Russian Carbon Black Prices Continue to Surge as Secondary Automobile Market Recovers

Novorossiysk (Russia): In May 2024, Russian Carbon Black prices continued to improve, driven by increased demand from downstream markets, particularly the recovering secondary automobile market. The uptick in demand is complemented by rising movements across Black Sea freights and shadow fleets delivering Russian Carbon Black to the Danube. According to market intelligence, Danube's traffic saw a 13% quarter-on-quarter recovery in Q1 2024 due to rising temperatures and increased water levels.

This increase in trade flows from the Black Sea, including LNG supply from Russia to Europe, has helped stabilize European gas prices, benefiting European crackers and tire markets. Russian Carbon Black N220 grade FOB Novorossiysk was assessed at USD 1170/MT in early May 2024, reflecting a 4% year-on-year recovery. This price increase is attributed to higher crude availability for Russian refineries and a tightening supply, which boosted Carbon Black demand in Russian markets during Q1 2024.

The used car market also saw significant activity, with supply continuing to grow. In April, sales announcements increased year-on-year and month-on-month, leading to a decline in average prices. After the May holidays, dealers reported a revival in demand, suggesting growth in the secondary market segment. This trend is mirrored in the Carbon Black N220 grade and SBR deliveries for April and May, where Russian prices remained high despite slowdowns in other major segments.

Avito Auto reported a 13.9% year-on-year increase in offers for used cars in April and a 5.8% increase compared to March. The supply has been rising steadily since the beginning of the year, with a 27.9% year-on-year increase in advertisements in the first week of May.

Danube's trade flow saw an uptick in April, with shadow tankers bringing Russian deliveries of Carbon Black N220 grade and fertilizers. Additional freights have joined shadow tankers to capitalize on global supply disruptions in the Red Sea and Middle East. Freight charges from Northeast Asia to Northern Europe have reached USD 4200/FEU, adding USD 40/ton on a CFR basis, which has increased cost pressures for European Carbon Black N220 grade and other petrochemical feedstock importers.

Despite this, European economies saw some recovery in February and March, partially due to accepting higher levels of Russian LNG deliveries. Russian daily reports indicated an increase in LNG imports to 4.3 million tons in Q1 2024 at prices lower than US supply, offering significant advantages. However, rising freight costs are eroding European production margins. Although theoretically, this could impact Russian Carbon Black exports, Russian analysts expect strong year-on-year demand from Europe, even if a quarter-on-quarter dip is anticipated in Q2 due to ongoing negotiations to extend the EU's ban on SBR and Carbon Black N220 grade, set to take effect in July. Consequently, prices are expected to improve further as European domestic production capacities are not scaled to meet higher demand until FY26-27, supporting continued Russian Carbon Black exports at an elevated pace for Q2.