Orion Engineered Carbons at Gabelli Symposium: Strategic Growth and Challenges

On Thursday, 20 March 2025, Orion Engineered Carbons (NYSE: OEC) presented at Gabelli Funds’ 16th Annual Specialty Chemicals Symposium, highlighting both its strategic growth initiatives and ongoing challenges. The company emphasized its robust position in the specialty carbon black market while acknowledging hurdles such as inflation and consumer confidence.

Key Takeaways

• Orion aims to increase EBITDA from $300 million to $500 million by the end of 2026.
• A new plant in La Porte, Texas, is expected to boost EBITDA by $40 million.
• The company is transitioning from capital investment to free cash flow generation.
• Orion is focusing on sustainability projects, including tire recycling initiatives with the EU and Michelin.
• Challenges include geopolitical uncertainty and fluctuating consumer demand.

Financial Results

• Orion reported its third consecutive year with EBITDA exceeding $300 million.
• The company anticipates reaching $500 million in EBITDA capacity by 2026.
• A $100 million improvement in free cash flow is projected from 2024 to 2025 due to reduced capital spending.
• Capital expenditures are expected to decrease by $50 million annually through 2026.

Operational Updates

• The La Porte, Texas plant is set to complete by the end of this year, with operations starting in 2026.
• Operational improvements in China are anticipated to contribute an additional $10 million in EBITDA this year.
• A cost reduction program has led to a 6% reduction in non-manufacturing headcount.
• Orion operates 15 manufacturing sites globally.

Future Outlook

• Growth in the specialty market is expected, driven by demand for higher-end products.
• The replacement tire market and freight sector are seen as key growth areas.
• Orion is working on improving rubber contracts and securing additional customer lines.
• Sustainability efforts include the Black Cycle project for recycling old tires.

Q&A Highlights

• Potential tariffs on Southeast Asian and Chinese tire imports could benefit Orion by filling excess capacity.
• Reshoring trends are evident as tire manufacturers invest in North American and European facilities.
• No significant expansion of carbon black capacity is planned in The Americas or EMEA.

For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Gabelli Funds’ 16th Annual Specialty Chemicals Symposium:

Shane, Unidentified role: areas and corrosion when you’re immersed in fluids, it’s not good, right, from a server perspective. We’ve manufactured this molecule so that there’s no corrosion issues and that it’s fully self contained. And also three ms has obviously publicly said that they’re getting out of PFAS and getting out of this molecule. So we will be the only individuals with this competitive dynamic of product online. We have said commercialization in 2026, end of twenty twenty six.

Key steps there are obviously manufacturing footprint and supply, which we’re hoping to discuss more transparently to shareholders in the months to come.

Unidentified speaker, Unidentified role: There is another question in

Jeff Gleich, CFO, Orion: the audience.

Unidentified speaker, Unidentified role: Just a quick question on Titanium TiO2. Will they recently announced Tronox shutdown in Europe have any material effect on the supply side?

Shane, Unidentified role: Yes, it’s a great question. I think the shutdown obviously is balancing their capacity and thinking through what the actual supply side looks like. At this point, I think people are asking a lot about capacity, whether it be in China or shutdowns in there. I don’t see it as a significant impact to myself, right, to come more from this side. I think there’s an opportunity here as we think about share in Europe.

So if only, you know, if I look ahead, I really am just thinking that it might be positives for us. The market is a lot of TBD on where capacity might go in China, to be honest with you.

Unidentified speaker, Unidentified role: So still on TiO2, you mentioned that you have lowered your own inventories and you are satisfied where you are. Can you talk about the where the overall industry is? We are getting into the spring and summer season. Usually, there is a higher demand for coatings with a problem with high well, a problem with high interest rates. Housing is not really that robust.

Can you talk about what you see in this environment?

Shane, Unidentified role: Yes, sure. As I think about just overall demand and potential, I obviously, we will see the seasonality come through in the spring demand in the second quarter and we’ve indicated such. Now do I think there’s a restock or any of that such coming? I think customers are looking ahead and thinking through make balancing strategic decisions based on where the market environment goes. And there’s a lot of complexity and a lot of ambiguity going on right now.

So though we’re cautiously optimistic that they’ll see a little bit of growth in the back half based on market conditions, We’re going to see where we go, and I don’t see a major restock as we think about in the second quarter. Though I do see customers’ inventory still being maintained at a lower level, so that restock could come in the future.

Unidentified speaker, Unidentified role: Are they buying mostly on an as needed basis? Do you see that happening instead of building up inventory?

Shane, Unidentified role: We do. Yes, I think it’s more on an as needed basis versus building up security and inventory supply.

Unidentified speaker, Unidentified role: And so we still have any more any other questions from the audience? Yes, Keith?

Keith, Unidentified role: Yes. First of all, Shane, thank you for the overview. I think it’s actually really interesting. On PFAS, by the way, I think it’s also included in pretty much every space component.

Unidentified speaker, Unidentified role: Yes, absolutely.

