Orion Engineered Carbons is implementing base price increases of up to 9% on all rubber black grades made in South Korea and sold in the Asia-Pacific market, effective as of shipments made from December 1, 2016.
Tightening environmental laws and regulations in South Korea are adding substantial amounts to the company’s operating cost base, as are the annual increases in labor costs. This is aggravated by unfavorable developments in the feedstock market; over the last few months Orion has had to pay significantly more for required high quality carbon black oil due to a very tight Korean fuel oil market. Orion has implemented intensive cost reduction campaigns to absorb cost increases, but these efforts are no longer adequate to deal with the challenges it faces.
The price increase is independent from the underlying movements of the Singapore fuel oil index, which continues to be used as a reference for price adjustments related to oil price changes which Orion negotiates with its Korean customers on a regular basis.
Meanwhile the company also plans to convert a tire grade carbon black production line at its plant in Yeosu, South Korea, to specialty and technical rubber products. This action will impact approximately 20 kilotons of carbon black.
The conversion process will begin in Q4 of this year and is expected to be completed by July 2017.