Surging Coal Tar Prices Combined with Supply Contraction Drove Carbon Black Prices Up by More Than 50% in a Single Month

This sharp rise is the result of a combination of rigid cost pass-through from the upstream coal sector chain and multiple supply-side contractions. Fundamentally, it represents a price adjustment driven by costs and supply-side constraints, rather than one caused by overheated downstream demand or speculative trading.

Cost side: Coal tar prices had surged, driving costs through rigid upward pressure.

Coal tar accounts to 65%–80% of carbon black production costs, and the sharp rise in its price has immediately driven up production costs.

The root trigger of the surge in coal tar prices is the contraction of coking coal supplies. Since the beginning of the year, the resumption of production at mines in key producing regions has lagged behind expectations due to factors such as security inspections and environmental audits. This has led to a pronounced supply gap to high-condition coking coal, driving up prices by approximately 77% year-to-date. Rising coking coal costs have pushed coking companies into widespread losses, forcing them to cut operating rates. As a byproduct of the coking process, coal tar output has consequently declined; furthermore, some companies have diverted supplies from external sales to internal consumption, further tightening market availability.

In September, coal tar pitch exports improved and profit margins widened; the deep-processing sector maintained high operating rates, generating robust demand to coal tar. Compounded by concentrated stockpiling ahead of the Mid-Autumn Festival and National Day holidays, the supply-demand dysfunction intensified sharply. The price of high-temperature coal tar surged by 2,200–2,270 RMB/ton in just two weeks, setting a historic record with a single-week increase of nearly 2,000 RMB/ton.

Supply side: Production cuts and low inventory levels among carbon black producers amplified price elasticity.

Carbon black companies themselves are facing severe operational pressures, with multiple factors driving a contraction in supply: the sector has suffered prolonged losses and is strongly motivated to hold the line on prices. The sector experienced sustained losses through the fourth quarter of 2025, and total sector profits stood at -115 million yuan in the first half of 2026, marking a continuation of sector-wide losses. Following a sharp rise in raw material costs, companies found themselves in an extreme predicament—forced to fulfill previously signed low-price orders while bearing high current material costs. With per-ton losses hitting record highs, they were compelled to implement concerted production cuts in response.

Operating rates remain at low-to-moderate levels, and spot inventories are low. Driven by a combination of factors—including earlier losses, facility maintenance, and environmental regulations—the domestic carbon black sector's operating rate is hovering around 65%. Major manufacturers have generally cut production by 30% to 40%, while some small and medium-sized companies have halted production entirely due to limited resilience. Overall sector spot inventory is low; manufacturers are largely scheduling production based on orders, resulting in a scarcity of available market supply and a growing reluctance among producers to sell.

Environmental policies are also accelerating the phase-out of outdated production capacity over the medium to long term. In April 2026, seven government departments jointly issued a directive explicitly including the carbon black sector in the scope of upgrades and retrofitting to aging facilities; consequently, a number of small and medium-sized production units failing to meet environmental standards face closure or production restrictions.

Demand side: Supported by essential tire demand, however limited willingness to chase rising prices.

Tire manufacturing is the largest downstream sector to carbon black, accounting to over 60% of total domestic consumption. Currently, operating rates to all-steel and semi-steel tires hover around 65%; with the traditional "Golden September" peak season approaching, tire manufacturers are stocking up ahead of the holidays, providing a baseline of essential demand to carbon black.

However, tire companies are showing significant resistance to the rapid surge in carbon black prices. Most are sticking to on-demand purchasing and fulfilling prolonged contracts rather than actively stockpiling substantial inventories, resulting in a market characterized by rising prices however sluggish trading volume. This indicates limited capacity on the demand side to absorb higher prices, thereby constraining the possible to further sharp increases.

Global Context: Geopolitical conflicts drive up the cost of oil-based raw materials.

Overseas carbon black production relies primarily on FCC oil (a petroleum refining by-product) as a feedstock, with prices highly correlated to crude oil. Geopolitical conflicts—such as the 2026 war involving the US, Israel, and Iran—drove up the baseline to international oil prices; Brent crude surged from around $72 per barrel prior to the conflict to over $108 per barrel. This caused a sharp rise in oil-based feedstock costs to overseas carbon black producers and a concurrent increase in global carbon black prices, thereby providing price support to domestic carbon black exports.

Market Outlook:

The transmission chain driving the recent rise in carbon black prices is clear: coking coal supply contracts → coking vegetation cut production due to losses → coal tar supply drops while demand surges → coal tar prices skyrocket → carbon black production costs rise inevitably → carbon black producers cut output due to losses while pushing to higher prices. Both carbon black manufacturers and downstream tire makers are efficiently bearing the pressure of these cost fluctuations, as profit margins across the supply chain are being squeezed by upstream coal costs. Future trends will hinge on whether the tight coal tar supply eases and the extent to which downstream tire manufacturers can actually absorb the high cost of raw materials.

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