5m Russian branded vehicles. There were also 4.1m
light commercial vehicles and 3.7m trucks registered in Russia.
Truck sales in Russia increased by an exceptional 39% year on year in February to 6,000 trucks, with the
Russian truck maker Kamaz remaining the market leader accounting for one third of the market with sales
of 2,000 trucks, followed by GAZ with sales of 650 trucks. Foreign truck makers also reported strong
increases in sales in February, with Volvo reporting a 77% increase year on year to 460 trucks; MAN
trucks a 130% increase to 400 trucks and Scania an 84% increase in sales to 390 trucks in February.
Cumulatively truck sales increased by 37% year on year to 10,900 trucks in the first two months of 2018
versus 2017.
Strong demand for trucks in Russia is being driven by the introduction of the ‘Euro 5’ standard in 2018,
which has led to very strong demand for new trucks since Q3 2017.
Russia’s second largest car producer Hyundai reported a 22% increase in vehicle sales to 181,000
vehicles from its Kia subsidiary in Russia in 2017, and a 9% increase in sales of Hyundai models to
157,000 vehicles, driven by strong demand for its Creta sports utility vehicle.

Ford reported an 18% increase in sales to 50,000 vehicles in Russia in 2017 generating a profit for the
first time in four years. Ford is projecting a 20% increase in vehicle sales in Russia in 2018, compared to
a forecast 10% increase in light vehicle sales this year. The company is to launch its new Ecosport this
year.
Volkswagen reported a 21% increase in sales in Russia to 89,000 vehicles in 2017. Volkswagen exported
25,100 vehicles from Russia in 2017, largely to Central European markets, with a further 9,000 vehicles
exported to former CIS countries. In 2018 Volkswagen signed an agreement with the Russian
Government aimed at increasing exports, which in return allows the company exemption on duties on
imported components into Russia.
Light commercial vehicle sales increased by 9% year on year in February 2018 to 7,800 vehicles, with the
market leader GAZ accounting for 45% of the market sales volumes or 3,600 vehicles. Cumulatively light
truck sales increased by 10% to 14,700 trucks in the first two months of 2018 versus 2017. In 2017 light
commercial vehicle sales in Russia increased by 16% to 108,000 vehicles, with GAZ reporting a 14%
increase in light commercial vehicle sales to 47,800 vehicles.
Passenger car production in Russia increased by 23% or by 300,000 vehicles to 1.56m vehicles in
2017 versus 2016, as detailed in the table below.
Vehicle Production (Russia) 2015 vs 2016 vs 2017 – 000’s
Vehicle 2015 2016 2017 % Change 2017

Passenger Car 1,216 1,124 1,400 21
Light Truck 109 117 123 5
Heavy Truck 22 20 37 85
Total 1,347 1,261 1,560 23
Passenger car output in Russia increased by 21% in 2017 to 1.4m vehicles, driven in part by the
introduction of new Lada models into production by Russia’s largest car maker AvtoVaz. Foreign
branded vehicles accounted for 60% of passenger car output in Russia in 2017, up from 58% in 2016 and
from 18% ten years ago in 2007. Production of foreign branded passenger cars increased by 21% to
998,000 vehicles in 2017.
Lada is rationing the supply of its Vesta model, demand for which has been underpinned by the Russian
Government’s family vehicle incentive scheme. The company sold 8,450 units of the Vesta model in
February 2018, up 66% year on year. Lada has shifted the production of a new model the Granta
hatchback model to its Togliatti assembly plant in order to concentrate production on the Vesta models.
The company has introduced a second production shift a the Togliatti plant
Passenger car production in Russia increased by 23% year on year in February 2018 to 125,000
vehicles, following a 31% increase in output year on year to 113,000 vehicles in January, as detailed in
the table below.
Vehicle Production (Russia) 2017 vs 2018 – Two Months only - 000’s

Passenger Car 187,000 238,000 27
Trucks 15,600 17,100 9
Bus 2,700 2,500 -18
Total 205,300 257,600 25
The three car producers, Hyundai, Nissan and Toyota reported a combined 24% increased in output in
2017 to 346,800 vehicles, the highest volume of output since 2013, when output reached 393,000
vehicles. Hyundai is the largest of the three plants in St Petersburg accounting for 67% of the output of
the three producers, with output increasing by 13% in 2017 to 233,500 vehicles. Output of the three
plants reached 80% of available production capacity in 2017, with output projected to increase by 5% in
2018 accounting for around 25% of total passenger car output in Russia.
Toyota reported a 70% increase in vehicle output in Russia in 2017 to 66,700 vehicles, a record for the
company’s Russian plant. The company will start production of the new Camry model this year. The
company sources more than 30% of its components from Russian suppliers for its vehicles.

Nissan reported a 25% increase in vehicle production in Russia to 45,800 vehicles in 2017. In October
2017 the company started a second production shift at its plant in St Petersburg.
The Russian car maker Avtotor reported a 40% increase in output to 140,000 passenger cars in 2017,
and is projecting its output will increase by between 10% and 15% in 2018. The company assembles
BMW, Hyundai and Kia models under contract.
Kia, which is one of the best selling brands of passenger cars in Russia, has started the production of a
new model the Stinger this year and updated its Sorento crossover model.
Volkswagen reported a 13% increase in vehicle output in Russia to 167,500 vehicles in 2017.
Volkswagen has started production of the Skoda Kodiaq sports utility vehicle at the GAZ Group vehicle
plant at Nizhny Novgorod in February.
Ford is planning to increase vehicle production in Russia in 2018, and is also expecting to introduce new
models into the light commercial vehicle market in Russia this year. The company has moved to a six day
production week due to strong demand for its crossovers and light commercial vehicles.
Truck production increased by almost 10% year on year on the first two months of 2018 to 17,100 trucks.
The Russian truck maker KAMAZ reported an 11% increase in output to 3,260 trucks in February, with
output increasing by 8% to 4,400 trucks in the first two months of 2018. In 2017 KAMAZ reported a 12%
increase in truck output to 39,500 trucks. KAMAZ is planning to sell 43,100 trucks in 2018, of which
37,000 will be sold into the domestic market, and is launching a new family of trucks the ‘K5’ range this
year.
Production of buses declined buy 18% to 2,500 buses in the first two months of 2018, but output is
expected to pickup this year due to demand for the football world cup which is to be held in Russia this
summer.
GAZ Group is planning to increase sales and production of light trucks by 10% in 2018, following a 5%
increase in sales to 58,600 trucks in 2017.
In March 2018 Peugeot Citroen started the production of two new light commercial vehicles, the Peugeot
Expert and the Citroen Jumpy in Russia. Peugeot is also launching two mini buses into production in
Russia by mid 2018 bringing the total number of models it produces in Russia to six. All six models will be
produced on one production line.
Volvo reported an output of 4,660 trucks at its plant in Kaluga in 2017, 3.7 times more than 2016 volumes
of output, having sold 6,000 trucks in Russia last year. In October 2017 the company increased the
number of production shifts at the plant, and was the first foreign truck maker to open a plant in Russia in
2009. The plant has an annual production capacity of 15,000 trucks.
MAN trucks reported a 125% increase in truck sales in Russia to 4,600 trucks in 2017, and is reported to
be the leading truck maker for the construction industry in Russia.
Isuzu trucks reported a 220% increase in truck output in Russia in 2017 to 5,160 trucks, of which 3,800
were light trucks.
The Russian Government is forecasting passenger car production in Russia will increase by 10% in 2018,
as the market continues to be underpinned by Government support. The Government is planning to
tighten the regulations concerning component localisation for vehicle makers in Russia when the current
regulations expire before 2020. Currently the minimum localisation rate is 60% for passenger cars and
locally assembled engines or gearboxes must be used in at least 30% of all vehicles assembled. The
Government is seeking to increase the localisation rate. Those companies that meet the new standards
will be able to continue to claim state support including selling vehicles to Government departments.
Current expectations suggest vehicle makers will have to assemble automatic transmissions in Russia by
2023 and manual gearboxes will have to be produced using components manufactured in Russia in order
to be eligible for state support.
Russia’s largest tyre maker KAMAZ has an objective of selling 43,000 trucks in 2018, an increase of 13%
versus 2017 from projected sales of 38,000 trucks in 2017. In 2018 KAMAZ is projected to sell 37,000
trucks into the Russian market and 6,000 to export markets. KAMAZ is to launch a new range of trucks in
2018.

Isuzu Truck is to the start the production of a new 3 ton truck at its Russian plant in Q1 2018. The
company reports its truck output in Russia doubled in the first ten months of 2017 versus 2016 to almost
3,500 trucks, with full year output expected to reach 4,500 vehicles.
Unit tyre production in Russia increased by 6% or by 3.2m tyres to 51.7m tyres in 2017 versus 2016, as
Unit Tyre Production (Russia) 2015 vs 2016 vs 2017 – 000’s
Tyre 2015 2016 2017 % Change 2017

Passenger Car 38,000 41,000 44,000 7
Truck 6,500 7,500 7,700 2
Total 44,500 48,500 51,700 6
Unit passenger car tyre output in Russia increased by 3m tyres to 44m tyres in 2017. The table below
details unit passenger car tyre output, together with net trade and apparent demand for passenger car
tyres in Russia in 2015, 2016 and 2017.
Unit Passenger Car Tyre Output & Apparent Demand (Russia) 2015 vs 2016 vs 2017 – 000’s
Car Tyres 2015 2016 2017 % Change 2017

Production 38,000 41,000 44,000 7
Imports 14,000 12,800 16,200 26
Exports 16,300 20,000 19,000 -5
Apparent 35,700 33,800 41,200 21
Demand
Unit passenger car tyre output in Russia increased by 7% or by 3m tyres to 44m tyres in 2017, largely
driven by an increase in domestic passenger car demand in Russia, while unit passenger car tyre exports
declined by 1m tyres to 19m tyres in 2017.
Most of the increase in passenger car tyre output in Russia in 2017 was in the Privolzhsky Federal District
where output increased by 1.3m tyres to 14.4m passenger car tyres in 2017. Unit passenger car tyre
output in the North West District, where Nokian operates its Russian tyre plant, increased by 1.1m tyres to
15m tyres in 2017 versus 2016. Passenger car tyre output in the Central District where tyre
manufacturers such as Pirelli, Yaroslavl and Michelin are located, increased by 800,000 tyres to 10.8m
tyres in 2017. In Siberia unit passenger car tyre output increased by 200,000 tyres to 3.9m tyres in 2017.
Recovering domestic demand for passenger car tyres in Russia in 2017 drove a 26% increase in
passenger car tyre imports equivalent to an increase of 3.4m tyres to 16m tyres in 2017. Passenger car
tyre imports from South Korea increased by 1.1m tyres to 3.2m tyres in 2017. Passenger car tyre imports
from China increased by 780,000 tyres; by 500,000 tyres from Thailand and by 440,000 tyres from Serbia
in 2017 versus 2016.
Passenger car tyre exports from Russia declined by 5% or by 1m tyres to 19m tyres in 2017, with exports
to Kazakhstan declining by 600,000 tyres and to Finland by 440,000 tyres in 2017. The decline in export
sales probably reflects the upturn in domestic tyre demand in Russia in 2017.
Despite increasing passenger car sales in Russia, Nokian tyre reports consumer purchasing power
remains weak, limiting the ability of tyre companies to meet increasing raw material costs through high
tyre selling prices in Russia.
Nokian Tyres has increased unit tyre production capacity at its Russian plant at Vsevolozhsk from 15.5m
tyres per annum to 17m tyres per annum, at a cost of €55m. The new production line will be the
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company’s 14 line at the Russian plant. Taking into account production capacity of 3m tyres per annum
at Nokian’s tyre plant in Finland, the company has a total annual production capacity of around 20m tyres
per annum. However, the company could increase output at the Russian plant further by making
adjustments to its production shifts. Approximately 70% of the output from Nokian’s tyre plant in Russia is
exported, suggesting the company sells around 5m tyres per annum into the Russian market. 86% of
Nokian’s passenger car tyre output was produced in Russia in 2016, where the company has a significant
cost advantage compared to its Finnish plant. The German tyre manufacturer Continental AG reports its
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labour costs in Russia are below those in Germany. After the addition of the 14 production line, Nokian
has no further space to increase production capacity at the Vsevolozhsk plant. This could limit the ability
of the company to increase output and sales before the new tyre plant in the US becomes operational.