Keith, Unidentified role: So it’s pretty important. On the liabilities though, one of the things you did not talk about, I think, was the potential European exposure. Could you help quantify for us what the European liability could be for the company and sort of where that is in the state and status? My understanding is that you’ve got each country has its own element here. And I’m just curious what that is from your perspective.

Shane, Unidentified role: Yeah. That’s a great question, Keith. And from a European perspective, it is state by state, and it’s mainly where we operate. Right? And so when you think about where we operate, there’s not a lot of individual areas.

It’s mainly focused on several key countries, Amsterdam being one of them, as we think about the PFAS components there. We’re in active discussions with those states. And I think as you look at our public filings, we’ve done a lot to mitigate community efforts, whether it be activities in community or resolving such. The quantification of that is quite difficult because it’s not like the federal level when you think about EPA or in the other side in The U. S.

And we have not put numbers out, but we feel like it’s less than what we would see far less what we see from a U. S. Perspective. And that’s really the only quantification I can kind of

Wayne, Unidentified role: give you.

Brandon, Unidentified role: A very different litigation structure, very different regulatory structure. Exposure is typically a lot more contained, and it’s more based on the municipality. And we’ve had some recent events with, like the Kitchen Gardens Reserve and things that are on our books as well.

Unidentified speaker, Unidentified role: Shane, we have run out of time. Again, I go overboard. But thank you very much for your really informative presentations. And Brandon, thank you for joining us as well and contributing.

Brandon, Unidentified role: I just want to share, if you haven’t seen the two phase immersion cooling opportunity or the technology, it’s on our website. There’s a video that explains it. It’s pretty exciting stuff.

Unidentified speaker, Unidentified role: Alright. Looking forward to looking at it. Thank you.

Brandon, Unidentified role: Thank you. Pleasure.

Unidentified speaker, Unidentified role: Thank you very much. Absolutely. Okay.

Jeff Gleich, CFO, Orion: No problem. It’s good. Thank you. Perfect. It doesn’t bother me.

It bothers me. There we go. Yes. That went forward. Got it.

Wayne, Unidentified role: Okay. So moving right along, next up, we have Orion Engineered Carbons. Orion headquartered in Luxembourg, but with its executive offices in Spring, Texas is a leading global manufacturer and supplier of Carbon Black products. Carbon Black is a solid form of carbon produced in powder or pellets and is used to create a variety of desired physical, electrical, and optical qualities of various materials. Carbon black products are primarily in the form of rubber carbon black used in the reinforcement of tires and other rubber applications and specialty carbon black uses additives in the production of polymers, batteries, printing inks and coatings.

Ryan is one of the largest global producers of Bolt. Ryan has around 57,000,000 shares outstanding, closed yesterday at $13.90 for a $792,000,000 market cap, net debt of $860,000,000 for a 1,650,000,000.00 enterprise value. Joining us today is CFO, Jeff Gleich, and VP of Investor Relations, Chris Kapsch. Jeff joined Orion in 02/2022 and has over thirty years of experience leading corporate, finance, and accounting functions for both public and private companies, including Graham Corporation, where he served as CFO for thirteen years prior to joining Orion. And Chris joined Orion last year as VP of Investor Relations, following nearly thirty years in institutional sell side research focused on specialty chemicals.

So I’ll now turn it over to Jeff for an overview of Orion.

Jeff Gleich, CFO, Orion: Thanks, Wayne. So we’ve got our safe harbor statement, which I’ll quickly go by. Carbon Black, Carbon Black is in a lot of different products. We talk about it being in tires, being in rubber, but it’s in a lot of other products. It’s in coatings, it’s in fibers, it’s in batteries, which we’ll talk about a little more detail later.

So it’s a very well used product across many different areas. We have 15 manufacturing sites. One of the things about Carbon Black, it can be transported across the world, but particularly the rubber products typically are manufactured and used in the same region. So as you can see, we have manufacturing locations in The Americas, 5 in The Americas. We have, I believe six in Europe and EMEA.

We also have ones in Asia. We’re currently building another plant in La Porte, Texas, which I’ll talk about in a few minutes. Orion has revenue of about $2,000,000,000 We are the largest specialty carbon black manufacturer in the world and we’re the third largest rubber manufacturer in the world. So we have value proposition. We believe it’s a very important long term value proposition.

Particularly the rubber market is not is very resilient. You don’t see the rubber sales drop dramatically in a recession. You don’t see them spike too high in a stronger period. It tends to be a pretty consistent long term business and very resilient. Our specialty business is really driven by the end markets that we’re in and sometimes they’re very strong, sometimes some of them are strong, some of them can be weak.

But overall, Orion has got a very resilient profitability level and very predictable as we move forward. As we’re looking forward, one of the important things about Orion, we currently have EBITDA of about $300,000,000 We have the capacity by the end of this year and entering 2026, we have the capacity to earn $500,000,000 of EBITDA. How do we do that? We need to fill up some of the facilities that are a little underutilized right now, as well as our new plant in La Porte, Texas. We can do that.

