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CARBON BLACK AND ITS SUBSTITUTE, RECOVERED CARBON BLACK: KEY FACTS
Carbon black is a raw material produced from the incomplete combustion of heavy petroleum products, commonly referred to as virgin carbon black. It has widespread applications in rubber, paints, and coatings, and is a key component of various everyday items such as charger cables, phone covers, and pen ink. One prominent application of carbon black is in car tires, where it serves both as black pigment and a filler material.
Its substitute, recovered carbon black (rCB), developed through a thermal pyrolysis process, addresses two opportunities.
Firstly, it provides a sustainable way of recycling used tires from which rCB is derived. Used tires, with a lifespan of around five years (50,000 km) contribute significantly to the global waste stream, with over 1.5 billion discarded annually, forming a large and available untapped potential resource. In Europe, in 2019, 95% of the 3.5 million tons of passenger ELTs were collected. This high collection rate is attributed to the ELTs management system introduced in Europe in 2006, which places the responsibility on tire manufacturers for ELTs collection and recycling. The thermal pyrolysis technology developed by several tire producers and start-ups repurposes end-of-life tires by producing rCB and thereby creating a sustainable tire recycling loop.
Second, recovered carbon black is a lever for decarbonizing the tire production chain. A vehicle tire contains on average 30% carbon black. rCB production generates five times fewer carbon emissions than conventional fossil fuel-based production (vCB). This generates 10 kg of CO2 when produced from virgin carbon black, compared to only 2 kg of CO2 when produced from recovered carbon black. This move towards sustainability has been somewhat accelerated by the embargo in Russia due to the invasion of Ukraine, underscoring the strategic importance of rCB in ensuring supply chain resilience and supporting the industry’s pivot towards more sustainable production practices. As of July 2024, EU will ban carbon black imports from Russia (30% of EU imports).
NEW ECOSYSTEM IN THE END-OF-LIFE TYRE SUPPLY CHAIN
The carbon black supply chain comprises various stakeholders, and recently, with the emergence of rCB and the interest it has generated, it has become more complex. Originally, the end-users of carbon black – tire, rubber, chemical, plastics, and ink producers - purchased vCB from manufacturers such as Cabot, Birla Carbon, and Orion, who source their raw materials from oil refineries. The introduction of recovered carbon black reshaped this value chain, adding three main players: raw material suppliers, carbon black producers and upgraders.
Recovered Carbon Black producers can be categorized into three groups:
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Raw rCB producers supply low value tire char, which requires post-processing and refining to address the carbon black market.
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Post-processed rCB producers can be further classified into two types: integrated players owning the pyrolysis technology for oil and rCB recovery; and pure operators who own the plant they operate but obtain a license from technology providers to carry out the manufacturing process.
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rCB upgraders acquire post-processed and raw rCB and utilize carbon activation and ash leaching methods to enhance rCB quality, producing high-value specialty-grade rCB.
Two strategic partnerships models have emerged to enhance access to rCB for end customers, including Michelin, Goodyear and Pirelli, who are also consumers of vCB.
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First, collaborations between vCB and rCB manufacturers have allowed rCB players to leverage vCB players’ market access, while vCB players can align with sustainability goals. The long-term agreement between Birla Carbon and Circtec since 2021 illustrates this type of partnership.
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Second, commercial partnerships between rCB producers and end-users have been established to facilitate co-development, better align with customer requirements, and importantly, secure rCB offtake at least during initial market introduction. An example of such a partnership is the collaboration between Swedish rCB manufacturer Enviro Systems backed by Antin Infrastructure Partners and Michelin. Antin and Enviro entered into the joint venture in March of 2023 to build a series of plants in chosen European geographies. Antin is a majority shareholder of the JV, Michelin a minority shareholder and Enviro has an option to become a significant minority shareholder. Michelin supports the JV by signing multi-year supply agreements regarding recycled materials from the first plants established. The JV signed multi-year agreements for the supply of end-of-life tires and offtakes for the recovered carbon black and oil products (5-10 years secured offtake contracts with leading tire manufacturers such as Michelin, Nokian Tyres, Preem, etc.). They announced in February 2024 the final investment decision for a first plant in Uddevall (Sweden).
In addition to rCB producers, the carbon black value chain now incorporates end-of-life tires recyclers, who supply rCB producers with the necessary raw materials. In Europe, these recycling entities are non-profit organizations funded by tire producers and importers. They collect an eco-contribution, which in 2023 amounts to €1.40 per processed car tire, deducted from the initial tire sale.