Nokian Tyres announced at the end of December 2017 that it is investing in a 50% increase in heavy tyre
production capacity for heavy tyres at a cost of €70m over three years, following strong demand for its
agricultural and forestry tyres in 2017. Nokian Tyres is investing US$82m to increase production capacity
for heavy truck tyres at its plant in Finland by 50% to around 32,000mt per annum from 20,000mt at
present. Nokian Tyres produces a range of commercial tyres for trucks, buses, agricultural, forestry and
mining vehicles.
Nokian Tyres reported the passenger car tyre replacement market in Russia increased by around 20% in
2017, as the market benefited from replacement tyres from the large volumes of new cars sold in Russia
three to four years ago. In addition inventories of summer tyres were relatively low in Russia at the start of
the selling season. Nokian Tyres is forecasting a 3% to 5% increase in sales of summer tyres in Russia
for 2018, as inventory levels of summer tyres at dealers are at normal levels.
Nokian is forecasting a sustained increase in demand in the Russian tyre market in the next two to three
years, which will lead Russian sales volumes to account for a larger proportion of the company’s Russian
tyre output. The startup of Nokian’s new tyre plant in the US will make more production capacity at its
Russian plant available for supply to the Russian tyre market from 2020.
Taftnet, which owns the Russian tyre producer Nizhnekamskshina, is aiming to sell 16.2m tyres per
annum annually and generate earnings of R14.5bn (US$232m) per annum by 2025. The company is
planning an expansion of its Viatti and SSC tyre brand ranges.
Bridgestone started production at its new tyre plant at Ulyanovsk Oblast in Russia, around 500 miles
southeast of Moscow, in Q4 2016. The new plant will have an initial production capacity of 2m tyres per
annum, which will be doubled in the longer term.
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. The opening of Bridgestone’s new tyre plant in Russia will have
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 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.
Continental AG is to increase unit tyre production capacity at its tyre plant at Kulga in Russia by 4m tyres
per annum by 2020/21, as part of its global plan to increase production capacity by 37m tyres per annum
by that time. The new investment in Russia will be the single largest expansion in tyre production capacity
in Europe for the company. Continental AG reported tyre output at its tyre plant at Kaluga in Russia was
unchanged from 2016 volumes at 3m tyres in 2017. Continental AG increased tyre exports from Russia to
30% of the output from its Russian plant in 2016 from 19% in 2015, but cut exports to 13% of output as
the domestic economy recovered.
Pirelli is considering increasing tyre production capacity at its plant at Voronezh in Russia, but not before
2020. The plant currently has an annual production capacity of 2.2m tyres per annum of which around
30% are exported. The company’s Kirov plant in Russia has been converted to only produce truck tyres,
with the conversion completed in 1H 2017. The Kirov plant previously mainly produced passenger car
tyres and had an annual production capacity of 6m tyres per annum. Unconfirmed reports suggest Pirelli
is planning to increase tyre exports to 2-3m tyres per annum in the longer term.
The Russian ministry of trade is to prepare a ‘roadmap’ in order to see an expansion of the tyre industry
in Russia in the years to 2020. The Government is aiming for a minimum 1.3 fold increase in tyre output
from 2015 volumes, and a 1.5 fold increase in the most optimistic scenario, with tyre exports to increase
by 36%. This would suggest
Unit truck tyre output in Russia increased by 2% or by 200,000 tyres to 7.7m tyres in 2017 versus 2016,
as detailed in the table overleaf.

Truck Tyre Output & Apparent Demand (Russia) 2015 vs 2016 vs 2017 – 000’s

Production 6,500 7,500 7,700 2
Imports 3,800 3,600 3,900 7
Exports 2,400 3,400 3,400 -
Apparent Demand 7,900 7,700 8,200 6
The increase in unit truck tyre output of 200,000 tyres to 7.7m tyres in 2017, was driven by an increase in
output of 200,000 tyres to 2.1m tyres in Siberia and an increase of 100,000 tyres to 1m tyres in Central
Southern District. These increases were offset by a decline in unit truck tyre output of 150,000 tyres to
4.45m tyres in the Privolzhsky region in 2017.
Unit truck tyre imports to Russia increased by 7% or by 300,000 tyres to 3.9m tyres in 2017, driven by an
increase in imports from China of 220,000 tyres to almost 1.3m tyres in 2017.
Truck tyre exports from Russia were almost unchanged from 2016 volumes in 2017, with a decline in
exports to the Ukraine of 120,000 tyres, offset by increases in exports to Belarus, Uzbekistan; Norway,
Azerbaijan and Lithuania.
Nokian Tyres reports demand for heavy truck tyres from the Russian mining industry have been
exceptionally strong and the company is increasing its share of the Russian heavy truck tyre market.
The Russian tyre maker Nizhnekamskshina reported it sold over 13m tyres in 2017, comparable sales
data is not available for 2016, but the company reported it produced 7.15m passenger car tyres and 1.5m
commercial vehicle tyres in 2016, and a further 76,700 tyres for agricultural vehicles. The increase in unit
sales volumes in 2017 would suggest a significant increase in tyre output by Nizhnekamskshina in 2017.
The company is increasing production capacity for its SSC tyre brand and to increase production capacity
for Viatti high performance tyres. Major repairs have also been carried out at the company’s truck tyre
plant.
Market demand for carbon black in Russia is assessed to have increased by 8% or by 24,000mt to
298,000mt in 2017 versus 2016, as detailed in the table below.
Market Demand for Carbon Black (Russia) 2015 vs 2016 vs 2017 – mt
Carbon Black 2015 2016 2017 % Change 2017

Production 807,000 885,000 959,000 8
Imports 2,000 2,000 3,000 50
Exports 585,000 613,000 664,000 8
Apparent Demand 224,000 274,000 298,000 8
The increase in domestic demand for carbon black in Russia was driven by an increase in vehicle
production of 300,000 vehicles in 2017 versus 2016. Unit passenger car tyre output increased by 3m
tyres to 44m tyres in 2017, largely driven by an increase in domestic demand, while passenger car tyre
exports from Russia increased by 1m tyres. Unit truck tyre output increased by 200,000 tyres to 7.7m
tyres in 2017 also driven by an increase in domestic truck tyre demand in Russia in 2017.
Carbon black output in Russia increased by an exceptional 74,000mt to 959,000mt in 2017, driven by an
increase in domestic demand for carbon black of 24,000mt, and an increase in carbon black exports of
51,000mt to a record volume of 664,000mt in 2017. Russian carbon black producers increased export
sales volumes of carbon black to Europe in 2017 following the closure of the two carbon black plants in
Western Europe in 2016. The table overleaf details carbon black output by Federal District for the years
2015, 2016 and 2017.

Carbon Black Production by Federal District (Russia) 2015 vs 2016 vs 2017 – 000 mt
Federal Carbon Black Plants located 2015 2016 2017 %

District in Federal District Change
2017
Central Yaroslavl, Ivanovo, Elektrougli 272 335 366 9
Siberia Omsk, Barnaul 242 240 266 10
Privolzhsky Nizhnekamsk, Tuimazy 139 144 166 15
Southern Volgograd 125 137 128 -6
North-Western Sosnogorsk 30 30 32 6
Total 807 885 959 8
Russia’s largest carbon black producer Omsk Carbon is assessed to have increased its output at its plant
in Omsk by 10% or by 26,000mt to 266,000mt in 2017. However, output at the Omsk carbon black plant
at Volgograd declined by 6% or 9,000mt to 128,000mt in 2017. In July 2016 Omsk Carbon announced a
fourth production line had come on stream at the plant with an annual production capacity of 40,000mt at
a cost of R400m (US$6.4m) for the production of carcass grades N550 and N660. This takes production
capacity at the Volgograd plant to 200,000mt per annum.
The Omsk Carbon, carbon black plant at Mogilev in Belarus is reported to be starting trial production in
April or May 2018, with the first production unit expected to start production in Q4 2018, assessed to have
an annual production capacity of 45,000mt of production capacity. Production capacity will be increased
to a total of 120,000mt in the next few years.
Omsk Carbon has announced it’s new carbon black plant in Mogilev in Belarus will start trial production in
Q2 2018, with the product to be tested at the Belshina JSC tyre company. The plant will have an initial
production capacity of 40,000mt per annum, which will be increased to 160,000mt per annum in the
longer term. The plant is expected to reach full production capacity by 2020, with exports destined at the
European and former CIS states.
In 2017 Yaroslavl Carbon Black reported its output was 350,000mt, with 80% of its output exported to
Germany, Italy, France, Hungary and Poland. The company is reported to have a nameplate production
capacity of 370,000mt per annum.
Carbon black exports from Russia increased by 51,000mt to 664,000mt in 2017 versus 2016, as detailed
in the table overleaf.
Carbon black exports from Russia to the rest of Europe increased by 50,000mt to 562,000mt in 2017
versus 2016, driven by an increase in exports to Hungary of 27,000mt to 117,000mt. Clearly this large
increase in exports to Hungary will also have been shipped to other markets in Central Europe. However,
carbon black exports to the Czech Republic increased by 5,500mt to 31,000mt in 2017. Carbon black
exports from Russia to Germany increased by 4,700mt to 68,800mt in 2017, following the closure of the
Birla Carbons carbon black plant in Germany in Q1 2016. Exports of carbon black to Lithuania increased
by an exceptional 7,100mt to 12,000mt, although it is unclear whether some of this product was re-
exported. Exports of carbon black from Russia to Spain increased by 3,100mt in 2017; to Finland by
4,300mt; to Romania by 1,300mt and to the Slovak Republic by 1,800mt in 2017.
By contrast exports of carbon black from Russia to Poland declined by 5,600mt to 189,000mt in 2017. It
seems probable that the decline in exports to Poland was partially offset by increased exports to other
Central European markets in 2017, and probably reflects changing distribution patterns of carbon black
from Russia to Central Europe in 2017.
Carbon black exports to the Middle East, Asia and Africa increased by almost 20,000mt to 83,000mt in
2017, with a decline in shipments to Turkey of 900mt offset by an in exceptional increase in carbon black
exports to Pakistan of 18,000mt in 2017 versus 2016.
Carbon black exports from Russia to the Americas declined by 13,700mt in the first nine months of 2017
versus 2016 with exports to the US declining by 8,700mt, and to Canada by 5,000mt to just 2,000mt in
the first nine months of 2017 versus 2016.

