Acute shortage of carbon black chokes non-tyre rubber companies

An acute shortage of carbon black is feared to have made the $3 billion (Rs  200 billion) non-tyre rubber industry cut production by 15 per cent over the past six months.

Carbon black contributes nearly 30 per cent to the input cost for the industry. The units are now staring at job losses and closure of units after the government levied an anti-dumping duty on tyre imports. Carbon black for non-tyre manufacturers has since been diverted to tyre makers, leaving non-tyre players struggling to get the crucial raw material.

Chairman and Managing Director of Oriental Rubber Industries Vikram Makar said: “Since the anti-dumping duty was levied, tyre production in India has gone up by nearly 25 per cent to meet the rising demand. This led to supply diversion of carbon black from non-tyre manufacturers to tyre manufacturers, who have stronger financial muscle. Most non-tyre rubber manufacturers are small and medium enterprises (SMEs) and cannot compete with tyre manufacturers when price increases. We, therefore, want the government to review its anti-dumping duty decision to safeguard the domestic producers.”

Prices of carbon black have almost doubled in six months and trade at Rs 130 a kg in India. Global prices are around $1,500 a tonne, making import unviable.

“Around 1,000 SME units are on the verge of closure and the remaining have reduced their operational capability due to non-availability or carbon black,” said Vishnu Bhimrajka, director, Polmann India Ltd. “Domestic suppliers have failed to meet non-tyre manufacturers’ demand. Import is virtually impossible due to high anti-dumping duty. We can comfortably say that the industry fears job losses of around 200,000 if carbon black supply remains constrained for some more time.”

Suppliers have started defaulting on orders, too, said sources.

There are 40 tyre manufacturers and around 6,000 non-tyre manufacturers producing seals, conveyor belts, extruded and moulded rubber profiles, etc. These products are used in auto, railway, defence, aerospace and many such areas. Being a labour-intensive sector, these units cumulatively employ around 1 million, primarily unskilled workers.

The industry has urged the government to review its decision to levy anti-dumping duty of $397.10 a tonne, $36.17 a tonne and $494 a tonne from China, Russia and the rest of the world, respectively. The anti-dumping duty was levied in November 2015 for five years.

“The user industry did not oppose the government’s move as the decision was in the interest of domestic producers,” said Vinod Bansal, managing director, Jayashree Polymers. “But they are suffering, as carbon black manufacturers transport only a small portion of orders. This affects our commitment to users of end products. We therefore, want the government to intervene to ease out carbon black supply to non-tyre manufacturers.”

India has a carbon black production capacity of around 1.2 million tonnes, almost that of the consumption by tyre and non-tyre manufacturers. The major manufacturers are SKI Carbon (a Birla Group company), Phillips Carbon Black Ltd and Himadri Speciality Chemical Ltd.