To fulfill their obligation regarding end-of-life tire management, major tire manufacturers such as Bridgestone, Continental, Goodyear, Pirelli and Michelin have established non-profit organizations in the countries where they operate to oversee the collection of used tires. Examples of these organizations include Aliapur in France (founded in 2003), or Ecopneus Scpa in Italy (founded in 2011). This efficient collection system, with a collection rate of nearly 95%, was established in response to European directives making public actors in charge of regulation another important player of the carbon black value chain. One of the most influential public entities overseeing this chain is the European Union’s DG Environment which has introduced various directives over the years. In 1999, it prohibited the landfilling of used tires; in 2000, it implemented measures to prevent the generation of waste from vehicles and their components, and in 2006, it introduced the Extended Producers Responsibility scheme, making tire producers responsible for managing used tires.
Waste management companies such as Veolia and Suez play a crucial role in this tire collection process, collaborating with garages, dedicated recycling centers, public landfills, and gas stations to supply used tires to rCB producers.
Marubeni also entered the rCB market in February 2024 through an investment in RCB Nanotechnologies, a Munich-based company currently constructing a rCB chemical purification plant to produce recovered Carbon Black to be used in tires. Marubeni plans to consolidate and structure a sustainable value chain from rubber raw materials to tire.
Finally, the interest from various investment funds in this emerging substitute, coupled with strategic partnerships involving prominent industry players, highlight the growing importance of this new product. For example, the post processed rCB producer Klean Carbon has collaborated with Niersberger Group, Europe's leading biogas engineering and construction company, to develop commercial scale pyrolysis technology within the European Union. Furthermore, Antin Infrastructure Partners investment fund has formed a joint venture with Enviro Systems, with support from Michelin to create the world’s first large-scale tire recycling group. Lastly, the BlackCycle project, an initiative coordinated by Michelin and funded by the EU, aims to establish a circular tire economy in Europe.
The commitments of various tire manufacturers on recycled and sustainable materials will increase demand for rCB, and interest from many other new entrants.
TECHNOLOGICAL AND REGULATORY BARRIERS
While the recovered carbon black market appears to be a promising and dynamic market, several challenges hinder its expansion, primarily due to its not yet full technical maturity.
Most pyrolysis technologies are considered demonstration systems (TRL-7, on the Technological Readiness Level scale) or first-of-a-kind commercial system (TRL-8), which is still too immature for large-scale commercialization (requiring TRL-9).
The industry’s slow-paced integration of rCB in new products constitutes another obstacle to the expansion of rCB. Indeed, the process of developing new products with recovered carbon black or integrating it into existing ones has experienced a long lead time, often taking a decade or more, as seen in the tire industry. Corporate sustainability initiatives, such as Michelin’s commitment to incorporating 40% recycled and sustainable materials in the production of new tires by 2030, and 100% by 2050, should accelerate the adoption of recovered carbon black in the rubber industry as a viable substitute for virgin carbon black.
Finally, there is a lack of standardization in terms of testing and product classification for rCB. In 2017, ASTM committee D36 was established to outline differences between char, carbon black, raw recovered carbon black and recovered carbon black. Additionally, subcommittees were formed to develop quality and safety standards for recovered carbon black products as well as terminology, guidelines, practices, and testing methods. This led to the creation of a rating system that categorizes the quality of recovered carbon black on a scale from N900 to N100, determining its suitability for various applications. While this rating system aids in facilitating the exchange between producers and buyers, the numerous distinctions within the N900 and N100 range can complicate the system and could slow the development of standardized products.
rCB MANUFACTURING CAPACITIES ARE NOT EXPECTED TO MEET DEMAND
Today, in Europe, around twelve players are trying to meet the demand for rCB. Together, they have an operating production capacity of ~20 kton per year. The largest producer is Circtec, an integrated player which has formed a strategic partnership with a major vCB producer, Birla Carbon. Another prominent rCB producer is the listed company Pyrum Innovations AG, which recently joined forces with BASF SE (the leading chemical group) and Suez (the French water and waste management specialist). Pyrum is positioning itself as a significant actor on the rCB market, with the goal of expanding its production capacity by four by 2030.
Despite the presence of these promising companies and numerous partnerships, the current supply of rCB falls significantly short of the existing demand in Europe. The current supply stands at approximately ~20 ktpa while demand ranges from 250-550 ktpa. The potential future expansions of the most ambitious players such as Enviro could potentially bridge the supply and demand gap.
It is essential to acknowledge the two significant expectations for the future trajectory of the rCB sector. Having initially started at a gradual pace, the industry is now advancing into the stage of industrialization and commercialization, with momentum now gathering strongly. A strong interest is anticipated as the sector expands, as reflected in the emergence of long-term commitments and offtake agreements, which indicate a market ripe for the mass deployment of technology.
Given the increasing demand dynamics, the capacity of existing facilities combined with the announced short-term additional capacities and long-term ambitions fall short of meeting the demand. This discrepancy presents a compelling opportunity for new market entrants and investors. The immediate challenges that must be tackled include establishing a supportive framework for sustained engagement and achieving the technological maturity necessary for broad-scale deployment, both essential for the sector’s full potential to be realized.
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