Carbon Black Exports (Russia) 2016 vs 2017 – mt
Destination 2016 2017 Average Import

Price US$/mt 2017
Poland 195,310 189,673 685
Hungary 89,454 117,137 710
Germany 64,146 68,849 729
Czech Republic 26,382 31,969 706
Slovakia 27,863 29,682 684
Serbia 27,771 28,113 695
Belarus 21,146 21,875 848
Romania 15,202 16,584 696
Lithuania 5,126 12,296 737
Finland 5,509 9,849 771
Switzerland 7,799 6,527 562
Netherlands 6,144 4,937 725
Italy 4,737 4,717 705
Spain 1,423 4,570 676
United Kingdom 1,870 3,130 717
Ukraine 3,460 3,088 619
Bulgaria 1,678 2,671 619
France 2,397 2,393 712
Austria 1,134 1,689 714
Greece 2,509 998 707
Cyprus - 531 458
Slovenia 390 468 955
Estonia 142 434 773
Sweden 80 259 683
Europe Total 511,672 562,439
Turkey 45,346 44,405 716
Pakistan 5,001 23,838 607
Israel 3,148 4,278 679
Uzbekistan 3,177 3,600 606
Sri Lanka 928 2,465 680
Vietnam 108 1,516 724
India 3,948 1,403 690
China 880 674 953
Kazakhstan 228 403 763
Malaysia 186 383 722
South Korea 325 260 1,035
Taiwan 304 217 1,027
Middle East & Africa Total 63,579 83,442
United States 25,658 14,031 627
Canada 8,876 2,430 629
Mexico 158 626 631
Brazil 164 520 685
Ecuador - 516 531
Argentina - 84 939
Colombia 39 43 715
Peru 474 - -
Americas Total 35,369 18,250 -
Other 2,257 340 -
Grand Total 612,877 664,471 700

Carbon black imports to Russia increased by 1,000mt to 2,500mt in the first nine months of 2017 versus
Carbon Black Imports (Russia) 2016 vs 2017 – mt

US$/mt 2017
Khazakhstan 0 673 97
Germany 525 509 2,984
Ukraine 0 468 861
Czech Rep 321 399 1,917
Poland 567 356 1,242
Sweden 190 133 1,593
China 116 132 1,583
Other 359 496 -
Total 2,078 3,166 1,490
The Russian carbon black producer JSC Yaroslavl carbon black has announced a price increase of
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US$124/mt on all rubber grades of carbon black effective 1 April 2018. The price increase will apply to
any applicable feedstock related index adjusted prices for rubber carbon blacks. The price increase is
caused by an unfavourable situation in the carbon black feedstock market, which has led the company to
pay much more for feedstock for the past several months.
In July 2017 Yaroslavl Carbon Black increased carbon black prices reporting that carbon black pricing
formulas based solely on 1% fuel oil indices were no longer valid to cover both the fixed and variable
costs of carbon black production in the longer term. The company proposed a discount of surcharge of
€45/mt if Brent crude falls below US$40pb. If the price of crude fluctuated between US$40-60/mt the
surcharge would decline to €30/mt. Likewise there would be no surcharge if Brent crude prices were in
the range US$60-110/mt.
Carbon black prices in Russia are reported to have increased in the range 17% to 20% in 2017, with
quarterly price adjustments for Q1 2018 assessed to be in the range 12-15%, with a further increase in
the range 5% to 7% for Q2 2018.

Asia
China
Economic growth in China has been upgraded to an increase of 6.4% in 2018 from and earlier forecast of
5.8%, as there are indications that the Chinese will not pursue a de-leveraging this year. Nevertheless
anti-pollution winter curbs on the coal and steel industries have had an impact upon economic growth.
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Steel mills resumed production on March 15 2018. The Chinese economy increased by 6.9% in 2017
with fixed asset investment in China estimated to have reached 8%, and with the Chinese Government
investing heavily in infrastructure.
Passenger car sales in China declined by 11% year on year to 1.72m vehicles in February, in part due
to the timing of the week long Chinese New Year. The decline in sales in February followed an 11%
increase in sales to 2.45m vehicles in January, driven by a 23% increase in sales of sports utility vehicles
to 1.08m vehicles, while passenger car sales increased by 7% to 1.15m vehicles. By contrast sales of
multi purpose vehicles declined by 13% to 178,000 vehicles in January. Sales of electric vehicles
increased fourfold year on year to 38,400 vehicles in January.
In January 2018 the Chinese Government implemented the second increase of the sales tax on
passenger cars with an engine size of 1.6 litres or less. As a result the tax on these vehicles increased to
10% in January 2018 from 7.5% in 2017. Clearly this hike in taxes will dampen demand for light vehicles
in China in 2018. The Chinese Automotive Industry Association is forecasting a 3% increase in light
vehicle sales in China this year, but that might be overly optimistic. It remains to be seen whether the
Government will provide some other stimulus if demand remains stagnant.
Light vehicle sales in China slowed to an increase of 1.4% in 2017 to 24.7m vehicles, from an increase of
14% in the previous year. The sharp slowdown in the rate of sales growth was due to the phasing out of
tax cuts on small passenger cars. Sales of standard passenger cars declined by 2.5% to 11.8m vehicles
in 2017, and multipurpose vehicles by 17% to 2.1m vehicles. Nevertheless sales of sports utility vehicles
increased by 13% in 2017 to 10.25m vehicles, and luxury car sales increased at a double digit rate. Sales
of luxury vehicles increased by 18% year on year in the first eleven months of 2017 to 2.24m vehicles
accounting for 10% of the passenger car market.
The Chinese Government is to increase subsidies for electric vehicles that can travel longer distances on
a single charge to Rmb50,000 (US$7,900) from Rmb44,000 (US$6,900). Vehicles must be able to travel
at least 150km in order to be eligible for the incentives, from 100km previously. The Government has
proposed increasing the number of electric vehicle charging stations to over 20 million by 2025 from
around 1 million in 2016.
Commercial vehicle sales increased by 18% year on year to 353,000 vehicles in January. Heavy truck
sales increased by 18% year on year to 98,000 vehicles in January 2018. In 2017 heavy truck sales in
China reached 1.12m vehicles, exceeding 1m vehicles for only the second time in the past seven years,
driven by the implementation of the Euro V emission standards from July 2017, and Government
infrastructure investment under its ‘Belt and Road’ initiative. Sales of truck tractors increased by 50% to
580,000 units in 2017 versus 2016. All of China’s largest ten truck makers reported record sales volumes
in 2017. Chinese truck makers are also investing in automated driving systems with several self driving
trucks passing initial trials.
Over the next five to seven years light truck demand is forecast to increase the most rapidly in China
driven by the fast growing logistics business as on line sales drive increasing home deliveries.
The table below details passenger car and commercial vehicle sales in China for 2017 versus 2016.
Passenger Car Sales (China) 2016 vs 2017 – 000’s

Sports Utility Vehicle 9,047 10,252 13
Multi Purpose Vehicle 2,496 2,070 -17
Mini Van 683 547 -20
Commercial Vehicles 3,651 4,160 13
Total 28,028 28,878 3

The increase in vehicle sales was driven by a 13% increase in sales of sports utility vehicles equivalent to
an increase of 1.2m vehicles to a total of 10.2m vehicles, offset by a decline in standard passenger cars
of 300,000 vehicles to 11.8m vehicles in 2017. Commercial vehicle sales increased by 13% in 2017
driven by the implementation of the Euro V emission standards in July 2017 and Government
infrastructure spending.
Vehicle sales increased by 1.7% or by 67,000 vehicles to 4.52m vehicles in the first two months of 2018
versus 2017, as detailed in the table below.
Vehicle Sales (China) 2017 vs 2018 – Two Months only – 000’s

Passenger Car 1,849 1,830 -0.7
Multi Purpose Vehicle 354 663 -15
Mini Van 9.4 60 -34
Commercial Vehicles 607 595 -0.6
Total 4,459 4,526 1.7
The increase in vehicle sales was driven by an 11% increase in sales of sports utility vehicles, equivalent
to an increase of 180,000 vehicles to 1.73m vehicles, which offset lower sales volumes for all other types
of vehicles. The decline in sales volumes for most types of vehicle was due to fewer selling days in due to
the Chinese New Year holidays.
Vehicle production in China increased by 3% or by 900,000 vehicles to 29m vehicles in 2017, as

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

Multi Purpose Vehicle 2,490 2,051 -17
Mini Van 665 530 -20
Truck 3,150 3,683 17
Bus 541 526 -3.8
Total 28,118 29,015 3
Output of passenger cars in China increased by 1.6% to 24.8m vehicles in 2017, driven by a similar
increase in domestic passenger car sales. A decline in demand for multi purpose vehicles drove a 17%
decline in the production of multi purpose vehicles, while standard passenger car output declined by 1%
to 11.9m vehicles. These were offset by a 12% increase in the output of sports utility vehicles to 10.2m
vehicles. A similar rate of increase in demand and output of sports utility vehicles in 2017 would result in
sports utility vehicle output almost equal to that of passenger car output in China in 2018.
Production of new energy vehicles increased by 53% to 794,000 vehicles in 2017, reflecting a similar
increase in domestic demand for electric or hybrid vehicles in China last year. Production of electric
passenger cars increased by 80% year on year, to 478,000 vehicles in 2017.
The increase in commercial vehicle output in China was due to an increase in truck output of 16.9% to
3.68m vehicles, driven by a similar increase in domestic demand for trucks. Output of buses in China
declined by 3.8% to 526,000 buses reflecting a similar decline in domestic demand in 2017.
Vehicle exports from China increased by 25% year on year to 890,000 vehicles in 2017, with exports of
passenger cars increasing by 34% to 639,000 vehicles. Commercial vehicle export sales declined by 9%
year on year in 2017 to 252,000 vehicles.
Passenger car production declined by 38% year on year to 1.43m vehicles in February, due to the timing
of the Chinese New Year holidays, which also resulted in a sharp decline in passenger car sales in China.
The table overleaf details vehicle production in China for the first two months of 2018 versus 2017.

