Cabot pins hopes on Chinese auto market
Updated: 2012-04-18 08:04
By Du Juan in Xingtai, Hebei (China Daily)
The world's largest manufacturer of carbon black is boosting its output in China with an eye on cashing in on booming automobile ownership in the country.
"The number of China's vehicles will grow rapidly in the next 10 years, which will bring opportunities to carbon black manufacturing," said Patrick Prevost, president and chief executive officer of the US-based Cabot Corp, the world's largest carbon black producer.
Carbon black is a reinforcing agent essential in the manufacturing of tires. The material is also used in many automotive parts, including adhesives and sealants, battery materials and coatings.
The company, together with its Chinese partner Risun Chemicals Co Ltd, will invest $100 million in a carbon black production facility with an initial annual production capacity of 130,000 metric tons, boosting Cabot's manufacturing capacity in China by 25 percent.
The construction of the factory in Xingtai, Hebei province, will begin on Wednesday. It is due to become operational in the middle of next year.
Cabot, which has a 60-percent stake in the project, will contribute cutting-edge technology, while Risun will provide raw materials and its production experience.
"Being located in China is an important aspect of our global strategy to produce locally," said Prevost.
"It is important for us to be right next to our customers to meet the demand."
According to Cabot, the products it manufactures in China are mainly sold and used within the country. The company's overall revenue last year was $3.1 billion, with the Chinese market accounting for almost 20 percent.
According to the research firm IHS Automotive, China's motor vehicle fleet is expected to increase to about 315 million vehicles by 2022, up from the current 102 million vehicles.
Yang Yang, an industry analyst, said domestic carbon black producers already face fierce competition, but mainly concentrate on low-quality products. However, some Chinese companies are changing their strategies to improve their products, aiming at the overseas market.
Prevost said he wasn't worried about competition, noting that the demand for the high-quality carbon black products exceeds supply and there is further room for market expansion.
Chinese customers are increasingly demanding high-performance materials, and Cabot is working on delivering high-quality carbon black products that can meet China's emerging demand for tires and industrial rubber products, said Dave Miller, Cabot Core Segment executive vice-president.