Carbon Black is an industrial material that most people have never heard of, but it is found everywhere. It is strong, dense, and very light. This high tech product is found in products from tires to clothing to plastic. It is used to color products, as well as to make them stronger and longer lasting.
In this exclusive video, Jack Clem discusses the business side of carbon black. As one of the world’s leaders in carbon black production, one of the big three, Clem is perfectly situated to explain how carbon black is finding its way into more products every day.
Carbon Black is Highly Profitable
The traditional carbon black market is Orion Engineered Carbon’s biggest contributor to its bottom line, comprising 62.5% of the company’s $1.18 billion revenue. However, the remaining 37.5% of sales comes from specialty carbon black products, which contributed 61.4% of Orion’s earnings before interest, taxes, depreciation and amortization (EBITDA). The difference arises from the comfortable profit margins for specialty products, an area which Orion has been actively pursuing. Specialty product sales contribute profit margins of 35.4%, which is more than 2.5 times the margins in the traditional rubber tire business.
As a whole, Orion leads the industry with a 26% market share by sales volume.
Barron’s named Orion Engineered Carbons as a global leader in the growing Carbon Black industry, currently worth $16 billion.
It’s improving conductivity without creating impurities that spoils the life of the battery.
The company, run by veteran entrepreneur Jack Clem, has expanded worldwide mainly due to the wide range of products it is offering. In most cases, it is the only supplier for these specialty products. The volume and variety allows it to charge premium prices. The growth in specialty products was 13% year over year for 2016. Besides polymers, paints and pigments, these included battery related products, which are used in the manufacture of lead acid batteries as well as lithium batteries.
Orion earned 80.2 million euros in 2016, an amount which is estimated to increase by 11% in 2017. The estimated revenue growth is around 14.6%. The company has gone public, with around 58% of the shares still in the hands of private-equity owners. This has resulted in a less volatile stock price, but with less liquidity, than most other new IPOs. The forecast for both the short-term and long-term stock prospect is bullish.
Expanding Markets, Increasing Profits
Besides tires, Orion Engineered Carbons has partnered with clothing manufacturers as well as various businesses across different industries. However, a bold application of carbon black technology is in the production of lithium batteries.
“It’s a great application. The challenge of all battery suppliers today is to make battery life last longer. Smaller batteries, longer life. It always requires some conductive material in the battery for that to occur. The conductive material that we supply is a particular kind of carbon black – it requires a special purity which we can do. It requires a special structure and size and shape of the particle of the aggregate that we can do,” Clem explained in his BOLD BUSINESS interview.
The Luxembourg-based company has worked directly with battery manufacturers as well as the suppliers of components to the batteries. He adds that the aim was to improve the dynamics of the physics of the carbon black particle to improve the conductivity which is critical to battery life.
Carbon, the element itself, is non-conductive. Orion’s Carbon Black is 95% to 99% carbon. However, with the right purity levels, manufacturing process and the addition of other elements, Carbon Black can have the very conductive properties which are uniquely required in batteries. This improves the performance of batteries, as well as the dynamics of how the battery works.
Traditional lead acid batteries have evolved over time. At one time, a car battery had to start an engine and store electricity; these days, far more is demanded. Many cars now have a quick start feature in which the engine turns off at stop lights, in order to save fuel. But that means the battery has to crank the engine to life again when the light changes, it saves money, but drains batteries. Plus anti-theft devices and other components drain charge from car batteries at higher rates than in the past.
With the use of Carbon Black in the manufacturing process, modern lead acid batteries can be designed to handle the additional load without undue stress. The new process, and a specific formulation for Carbon Black, has enabled batteries to be used longer even with the stress of start-stop operations and 24 hour devices.
“It’s always about conductivity,” Clem stressed. He added, “It’s improving conductivity without creating impurities that spoils the life of the battery. We work hard to make sure we’ve got that rock-type of a composition to accomplish that.”
Batteries are a source of growth for Carbon Black products which is not usually seen by the public. With technology improvements in batteries directly attributable to Carbon Black, any growth in battery use and manufacturing volume and demand also results in demand and volume for Carbon Black.
A visionary and bold thinker, Clem is looking at expanding the world-class capabilities of Carbon Black and driving growth at Orion Engineered Carbons.