Vehicle Production (China) 2017 vs 2018 – Two Months only – 000’s

Multi Purpose Vehicle 352 293 -16
Mini Van 9.3 5 -41
Truck 609 623 3
Total 4,529 4,393 -2
Vehicle production in China will be impacted by strict quotas for new energy vehicles, which are to be
implemented in 2019.
General Motors reported a 7.8% increase in vehicle sales in China in February 2018 to 265,900 vehicles,
despite fewer selling days due to the Chinese New Year. Sales of GM’s budget Baojun brand increased
by 38% year on year to 74,700 vehicles, while Chevrolet branded vehicle sales increased by 25% to
29,000 vehicles. In the first two months of 2018 GM and its joint venture partners reported a 12%
increase in vehicle sales year on year to 633,700 vehicles. GM is planning to launch 15 new and
refreshed models in China this year.
General Motors reported a record sales of 4m vehicles in China in 2017, an increase of 4% from the
previous year and the first time its annual sales exceeded 4m vehicles. GM reported a 37% increase in
sales of sports utility vehicles. Sales of the company’s low price Baojun models increased 45% to
996,000 vehicles, and sales of Cadillac’s increased by 51% year on year reaching a record 175,000
vehicles in 2017. The increase in sales was also driven by the launch of eighteen new or refreshed
models into the Chinese market in 2017. By 2025 GM will offer electric versions of all the models it sells in
China.
Volkswagen reported a 5% increase in vehicle sales to 4.18m vehicles in China in 2017. Volkswagen
reported VW branded vehicles sold 3.18m vehicles in China in 2017, an increase of 5.9% year on year
and the first time the brand sold over 3m vehicles. VW reported sales of sports utility vehicles exceeded
400,000 vehicles in 2017. The company is to launch nine new models across five of its assembly plants in
China in 2018, four of which will be sports utility vehicles. VW is to launch ten new sports utility vehicles
by 2020. Volkswagen is also planning to sell 1.5m electric vehicles in China by 2025, representing half of
its global target.
In January 2018 VW reported a 9% increase in vehicles sales in China to 296,000 vehicles, over half of
its global sales volumes, supported by strong demand for its sports utility vehicles. Volkswagen is to
launch at least seven new sports utility vehicles and crossovers in China in 2018, under the Volkswagen
and Skoda brands. While most other foreign vehicle makers in China have finished building new
assembly plants, Volkswagen has not. The company will open three new assembly plants in China in
2018, in Qingdao in eastern China; in the northern city of Tianjin and in northeastern China in
Changchun. The plant in Changchun will be open in March 2018 and produce the Audi Q5. Each of the
three new plants will have an annual production capacity of 300,000 vehicles. In addition Volkswagen is
to launch a low priced brand in a joint venture with its joint venture partner FAW, with vehicles to be sold
in the price range Rmb50,000 to Rmb80,000 (US$7,900 to US$12,600).
Nissan is to invest US$9.5bn in China over the next five years as part of its global objective of becoming
one of the three largest vehicle makers globally. Nissan and its Chinese joint venture partner are seeking
to increase vehicle sales in China to 2.6m vehicles per annum by 2022 from 1.5m vehicles in 2017.
Nissan is aiming to become a leading manufacturer of electric vehicles in China and is to launch its low
priced Venucia brand in China. Nissan is aiming to launch up to 20 electric models in the next few years,
having sold only 22,000 electric vehicles in 2017. The company is aiming to reduce costs of electric
vehicles by sourcing electric motors from Chinese producers as well as other electric vehicle components.
Sales of Venucia branded vehicles are projected to increase to 600,000 vehicles per annum by 2022. It
is also aiming to increase sales of light commercial vehicles.
Toyota reported a 25% increase in vehicle sales year on year in January to 127,500 vehicles. Toyota is
aiming to sell 1.4m vehicles in China in 2018, representing an increase of 9% from 2017, despite
suggestions that capacity constraints could hinder the increase in sales volumes. The optimistic sales
projections are due to the company launching its new CH-R compact crossover as well a second
crossover this year.

Honda is projecting China will overtake the US as its largest market in the next few years. In 2017 the
company reported a 16% increase in vehicle sales to 1.44m vehicles in China. At present the company’s
sales volumes are constrained by limited production capacity, but will open a new plant with its joint
venture partner Dongfeng Motor in 2019. Honda is to launch an electric vehicle in China this year.
Dongfeng Motor Corp reported vehicle sales of 4.12m vehicles in 2017, with sales of passenger cars
reaching 3.52m vehicles, and sales of sports utility vehicles increasing by 10% year on year to 1.64m
vehicles. The company assembles Peugeot, Renault, Nissan and Honda models. Sales of Nissan models
increased by 10% to 1.11m vehicles; Honda models by 22% to 727,000 vehicles and Peugeot models to
378,000 vehicles in 2017. Dongfeng is forecasting its vehicle sales will increase by 9% to 4.5m vehicles in
2018.
In the past two decades foreign car makers have been the key investors in new vehicle assembly plants
and in production capacity in China. However, as foreign car makers are completing current investment
programmes in China, Chinese car makers are becoming more significant in leading new investment in
the Chinese automotive industry. In part this is being led by increasing investment in electric vehicle
production capacity. In 2017 fourteen startups were given licenses to produce electric vehicles, and most
have started to construct vehicle assembly plants.
The Chinese company Geely Automotive has completed three new assembly plants in the past two years
in China taking its annual production capacity to 1.3m vehicles. However, the company reported sales
volume of 1.25m vehicles in 2017, and is planning to increase its production capacity to 2m vehicles per
annum by 2020 by expanding existing plants as well as building new ones.
Two other state owned car makers are also seeking to substantially increase vehicle production capacity
in China. SAIC Motor Corp has started the second phase of construction at its new plant at Zhengzhou in
northern China, only four months after completing the first phase of the plant. When the second phase will
be complete SAIC Motor Corp will have an annual production capacity at the plant of 600,000 vehicles,
with a total production capacity of 1.2m vehicles per annum in China.
Guangzhou Automobile Group has started the renovation of a plant it acquired from ZX Auto, with
production capacity at the plant to be 200,000 vehicles per annum when production starts in June. In total
the company will have an annual production capacity of 1m vehicles this year. Guangzhou Automobile
Group, SAIC Motor and Geely Automotive have all reported a tripling of vehicle sales in the past three
years driven by sales of sports utility vehicles.
Great Wall Motor is seeking to double its annual vehicle sales to 2m vehicles per annum by 2025, with
around one third of the vehicles to be electric vehicles. The company is investing US$3.2bn on electric
vehicle development by 2020. In January 2018 Great Wall signed a letter of intent with BMW to develop
electric Mini vehicles in China. Great Wall is also to launch three of its own electric vehicles this year and
two next year. Great Wall Motors sold 950,000 vehicles in 2017 down by 2% from 2016.
Sales of pickup trucks increased by almost 19% to 410,000 trucks in 2017, with the largest manufacturer
Great Wall reporting a 29% increase in sales volumes to 120,000 pickup trucks in 2017. The industry is
forecasting pickup truck sales will increase further to reach a record 500,000 units in 2018.
China truck manufacturers are benefiting from the Chinese Governments ‘Belt and Road’ initiative, which
is encouraging truck manufacturers to develop export business and expand overseas operations. As a
result major truck manufacturers reported significant increases in truck exports from China in 2017.
SinoTruck, China’s largest truck maker reported a 26% increase in heavy truck exports in 2017 to 33,700
trucks accounting for almost 50% of China’s heavy truck exports last year, as the company benefits from
China’s Belt and Road policy.
Dongfeng Trucks, China’s second largest truck maker, reported a 20% increase in commercial vehicle
sales in 2017 to 593,000 vehicles, with sales of heavy trucks increasing by 51% to 216,000 trucks. Sales
of light trucks increased by 14% to 188,000 trucks and mini trucks to 105,000 trucks in 2017. The
Japanese car maker Nissan owns a 50% stake in Dongfeng. DongFeng reported a 55% increase in truck
exports to 65,000 trucks and is aiming to increase truck sales to 80,000 trucks in 2018, with the aim of
reaching export sales of 150,000 trucks per annum by 2020.
FAW Jiefang has an objective of selling 319,800 trucks in 2018. FAW Jiefang has entered into an
agreement with Continental AG to build an intelligent internet system for ‘smart’ commercial vehicles.

JAC Heavy Trucks reported a 44% increase in sales of heavy trucks to 43,000 trucks in 2017. Total truck
sales for the company increased by 16% to 192,000 trucks in 2017.
Domestic truck sales in China increased by 3% year on year in the first two months of 2018 versus 2017.
It remains to be seen whether the Government’s ‘Belt and Road’ policy and heavy spending on
infrastructure will sustain near record volumes of heavy truck sales in China throughout 2018.
Around 40% of global tyre output is concentrated in China. Tighter environmental restrictions in China,
increasing labour costs, and higher raw material costs in China could lead to a shift to new tyre
production capacity being in other Asian countries in the medium term.
Unit radial tyre output in China is reported to have increased by 15% to 6.53bn tyres in 2017 versus
2016, including all types of tyre production. All steel radial tyre output is reported to have declined by
6.7% to 1.13bn tyres in 2017, while semi steel tyre output increased by 8% to 4.82bn tyres.
2017 was a difficult year for the Chinese tyre industry as the sharp increase in chemical raw material
costs, and in particular carbon black, resulted in a sharp decline in earnings for tyre producers as they
were unable to increase prices as fast as raw material prices increased. Higher labour costs and a
tightening in the enforcement of environmental regulations, led to tyre company earnings to decline by
around 50% in 2017, despite increasing sales volumes. Chinese tyre companies are concerned that they
could lose their international competitiveness if domestic raw material costs remain high in the long term.
The Chinese tyre industry is promoting a ‘Made in China and Power of China’ policy which aims to see a
concentration of the large number of tyre brands into smaller number of brands that can be developed
internationally, and make the Chinese tyre industry more market oriented.
The Chinese tyre association has also established five technological centres in order to develop the
technological innovation capability of the tyre industry in China. Zhejiang Double Arrow Rubber Co., Ltd is
to be the energy-conserving and environment-friendly conveyer belt technological centre. Qingdao
Rubber Six Conveyor Belt Co., Ltd. is the high tenacity conveyor belt technological centre. Yangquan
Coal Industry (Group) Co, is the centre for coal conveyor belt technology. Chengdu Shengbang Seals
Co., Ltd. is the sealing and nuclear protection technological centre.
Up to 20m new bicycles were introduced to bicycle sharing services in China in 2017, which led to
innovation in the bicycle tyre market, including non pneumatic tyres.
Unit passenger car tyre output in China is assessed to have increased by 4% or by around 20m tyres
to an estimated 457m tyres in 2017 versus 2016, as detailed in the table below.
Estimated Unit Passenger Car Tyre Production (China) 2016 vs 2017 – 000’s
Passenger Car Tyre 2016 2017 % Change 2017

OE 119,000 121,000 2
Replacement 100,000 110,000 10
Exports 218,000 226,000 3
Total 437,000 457,000 4
Demand for passenger car and light truck tyres from the OE sector is calculated to have increased by 2%
or 2m tyres to an estimated 121m tyres in 2017 versus 2016. However, Michelin reports that demand for
tyres in the OE passenger car tyre market increased by 7% in 2017, while demand in the replacement
market increased by 10%. On this basis the passenger car tyre replacement market is assessed to have
increased by around 10m tyres in China in 2017 to an estimated 110m tyres.
Passenger car tyre exports from China increased by 3.6% as measured in metric tonnes to 1.92m mt in
2017, which is estimated to equate to an increase in until passenger car tyre output of 8m tyres to an
estimated 226m tyres. The increase in passenger car tyre exports was largely driven by an increase in
exports to the EU in 2017.
Reports indicate that sales of winter tyre tyres in China have been increasing, with all of the major tyre
producers producing winter tyres for several of the country’s regions including the provinces of
Heilongjiang, Jilin, Xinjiang, eastern Inner Mongolia, and Liaoning, all of which have cold winter weather.
Tyre companies are aiming to educate tyre dealers and consumers in these regions of the importance of
winter tyres, as many consumers are first time car owners and do not understand the importance of tyre
safety.

