The Monolith announcement is not that surprising, as the auto industry is very focused on its carbon footprint and its suppliers, like Goodyear, are under pressure to look for more sustainable solutions. While Monolith uses natural gas as a feed, it’s carbon black is produced with very limited Scope 1 emissions, unlike the traditional route, used by the incumbents. It is not clear what the production economics are for Monolith because the co-product value of hydrogen could vary greatly depending on local needs, but the emergence of a competitor who sees carbon black potentially as a by-product is not likely to be good news for the traditional makers. A by-product that is more environmentally friendly is even more of a threat. Complicating the picture further could be the arrival of larger volume production from Origin Materials, which has a renewable based carbon black like material, which may also be seen as a by-product.
We think that Orion Engineered Polymers and its fellow traditional carbon black producers could be in for a rough ride.
Given the complexity of solving both the climate and the plastics waste issues, both of central importance to the chemical industry, we are very much of the view that you should try everything. No single technology or pathway is likely to be the answer and different solutions may have different levels of attraction in different geographies. In our ESG and Climate weekly report yesterday, we spent time talking about recycling and how the business might logically develop and we talked about where blue and green methanol might fit.