China’s largest tyre company Zhongce Rubber Group reported double digit increases in both sales
revenues and tyre production capacity in 2017. Zhongce Rubber reported a 22% increase in sales
revenues in 2017 to around US$3.3bn, and increased its tyre production capacity for passenger car tyres
by 20% to 32.5m tyres per annum. Tyre production capacity for two wheelers was increased by 14% to
94m tyres in 2017, and radial truck and bus tyre production capacity was increased by 13% to 17.2m
tyres. The company’s tyre plant in Thailand accounted for some of the increase in sales revenues in 2017
producing 4.4m passenger car tyres and 1.4m truck and bus tyres. Zhongce Rubber Group has more new
production capacity due on stream in 2018.
Linglong Tyres reported a 32% increase in sales revenues to US$2bn in 2017. The company reported
tyre demand improved and it has been improving its products and production capacity. Operating profits
for the company increased by 4% year on year to US$161m and net profits by 2% to 150m year on year
in 2017. Profits were impacted by increased raw material costs including carbon black. Linglong Tyres
reports that China imports more than 80% of its natural rubber requirements. The company is investing
Rmb30m (US$4.7m) to investigate the potential of dandelions as a source or rubber.
Linglong Tyres is to invest in a fourth tyre plant in Chin at a cost of US$875m in Hubei Province.
Construction of the new plant is due to start in May 2018. The plant will have an annual production
capacity of 12m passenger car and 2.4m truck tyres, as well as 1.5m inner tubes. Linglong Tyres
envisages constructing one more tyre plant in China in the future as one plant in the US and one in
Europe.
Qingdao Doublestar is to relocate its Dongfeng Tyre plant in Shiyan and upgrade it to a ‘smart’ factory at
a cost of US$220m. The new plant will have an annual production capacity of 5m passenger car tyres
and 1.5m truck and bus tyres at the Zhangwan District Industrial Park, Shiyan, Hubei Province.
Sailun Group is forecasting a sharp increase in earnings to be in the range US$16.7m to US$19.3m in Q1
2018 up compared to a loss of US$8.7m in Q1 2017. For the full year of 2017 the company reported a
13% decline in profits to US$51m, despite a 22% increase in sales revenues to US$2.2bn. The decline in
earnings was due to the significant increase in raw material costs in 1H 2017, while tyre selling prices
lagged behind. This year the company reports raw material costs have stabilised while tyre output at its
plant in Vietnam has been increasing.
Sumitomo Rubber is increasing production capacity at its China Hunan plant from 2,450mt/month to
2,950mt/month from 2018. The Changshu plant is increasing capacity from 7,000mt to 7,200mt per month
in 2018. Production capacity at its third plant is staying the same but total Chinese production capacity
will be 15,250mt/month in 2018, from 14,550mt per month in 2017.
The German tyre company Continental AG reported it produced 8m passenger car and light truck tyres in
China in 2017, up by 2m tyres from 6m tyres in 2016. Continental AG is projecting an increase in unit tyre
production capacity of 14m tyres in the years to 2020/21 at its plant at Hefei. The investment forms part of
the company’s strategy of balancing its global growth in the tyre market, which requires more sales
volumes in Asia to balanced those in Europe and the Americas. Labour costs at Continental’s Chinese
tyre plant are 17% those of its plants in Germany.
Bridgestone reported tyre output as measured in metric tonnes from its China and Asia Pacific business
unit of 120,000mt of tyres in Q4 2017 down from 130,000mt of tyres in Q4 2016 volumes. Cumulatively
the company reported a 7% decline in tyre output in China and the Asia Pacific region in 2017 to
470,000mt of tyres from 510,000mt in 2016.
Bridgestone reported sales of passenger car tyres to the OE sector in China declined by 2% in 2017, but
increased by 2% in the replacement market. In the Chinese truck tyre replacement market Bridgestone
reported a 7% increase in sales year in 2017, and a 25% increase in sales to the OE truck tyre sector in
China in 2017 probably from a low base comparison in 2016.
Bridgestone is forecasting its tyre output in China and Asia Pacific will increase by 8% to 510,000mt of
tyres in 2018, from 470,000mt in 2017. In China Bridgestone is forecasting a 6% to 10% increase in sales
to the passenger car OE market, and a 6% to 10% increase in the replacement market. The company is
projecting stronger demand for its passenger car tyres in China in 2H 2018. In the Chinese truck tyre
market Bridgestone is forecasting a 5% decline in sales to the OE market in 1H 2018, but a 10% to 15%
increase in sales in 2H 2018. In the replacement truck tyre market Bridgestone is forecasting a 16% to
20% increase in sales volumes in China in 2018.

The Korean tyre company Hankook Tire, reported a 5% increase sales revenues to KRW903bn
(US$843m) from its Chinese tyre business in 2017. The increase in sales revenues was due to increased
sales of premium tyres in the OE sector, and sales to the replacement market increased at a faster rate
than the market. The company is believed to have production capacity to produce around 30m passenger
car and light truck tyres per annum in China.
The Japanese tyre maker Toyo Tire reported a 12% increase in tyre output from its Asian tyre plants
outside of Japan, believed to comprise its tyre plants in China and Malaysia to 41,900mt of tyres from
37,400mt in 2016. The company is forecasting a 5% increase in tyre output from its Asian tyre plants to
44,200mt in 2018.
Sumitomo Rubber Industries reported a 12% increase in sales revenues from Asia in 2017 to ¥177.5bn
(US$1.14bn). In Q4 2017 the company reported a 2% decline in tyre sales volumes year on year in Asia,
following a 4% increase in Q3 2017, a 2% increase in Q2, and a 6% increase year on year in Q1 2017.
The company is forecasting a 10% increase in tyre sales volumes in Asia in 2018.
Sumitomo Rubber is to treble production capacity for passenger cars at its plant at Changsa in China by
2020 at an investment of ¥30bn (US$277m). Daily tyre production capacity at the plant will increase from
20,000 tyres/day to 60,000 tyres/day as part of the company’s long term objective of producing 100,000
passenger car tyres /day in China.
Goodyear reported a 4% increase in unit tyre sales to 8.8m tyres in Asia Pacific in Q4 2017 from 8.4m
tyres in Q4 2016. The company reported its tyre sales volumes reached a record high in Asia in Q4 2017,
driven by a 12% increase in sales to the OE sector. Operating income increased 13% year on year to
US$117m in Q4 2017, driven by an improvement in the mix of tyres sold and increased tyre sales
volumes.
For the full year of 2017, Goodyear reported a marginal increase in unit tyre sales in Asia to 31.2m tyres
from 30.9m tyres in 2016, with operating income declining to US$342m or 15.3% of sales from US$373m
or 17.7% of sales in 2016. The company is forecasting mid single digit growth in the consumer tyre
replacement market in China, with most rapid growth for larger diameter passenger car tyres. Goodyear is
expanding its retail distribution network in Tier 3 and Tier 4 cities in China and is expecting to add over
300 retail outlets in 2018.
The Chinese tyre company Qingdao Doublestar is to invest US$598m to acquire a 45% stake in the
Korean tyre company Khumo Tire, after an agreement to purchase the shares in 2017 collapsed.
Assuming an average weight of 8.5kg per tyre, then the volume of unit passenger car tyre exports from
China would have increased by around 7-8m tyres to an estimated 226m tyres in 2017 versus 2016. The
table below details passenger car tyre exports from China by region as measured in metric tons for 2017
versus 2016.
Passenger Car Tyre Exports by Region (China) 2016 vs 2017 – 000 mt
Destination 2016 2017 % Change 2017

Europe 598 661 10
Middle East/Africa 373 385 3
North America 361 298 -17
Asia 280 310 10
Latin America 213 234 9
Other 33 37 12
Total 1,858 1,925 3
Most of the increase in passenger car tyre exports from China was accounted for by an increase in
exports to Europe of 63,000mt of tyres to 661,000mt in 2017. It is estimated this was equivalent to an
increase in exports of around 7m tyres to 77m tyres in 2017. Chinese passenger car tyre exports to Asia
are estimated to have increased by around 3m tyres and by 2-3m tyres to Latin America. By contrast
passenger car tyre exports to North America declined by an estimated 7m tyres in 2017, as high import
tariffs negatively impact the volume of exports to the US market.
Traced imports of passenger car tyres to the US from China for 2017 versus 2016 indicates a 35%
decline in imports from China to 10.6m tyres, as detailed in the table overleaf.

Traced Passenger Car Tyre Imports from China by Tyre Diameter (US) 2016 vs 2017 – 000’s
Tyre Diameter 2016 2017 % Change 2017

13” or less 100 100 -
>13”<14” 600 300 -50
>14”<15” 2,200 1,200 -45
>15”<16” 4,100 2,300 -44
>16”<17” 3,900 2,600 -33
>17”<18” 1,600 1,250 -21
>18” 2,700 2,100 -22
Other 1,100 750 -
Total 16,300 10,600 -35
Three Chinese tyre manufacturers have constructed tyre plants in Thailand in the past three years,
circumventing high tariffs on Chinese passenger car tyres in the US market. As a result there has been a
major shift in the pattern of passenger car tyre exports to the US from Asia in the past two to three years.
In the past month the US Government has revised antidumping duties on passenger car and light truck
tyres produced in China. In some instances import duties have been lowered. For Giti Tire the anti
dumping rate has been lowed from 30.74% to just 1.5%. The rate for Qingdao Sentury Tire has been
lowered from 25.3% to 4.41%. For more than 60 other importers of passenger car tyres from China the
US Government has imposed an anti dumping margin of 2.96%. These reductions could lead to a
resurgence in passenger car tyre exports from China to the US market this year.
Larger Chinese tyre producers are seeking to develop new materials to match those of global tyre
companies. Linglong Tire has recently exhibited a dandelion natural rubber based tyre featuring a
graphene compound and polyurethane tyre using 3D printing techniques.
Unit truck tyre output in China is assessed to have increased by 2% in 2017 versus 2016, as detailed in
the table below.
Estimated Unit Truck Tyre Production (China) 2016 vs 2017 – 000’s
Truck Tyre 2016 2017 % Change 2017

OE 30,000 34,000 15
Replacement 88,000 86,000 -2
Exports 64,000 65,000 1.7
Total 182,000 185,000 1.6
The increase in unit truck tyre output is assessed to have been driven by an increase in demand from the
OE sector as truck output in China increased by 17% in 2017. Truck tyre exports from China increased by
1.6% as measured in metric tonnes to an estimated 66m tyres in 2017. These increases were offset by
weaker demand for truck tyres in the Chinese truck tyre replacement market remained weak in 2017
despite strong economic conditions and near record output of trucks in China.
Truck Tyre Exports by Region (China) 2016 vs 2017 - 000 mt
Destination 2016 2017 % Change 2017

Middle East/Africa 988 1,003 1
Asia 774 768 -
North America 743 735 -1
Europe 461 516 11
Latin America 324 328 1
Other 20 20 -
Total 3,310 3,370 1.7
Most of the increase in truck tyre exports from China in 2017 was accounted for by an increase in exports
to Europe offset in part by a decline in exports to North America. Truck tyre exports to Europe increased
by 55,000mt to 516,000mt in 2017, as the EU commission investigates allegations of dumping of truck
tyres into the European market. Truck tyre exports to the rest of Asia were almost unchanged from 2016
volumes in 2017, while exports to the Middle East and Africa increased by 1.5% or by 15,000mt to just
over 1m mt in 2017.
The decline in truck tyre exports to the US from China probably suggests truck tyre dealers built
inventories of Chinese produced truck tyres at the start of 2017 in case anti dumping duties were

imposed. It is possible that as these tyre inventories are depleted truck tyre exports to the US from China
will start to recover in 2018, supported by strong economic growth in the US. Should the EU impose
punitive import duties upon Chinese produced truck tyres, then clearly Chinese truck tyre producers will
seek to hike exports to other regional markets. Michelin reports there is a structural imbalance in the
global truck tyre market due to overcapacity in the Chinese truck tyre industry, which accounts for a
substantial proportion of global truck tyre capacity. Clearly this overcapacity has implications for the truck
tyre industry around the world.
Guizhou Tyre has opened a new radial truck tyre plant in Vietnam, with an annual production capacity of
1.2m tyres. The plant was opened in November 2017, with the opening ceremony was attended by the
Chinese President Xi Jinping. The new truck tyre plant represents part of China’s ‘Belt and Road’ policy
which aims to extend China’s road network across Asia. The policy is an important factor driving demand
for trucks and truck tyres as this major network of new roads are constructed. Major truck companies in
China are forecasting significant increases in truck exports for 2018, driven in part by the Belt and Road
policy.
Michelin reported very strong demand for truck tyres from the OE sector in China in Q4 2017, albeit from
a small base comparison. The company reports that very strong OE demand for truck tyres in Q4 2017
dampened demand from the replacement market. The company is expecting slower OE demand in 2018,
but an improvement in the replacement market due to the favourable economic conditions in the country.
Michelin is optimistic as truck producers in China realise the benefits of premium truck tyres it will make
substantial inroads into the Chinese truck tyre market. The company reports this change in mindset is
already happening in India as it has recently won a contract to fit its tyres to an Ashok Leyland truck.
Increasing environmental concerns should benefit Michelin and other premium truck tyre producers in
emerging markets such as China and India. In the meantime the company reports that the huge
structural imbalance in the Chinese truck tyre industry remains a major problem globally.
Passenger car and truck tyre exports from China increased sharply in Q4 2017, increasing by 3% to 3.m
mt in 2017 versus 2016, as detailed in the table below.
Tyre Exports (China) 2016 vs 2017 – 000 mt
Tyre 2016 2017 % Change 2017

Passenger Car 1,858 1,925 3
Truck 1,770 1,825 3
Total 3,628 3,750 3
The lowering of anti dumping duties for a number of tyre producers in China could lead to a recovery in
passenger car and light truck tyre exports to the US market this year. By contrast the EU Commission is
investigating alleged dumping of truck tyres into the EU, following a significant increase in the volume of
truck tyres being exported to the EU from China in the past four years.
Panasonic has opened a lithium ion battery plant to supply electrified vehicles and hybrid vehicles
produced in China and North America. The new plant at Dalian in northeastern China has been built at a
cost of US$142m. Korean battery makers LG Chemiclas and Samsung SDI both already operate lithium
battery plants in China.
Market demand for carbon black in China is calculated to have increased by 4.6% or 210,000mt to
4.77m mt in 2017 versus 2016, as detailed in the table below.
Estimated Market Demand for Carbon Black (China) 2016 vs 2017 – 000 mt

Production 5,200 5,400 3.8
Imports 90 102 13
Exports 734 731 -
Apparent Demand 4,556 4,770 4.6
The increase in market demand for carbon black is assessed to have been driven by an increase in unit
passenger car tyre output of around 20m tyres to an estimated 457m tyres in 2017. Domestic demand for
passenger car tyres in China is estimated to have increased by around 13m tyres to an estimated 230m
tyres in 2017, while passenger car tyre exports from China are estimated to have increased by 3% or by
8m tyres to an estimated 226m tyres in 2017. Unit truck tyre output is also assessed to have increased,
driven by strong domestic demand from the OE sector, as truck output in China reached record volumes

of output in 2017, offset in part by weaker demand in the replacement market. Vehicle production in
China also increased by 3% or by 900,000 vehicles to 29m vehicles in 2017. Unchanged carbon black
export sales volumes in 2017 from 2016, also suggest that all of the increase in carbon black output in
China in 2017 was to meet an increase in domestic demand.
Carbon black output in China is reported to have increased by 200,000mt to 5.4m mt in 2017, despite
reports from the market suggesting a number of carbon black plants have been forced into temporary
closure at least due to failures to meet strict environmental regulations. All of the increase in output came
from carbon black producers, which are members of the Chinese carbon black association. These
producers reported an increase in output of 200,000mt to 4.3m mt in 2017, while non member producers,
which includes Cabot Corp, reported output unchanged from 2016 volumes in 2017.
The table below details carbon black output for the ten largest carbon black producers in China for the
years 2015 to 2017.
Carbon Black Output by the Ten Largest Carbon Black Producers (China) 2015 - 2017 – 000mt
Producer 2015 2016 2017 % Change

2017
Jiangxi Black Cat 990 1,026 990 -3
Cabot Corp 500 560 500 -10
Hebei Shahe 405 450 446 -
Shanxi Yongdong 154 202 250 23
Suzhou Baohua 200 195 210 7
Shandong Jinneng Technology 181 193 200 3
Shandong Best 117 182 170 -6
Shan Xisanqiang 143 152 170 11
Liaoning Dashiqiao Liaobin 133 148 133 -10
Total 2,980 3,100 3,070 -1
% of Total Output 59 59 57
The re-election of President Xi Jinping is being seen as an indication that the implementation of
environmental regulations in China will become more strict especially if winter smog recurs. Investment by
carbon black producers who are able to source funding for investing in equipment to meet environmental
regulations will also lead to significantly higher operating costs for carbon black producers. However,
reports suggest that many smaller carbon black producers will be unable to source funding to invest in the
necessary equipment to meet environmental regulations. This is leading to suggestions that a number of
smaller carbon black producers in China could be forced to close.
Carbon black prices increased sharply in China in 2017, due to stricter implementation of environmental
regulations. This has led to a tightening supply of coal tar over the past year as capacity reductions in the
steel industry and the shift to produce more recycled steel has led to significant reductions in the
availability of coal tar. The process of implementing environmental inspections is reported to have been
widely variable depending upon the understanding and interpretation of local inspectors. Some local
inspectors have also not taken the implementation as seriously as others, but have discovered the
serious intent of the Government when national level inspectors have intervened. This has led inspectors
to put pressure on local mayors to quickly implement the regulations to reduce poor air quality for
example. In some instances this has led to plant closures in a single region even if some carbon black
plants have been compliant with the new regulations. As a result plant closures even of a temporary basis
have led to tight supply for carbon black in China. Reports indicate that many carbon black producers in
the Beijing, Tianjin and Hebei regions were greatly affected by the implementation of the strict
environmental regulations.
Increasing raw material and environmental costs and tight carbon black supply has driven carbon black
prices to high levels this year. The closure of many coking plants for environmental reasons has led to
tight supply of coal tar and the tight supply of carbon black. Coal tar prices are reported to have reached
to Rmb4,000/mt (US$633/mt). However, the restarting of steel mills in mid March 2018 is reported to have
improved the availability of coal tar. Nevertheless coal tar prices are being impacted by changes in the
steel industry, as the steel industry is shifting from virgin steel production to more recycled steel, which is
reducing the volume of coal tar production and driving higher coal tar prices. As a result the export
advantage of Chinese carbon black producers in terms or low coal tar prices is being diminished and is
unlikely to change in the near future.

Carbon black exports from China increased by 4% or by 22,000mt to 567,000mt in the first nine months
of 2017 from 2016, as detailed in the table below.
Carbon Black Exports (China) 2016 vs 2017 – mt
Destination 2016 2017 Average Export

US$/mt US$/mt 2017
Thailand 188,605 195,704 913
Indonesia 134,682 145,485 922
Vietnam 63,696 83,583 960
Japan 66,149 70,832 907
Taiwan 54,167 54,693 969
India 57,454 47,808 953
Malaysia 37,322 39,786 879
Philippines 8,246 12,981 913
Sri Lanka 13,442 10,120 947
South Korea 25,792 9,858 1,075
Australia 5,218 7,616 934
Pakistan 11,732 6,768 927
Myanmar 3,576 1,938 921
Singapore 1,341 1,884 1,094
Korea North 1,028 768 917
New Zealand 368 475 1,005
Bangladesh 305 440 1,306
Asia Total 673,123 690,739
Turkey 9,435 9,014 1,012
Israel 3,942 3,234 920
Nigeria 1,435 2,435 966
UAE 1,087 2,404 1,053
Kenya 1,353 1,801 1,124
Egypt 1,393 1,029 940
Iran 69 735 1,448
Djibouti 235 706 1,215
South Africa 488 613 1,123
Saudi Arabia 381 233
Iraq - 173
Syria 134 122
Middle East & Africa Total 19,952 22,499
United Kingdom 5,138 2,538 1,083
Belgium 4,077 1,998 1,855
Romania 3,724 1,857 973
Poland 47 1,822 958
Netherlands 1,176 1,201 1,315
Italy 714 511 2,022
Russia 91 390 928
Spain 511 234 1,770
Germany 196 232 1,855
Denmark 203 226 1,770
France 2,576 168 1,968
Europe Total 18,453 11,177
Chile 1,137 1,874 741
United States 7,663 1,649 1,637
Peru 1,450 1,093 781
Argentina 2,459 320 1,117
Colombia 827 317 1,537
Canada 4,800 187 824
Mexico 598 162 1,477
Brazil 266 148 1,621
Ecuador 1,220 68 1,267
Americas Total 20,420 5,818
Other 2,286 1,041 -
Total 734,234 731,274 941

Carbon black exports from China to the rest of Asia increased by 17,000mt to 690,000mt in 2017, driven
by an increase in exports to Vietnam by just under 20,000mt in 2017. Carbon black exports to Indonesia
increased by 10,800mt to a record 145,000mt and to Thailand by 7,100mt to a record 195,000mt,
however, export sales volumes to both markets slowed considerably in Q4 2017. Carbon black exports to
Japan increased by 4,700mt in 2017. However, carbon black exports to South Korea declined by
15,900mt and to India by 9,600mt in 2017. The substantial increase in feedstock costs in China has led to
a loss of cost advantage for Chinese carbon black producers in Asian export markets. It remains to be
seen whether carbon black producers are able to sustain export sales volumes, or whether tight supply
for carbon black in Asia will enable Chinese producers to implement large price increases to sustain sales
volumes.
Carbon black exports to the Middle East and Africa increased by 2,500mt to 22,500mt in 2017, driven by
an increase in exports to the UAE of 1,300mt and to Nigeria by 1,000mt, offset in part by a decline in
exports to Israel of 700mt and to Turkey of 400mt in 2017.
Carbon black exports to Europe declined by 7,000mt to 11,000mt in 2017, with exports to the UK
declining by 2,600mt; to Belgium by 2,000mt and to Romania by 1,000mt in 2017. By contrast carbon
black exports from China to Poland increased by 1,700mt in 2017. It seems probable that Chinese
exports to Europe will decline further if current feedstock prices are sustained in China.
Carbon black exports to the Americas declined by 14,600mt in 2017, driven by a decline in exports to the
US of 6,000mt; to Canada by 4,600mt and to Argentina by 2,100mt.
Carbon black imports to China increased by 11,500mt to 102,000mt in 2017 versus 2016, as detailed in
the table below.
Carbon Black Imports (China) 2016 vs 2017 – mt

2017 US$/mt
United States 20,427 21,850 2,675
Japan 13,562 16,917 2,712
South Korea 17,218 12,963 1,805
Thailand 5,445 11,652 1,046
Taiwan 7,855 10,032 1,648
Germany 6,033 7,359 3,332
Canada 5,413 6,254 1,836
Belgium 5,067 5,745 5,374
Singapore 2,408 3,031 2,637
Netherlands 2,768 1,729 3,097
Italy 1,010 1,243 1,859
Russia 1,622 1,126 1,209
Czech Republic 940 1,086 3,023
Other 836 1,154 -
Total 90,604 102,141 2,411
Carbon black imports from Thailand increased by 6,200mt; from Japan by 3,300mt and from Taiwan by
2,100mt in 2017 versus 2016.
Cabot Corp reported an increase in earnings of US$14m year on year in Q4 2017, due in part to an
improved pricing environment in China. Cabot reports the Chinese Government is continuing to enforce
environmental regulations against non compliant companies, as they focus upon air quality particularly
during the winter. Cabot reports it benefited from through improved pricing, as some carbon black plants
were forced to halt production, which tightened supply for carbon black. The company was able to
implement price increases ahead of anticipated increases in feedstock costs in Q4 2017. Reductions in
carbon black output in China also led to improved pricing for carbon black in South East Asia as carbon
black exports from China were negatively impacted by production cuts. Cabot Corp is uncertain how the
implementation will affect the carbon black industry in China in the longer term as implementation can
always be volatile in China. Some tyre companies in China have also been impacted by the
implementation of stricter environmental controls. Cabot Corp is trying to increase its sales at the rate of
the market in China, and is confident that market demand for carbon black in China will remain robust.

China’s largest carbon black producer Jiangxi Black Cat has yet to announce its full year financial results
for 2017. However, the company is forecasting net profits will increase year on year by between 118%
and 166% in Q1 2018 to be in the range Rmb115m to Rmb140m (US$18m to US$22m) from a net profit
of Rmb52.6m (US$8.3m) in Q1 2017, due to higher selling prices in Q1 2018.
The supply of carbon black to export markets has eased recently following reported tight supply in the first
two months of 2018. Exports prices for grade N220 from China are reported to be in the region
US$1,200/mt on an fob basis and US$1,100/mt for grade N330 on a similar basis.
Malaysia
The Malaysian economy increased by 5.9% in 2017, up from 4.3% in 2016 driven by a recovery in
exports, higher commodity prices and increasing capital investment.
Passenger car sales in Malaysia declined by 5% or by 2,200 vehicles to 36,600 vehicles in February
2017 due in part to fewer selling days in February 2018. Passenger car sales in Malaysia were
unchanged from 2016 volumes at 514,000 vehicles in 2017, following a 13% decline in vehicle sales in
Vehicle Sales (Malaysia) 2015 vs 2016 vs 2017 – 000’s
Vehicle 2015 2016 2017 % Change

2017
Passenger Car 591 514 514 -
Commerical Vehicle 75 65 62 -4
Total 666 579 576 -0.5
Declining demand in 2H 2017 offset strong demand for new vehicles in the first half of 2017. Indeed
demand for new vehicles in Malaysia continued to deteriorate in Q4 2017, declining by 6% year on year
to 150,000 vehicles, despite accelerating economic growth throughout the year. By contrast sales of
motorcycles and scooters increased by 10% year on year to 434,800 vehicles in 2017.
The Malaysian automotive industry is forecasting the overall market demand for new vehicles in Malaysia
will increase by 2% to 590,600 vehicles in 2018. Malaysia’s largest car maker Perodua is also forecasting
a 2% increase in sales to 209,000 vehicles in 2018 from sales of 204,900 vehicles in 2017.
Commercial vehicle sales declined by 5% or by 3,500 vehicles to 61,950 vehicles in 2017.
Across the Asean region new vehicle sales increased by 4.4% or by 143,000 vehicles to 3.38m vehicles
in 2017, despite slowing vehicle demand in Indonesia and Malaysia in Q4 2017.
Malaysia’s largest car maker Perodua, reported it sold 204,000 vehicles in Malaysia in 2017, down 1%
from the 207,000 vehicles it sold in 2016. The company has launched a refreshed ‘Myvi’ subcompact
passenger car into the market in order to drive an increase in sales volumes in 2018. The company is
targeting sales of 209,000 vehicles in Malaysia for 2018.
Honda reported a 19% increase in vehicle sales in Malaysia to 109,000 vehicles in 2017 compared to
sales of 91,800 sales in 2016, driven by the introduction of four new models in the domestic market.
Vehicle production in Malaysia declined by 16% or by 100,000 vehicles in 2016 to 513,000 vehicles, as
Vehicle Production (Malaysia) 2015 vs 2016 vs 2017 – 000’s
Vehicle 2015 2016 2017 % Change 2017

Passenger Car 563 503 459 -8
Light Truck 47 41 40 -3
Heavy Truck 2.9 2.5 2.5 -
Total 613 546 501 -8
Passenger car output in Malaysia declined by 8% or by 44,000 vehicles to 459,000 vehicles in 2017
versus 2016, despite car sales in Malaysia remaining unchanged from 2016 volumes in 2017. Vehicle

producers in Malaysia reduced output in order to reduce inventories of unsold vehicles in 2017. However,
vehicle output increased by 20% year on year in the first two months of 2018, as detailed in the table
below.
Vehicle Production (Malaysia) 2017 vs 2018 – Two Months only - 000’s

Passenger Car 83 99 19
Commercial Vehicle 5.5 6.8 24
Total 88 106 20
Passenger car output reached a monthly record of 64,300 vehicles in January 2018.
A recent forecast suggests vehicle production in Malaysia will increase slowly in the years to 2021. High
levels of car ownership in Malaysia are assessed to be driving slow increases in vehicle demand. The
Malaysian automotive association is forecasting new vehicle demand will increase by 5% in 2018 slowing
to an annual increase of 2.1% by 2021. On this basis domestic vehicle demand in Malaysia will increase
by around 70,000 vehicles per annum to around 574,000 vehicles by 2021, probably driving a similar
increase in domestic vehicle output. The Malaysian Government is forecasting vehicle output will increase
by 4% in 2018 to between 530,000 and 535,000 vehicles.
Malaysia’s largest vehicle maker Perodua produced 200,000 vehicles in 2017, down 6% from the 213,000
vehicles it produced in 2016, and down by 12% from the 229,000 vehicles it produced in 2015. The
company is forecasting output will increase by around 15,000 vehicles to 215,000 vehicles in 2018, driven
by strong demand for a recently refreshed sub compact model the ‘Myvi’.
Malaysia’s national car company Proton reported a 2% decline in vehicle sales to 71,000 vehicles in
2017, down from 72,300 vehicles in 2016. The decline in sales was due to lower fleet sales to taxi
companies, while retail sales increased by 2% year on year to 68,000 vehicles. The Chinese car
company Geely has acquired a 49.9% stake in Proton, and the two companies are working jointly to
develop a sports utility vehicle, which is to be launched in the Malaysian market in Q4 2018. The new
SUV is expected to be Geely’s Bouye model, which is its best selling model in China. Geely is planning to
use Proton’s large vehicle plant in Tanjung Malim as a base to supply the Asean market. The Proton plant
has an annual production capacity of one million vehicles. Proton reports suggest the company is
planning a major expansion of vehicle output in the years to 2022, in association with its new partner
Geely under a new five year plan. The objective is to increase vehicle output to 400,000 vehicles per
annum by 2022, of which around 200,000 vehicles will be exported. Geely, which owns the Volvo car
brand is thought to be planning to produce some Volvo models in Malaysia. Geely is reported to be
planning to install its own production technology at the Proton plant in Malaysia, as part of the new plan,
and will produce new models it has developed in China at the Malaysian plant. Geely expects the large
upscaling of production at the Proton plant will create a long supply chain to meet the increase in vehicle
output.
The Malaysian Government is developing a new National Automotive Policy, as the country struggles to
attract Tier One and Tier Two suppliers to the country. The automotive industry in Malaysia is facing
severe international competition and needs more strategic partnerships between local car companies and
foreign vehicle makers. The new policy is also seeking to encourage an increase in vehicle exports from
Malaysia, which remains low at 20,000 vehicles in 2017. High labour costs in Malaysia are one deterrent
to attracting internal investment in the automotive industry, in a highly competitive region where
competing Governments in Thailand and Indonesia are also seeking to attract foreign investment in the
automotive industry.
The French company Peugeot Citroen has entered into a joint venture agreement with Naza Automotive
Manufacturing in Gurun Kedah, as its first manufacturing base in the Asean free trade zone. Naza’s
vehicle plant has the capacity to assemble 50,000 vehicles per annum and will assemble the Peugeot
3008 and the Citroen C Aircross models.
Total unit tyre output in Malaysia is reported to have declined by 590,000 tyres to 15.2m units in 2017
versus 2016. Unit passenger car and truck tyre output and so has been estimated, as detailed in the table
overleaf.

Estimated Unit Passenger Car and Truck Tyre Output (Malaysia) 2015 vs 2016 vs 2017 – 000’s
Tyre 2015 2016 2017 % Change 2016

Passenger Car 9,000 9,000 10,060 11
Truck 700 600 500 -16
Total 9,700 9,600 10,560 10
Unit passenger car tyre output in Malaysia is estimated to have increased by around 1 million units to
11m tyres in 2017 versus 2016, as detailed in the table below.
Estimated Unit Passenger Car Tyre Production & Net Trade (Malaysia) 2016 vs 2017 – 000’s
Passenger Car Tyre 2016 2017 % Change 2017

Production 9,000 10,060 11
Imports 7,800 8,100 3
Exports 4,800 5,800 20
The increase in passenger car tyre output is assessed to have largely been driven by an increase in
exports in 2017. Passenger car tyre exports from Malaysia increased by one million tyres to 5.8m tyres in
2017, despite a decline in exports to the largest export market the US of 400,000 tyres. Passenger car
tyre exports from Malaysia to Russia increased by 280,000 tyres in 2017; to Thailand by 280,000 tyres; to
Hong Kong by 180,000 tyres and to Japan by 180,000 tyres in 2017.
Passenger car tyre imports to Malaysia increased by almost 300,000 tyres to 8.1m tyres in 2017 versus
2016, driven by an increase in imports of 220,000 imports from Thailand, and 200,000 tyres from Japan
offset by a reduction in imports from Indonesia to 2.4m tyres in 2017. Passenger car tyre imports from
Thailand and Indonesia account for 70% of car tyre imports in Malaysia with the total volume of imports
assessed to account for around two thirds of domestic demand.
The tyre maker Continental AG reported passenger car tyre output at its plant in Malaysia was
unchanged from 2016 volumes in 2017 at 4m tyres. The company is building a new tyre plant in Thailand
with an initial production capacity of 2m tyres in the years to 2021, but has no plans to increase capacity
at its Malaysian plant by 2021.
The Japanese tyre maker Toyo Tire reported a 12% increase in tyre output from its Asian tyre plants
outside of Japan, believed to comprise its tyre plants in China and Malaysia to 41,900mt of tyres in 2017
from 37,400mt in 2016. The company is forecasting a 5% increase in tyre output from its Asian tyre plants
to 44,200mt in 2018.
Toyo Tire is to increase tyre production capacity at its Malaysian plant with an investment of US$187m to
increase unit tyre production capacity by 4.8m tyres per annum, from an existing production capacity of
5m tyres per annum. Toyo’s tyre plant in Malaysia has sufficient land next to it to be able to construct a
second plant. The company is planning to produce large diameter tyres for pickup trucks, sports utility
vehicles and crossover vehicles at the new plant. In the past year the company reports it has produced
10m tyres at its plant in Malaysia that it acquired in 2011.
Toyo Tire reports it has developed a new nano process technology that optimises the structure of the tyre
filler in the solid rubber before preparing the compound. The company’s processing method then
achieves the ideal state for the filler where it is uniformly and highly dispersed even in natural rubber. The
new nano process disintegrates carbon black in a special solution and disperses it at the molecular level
in the initial compound creation process while stirring and coagulating natural rubber latex. As a result
the company has achieved its goal of formation of highly dispersed filler at the molecular level. The
company has established a research and development facility at its plant in Malaysia, and is planning to
develop a production line this year.
In late 2016 the Chinese tyre company Qingdao Fullrun Tyre reported it was to invest US$200m to build a
tyre plant in Jasin, Malacca state, Malaysia. It is unclear whether the company has yet proceeded with its
plans.
The Chinese tyre company Shandong Wanda Boto Tyre is also reported to have been considering
building a tyre plant in Malacca state, Malaysia at a cost of US$275m. The plant is expected to become
operational in mid 2018. The company has an annual production capacity of 15m passenger car tyres

and 3m truck tyres per annum at its plant in Dongying City in China, and generated revenues of
US$628m in 2015.
Unit truck tyre output in Malaysia is estimated to have declined by 16% or around 100,000 tyres to
500,000 tyres in 2017 versus 2016, as detailed in the table below.
Estimated Unit Truck Tyre Production (Malaysia) 2015 vs 2016 vs 2017 – 000’s

Production 700 600 500 -16
Imports 1,200 1,200 1,500 25
Exports 400 300 450 50
Apparent Demand 1,500 1,500 1,550 3
The decline in truck tyre output is assessed to have been due to the large increase in truck tyre imports of
300,000 tyres in 2017, which will have far exceeded any increase in domestic demand for truck tyres in
Malaysia in 2017. Truck tyre imports to Malaysia increased by 300,000 tyres to 1.5m tyres in 2017, driven
by an increase in imports from Thailand of 160,000, and from China of 140,000 tyres.
Continental AG reported unit truck tyre output of 200,000 tyres at its plant in Malaysia in 2017 unchanged
from 2016, but down from an output of 300,000 tyres in 2014.
Market demand for carbon black in Malaysia is assessed to have been unchanged from 2017 volumes in
2016 at 69,000mt, as detailed in the table below.
Market Demand for Carbon Black (Malaysia) 2016 vs 2017 – mt

Production 0 0 -
Imports 72,000 72,000 -
Exports 3,000 3,000 -
Apparent Demand 69,000 69,000 -
Unit passenger car tyre output in Malaysia is assessed to have increased by up to 1 million tyres to an
estimated 10m tyres in 2017, driven by a similar increase in car tyre exports. As the German tyre maker
Continental AG reported its tyre output in Malaysia was unchanged from 2016 volumes at 4m tyres in
2017, it seems probable that some of the increase in passenger car tyre output was by Toyo Tire at its
Malaysian plant. The company reported a 12% increase in tyre output from its Asian tyre plants outside of
Japan, believed to comprise its tyre plants in China and Malaysia to 41,900mt of tyres in 2017 from
37,400mt in 2016. It is estimated this would equate to an increase of around 500-600,000 tyres to an
estimated 7.9m tyres in 2017. The announcement by Toyo Tires that it is almost to double unit tyre
production capacity in Malaysia will be the key driver of increasing market demand for carbon black in the
country in the next three to four years.
In the mechanical rubber goods sector medium prospects for growth in market demand for carbon black
will hinge upon the ability of the Chinese car company Geely company to ramp up vehicle output at
Malaysia’s national car company Proton, having acquired a 49% stake in the company. Geely has set an
objective of ramping up vehicle output to 400,000 vehicles per annum by 2021/22, which would clearly be
a significant increase in vehicle output in Malaysia where vehicle output has been in the range 500-
600,000 vehicles per annum in recent years. Geely is expecting the development of the component
supply chain in Malaysia to meet its projected increases in vehicle output in the coming years.
Carbon black imports to Malaysia were unchanged at 72,000mt in 2017 versus 2016, as detailed in the
table overleaf.
Carbon black imports to Malaysia from China increased by 1,100mt to 42,500mt in 2017, accounting for
58% of market demand in Malaysia. Major carbon black producers such as Jiangxi Black Cat as well as
Cabot are believed to be supplying the Malaysian market from their plants in China. Carbon black imports
from India increased by 1,200mt and from South Korea by 1,000mt in 2017. However, these increases
were offset by a decline in imports from Thailand of 2,000mt and by 1,500mt from Indonesia in 2017.

Carbon Black Imports (Malaysia) 2016 vs 2017 – mt

US$/mt
2017
China 41,433 42,546 879
Indonesia 10,246 8,728 828
Thailand 9,324 7,315 1,055
South Korea 3,504 4,587 1,700
India 1,633 2,857 932
United States 2,045 2,185 3,189
Japan 969 1,263 4,127
Germany 1,386 1,139 1,933
Belgium 379 457 4,535
Singapore 143 245 3,988
Austria 236 193 852
Sweden 161 180 1,550
Canada 218 149 1,946
Italy 107 149 2,327
Switzerland 22 105 1,474
Taiwan 88 70 1,584
Poland 139 59 927
Other 405 186 -
Total 72,674 72,694 1,140
The table below details estimated specialty carbon black imports from the above table. The imports are
assessed to be specialty imports based upon the source country of the imports, and the high average
import value for 2018.
Estimated Specialty Carbon Black Imports (Malaysia) 2016 vs 2017 – mt

US$/mt
2017
South Korea 3,504 4,587 1,700
United States 2,045 2,185 3,189
Japan 969 1,263 4,127
Germany 1,386 1,139 1,933
Belgium 379 457 4,535
Singapore 143 245 3,988
Sweden 161 180 1,550
Canada 218 149 1,946
Italy 107 149 2,327
Switzerland 22 105 1,474
Taiwan 88 70 1,584
Total 9,258 10,810 -
The increase in imports was largely due to an increase in imports from South Korea of 1,080mt in 2017.
Cabot closed its carbon black plant in Malaysia in 2013, but has continued to produce elastomer
composites at Port Dickson in Malaysia. Cabot Corp is increasing production capacity for elastomer
composites at Port Dickson, which is a unique material made from natural rubber and carbon black.
Elastomer composites are produced using a proprietary and patented mixing process that enables a
superior level of carbon black dispersion, creating materials that are structurally different from
conventional compounds
Carbon black continues to be exported from Malaysia and are believed largely to be specialty grade
carbon black, as detailed in the table overleaf.

Carbon Black Exports (Malaysia) 2016 vs 2017 – mt

US$/mt 2017
Japan 694 692 462
Thailand 279 611 3,290
Indonesia 590 448 4,313
Singapore 342 365 2,805
India 315 265 4,084
Vietnam 108 234 2,411
Australia 135 170 2,657
Taiwan 170 167 4,228
China 409 121 2,877
Philippines 99 44 4,390
South Korea 28 28 3,289
Bangladesh 22 23 420
Other 33 54
Total 3,224 3,222 2,769
Carbon black grade N220 is currently reported to be priced in the region US$1,400/mt on a cif basis to
Malaysia from Thailand and grade N330 is in the region US$1,300/mt on a similar basis, with reports
suggesting carbon black supply from Thailand is currently tight.

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© Chemical Market Intelligence 1

US Exports of Carbon Black Feedstock Oil

Destination January/February 2018

US Exports of Carbon Black Feedstock Oil

Destination February 2018

© Chemical Market Intelligence 2

Vehicle 2016 2017 2018 % Change 2018

© Chemical Market Intelligence 3

Vehicle Production (North America) 2016 vs 2017 vs 2018* - 000’s

Vehicle 2016 2017 2018* % Change

Tyre 2016 2017 2018* %

© Chemical Market Intelligence 4

© Chemical Market Intelligence 5

© Chemical Market Intelligence 6

Vehicle 2017 2018 % Change 2018

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

Vehicle 2015 2016 2017 % Change 2017

© Chemical Market Intelligence 7

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

Vehicle 2015 2016 2017 % Change 2017

Vehicle 2016 2017 % Change 2017

© Chemical Market Intelligence 8

Tyre Diameter 2016 2017 % Change 2017

Truck Tyres 2016 2017 % Change 2017

© Chemical Market Intelligence 9

Carbon Black 2015 2016 2017 % Change 2017

© Chemical Market Intelligence 10

Carbon Black Imports (Canada) 2016 vs 2017 – mt

Source 2016 2017 Average Import Price

Carbon Black Exports (Canada) 2016 vs 2017 – mt

Destination 2016 2017 Average Export Price

© Chemical Market Intelligence 11

Vehicle 2017 2018 % Change 2018

© Chemical Market Intelligence 12

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

Vehicle 2016 2017 % Change 2017

Light Vehicle Production by Manufacturer (Mexico) 2016 vs 2017 – 000’s

Vehicle 2016 2017 % Change 2017

Light Vehicle Exports (Mexico) 2016 vs 2017 – 000’s

Vehicle 2016 2017 % Change 2017

© Chemical Market Intelligence 13

Passenger Car Tyre 2014 2015 2016 2017 % Change

© Chemical Market Intelligence 14

Passenger Car Tyre 2014 2015 2016 2017 % Change

Traced Passenger Car Tyre Imports to the US from Mexico

Source 2016 2017 % Change 2017

© Chemical Market Intelligence 15

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

Carbon Black 2016 2017 % Change 2017

Carbon Black Imports (Mexico) 2016 vs 2017 – mt

Source 2016 2017 Average Import Price

© Chemical Market Intelligence 16

Carbon Black Exports (Mexico) 2016 vs 2017 – mt

Destination 2016 2017 Average Export Price

© Chemical Market Intelligence 17