We can move from the $300,000,000 range, which is a new plateau we moved moved to a couple of years ago up to as high as $500,000,000 And a key point in that is our ability to generate free cash flow. For many, many years, we had to reinvest in this business, first for some required emissions investments here in The United States and then more recently for some growth investments in Italy, in China and a plant in La Porte, Texas that we’re currently building. When those are done, at the end of the they’re all done except for the La Porte plant. When the La Porte plant is done at the end of this year, we will be reducing our capital spending using that runway that we have to get toward the $500,000,000 of EBITDA and ultimately generating a lot more free cash flow. And that we believe is an important reflection in the Orion story.

As you can see, our profitability level other than the 2020 dip due to COVID has actually been pretty consistent. But importantly, over the last three years were the first three years that we had ever gotten our EBITDA over $300,000,000 and we’ve been consistent in that despite some pretty significant headwinds in our end markets. Specifically, if you look at the rubber market, which are primarily tires, if you look at the tire market, the imports coming into The United States have increased very significantly over the past two or three years from their normalized level. This is because the consumer is looking for cheaper tires and some of our customers have not reacted as aggressively yet. When they start to react and or when the consumer moves to higher value tires that will allow us to fill up some of the available capacity that we have today and ultimately allow us to move toward that 500,000,000 of EBITDA.

In the rubber market alone, we believe we have about $80,000,000 of available EBITDA just by filling that capacity. So talking about Rubber Carbon Black. Rubber Carbon Black is about two thirds of our revenue. About 70% of it or so goes into tires. And it’s not just car tires, it’s car tires, it’s truck tires, it’s heavy operating equipment.

And then beyond looking just at the tire side, when you’re looking particularly at the car tires, it’s mostly replacement tires. If you think about buying a new vehicle, you buy a vehicle, how many times do you change the tires out? Typically, three or four times. So about 60% of our volume roughly in the rubber market is replacement tires. And the other roughly one third of the business beyond the tire side are mechanical rubber goods.

So if you’re looking at a car at a vehicle, you’re looking at the dashboard, you’re looking at the sealants around the windows, the hoses within the vehicle. If you’re looking at an EV, you don’t have a lot of the hoses, but you do have the map that the battery is on top. So that these are all important end markets for us. And so a lot of it’s driven by vehicles, but it’s not necessarily driven by OEM vehicle sales. It could be a it’s a replacement tires as well as obviously the freight market and the truck tires.

Growth drivers. Traditionally, you’ve had miles driven tire production. Those have been what’s been driving the tire market and the rubber market for us in the past. But as we look forward, the transition toward EVs on the rubber side, if you think about it, electric vehicle, it doesn’t have the hoses, but it’s got a map for the tires or for the battery, I’m sorry. But then you look at the tires and the if you think about EV tires, they’re heavier.

The vehicle’s heavier. Typically, EV weighs about one third more than a than an internal combustion engine vehicle. You also have greater acceleration if you’ve driven an EV or even if you’ve driven a hybrid. When you accelerate, you get a quick start from the stop. And that quick start is friction and friction is wear on the tires.

So if you look at a at a a card vehicle like a Tesla or if you look at a truck like a Rivian, the usage of the the tires do not last anywhere near as long as they do on a on a regular internal combustion vehicle. So that’s an important change as well as the design of the tire. So all of these are positive things for us as we look forward. Specialty business, about one third of our overall revenue and it’s a lot of end markets. It’s the biggest end market for us is polymers and polymers goes is a pretty broad end market.

It tends to be mid to kind of lower end of our specialty business, but then we have the coatings market. So if you look at a very high sleek black car, got the black, but you’ve also got the kind of blue undertone. That’s a tremendous market for us. The fiber market, the athletic wear that’s worn primarily by women, but also by men, there’s carbon black within those. There’s the ink market.

There’s the battery market. It’s a very the battery market is a very, very small volume for us, but it’s a significantly higher profitability per ton of products. So all of these are important markets for us in the specialty arena. We’re heavily weighted in Europe and Asia in the specialty markets, a little underweighted here in The United States. The growth drivers for specialty, again consumer demand and the some of the headwinds that we’ve seen globally have impacted us over the past couple of years.

So we think that eventually will turn. It may not turn immediately, but it will eventually it could eventually turn. One of the questions I often get around the consumer market, but specifically the European market is the the, the fact that carbon black has now been banned from coming from being imported into the EU from Russia. What happens if the war ends in Ukraine? Well, first off, if the war ends in Ukraine, that’s a very good thing for humanity.

We should all be happy about that. And and it’s beyond, you know, our quarterly or annual results. But if that does happen, two things. One, we believe that consumer confidence in Europe will go up very significantly, and that will help on the consumer demand side. And then secondly, the product that used to be imported, the carbon black that used to be imported from Russia that is no longer allowed to be imported from Russia because they they put a ban on it last summer has been replaced from imports from from Asia.

We believe if Russia is back into the into the European market, the Asian imported product will probably cut back some. Why? There’s been very significant supply chain issues getting product from Asia into the European market. So we believe that ourselves and our other European local competitors will continue to keep our market share and the import piece will just move from one to another as it did when it moved from Russia to Asia. It’ll just move back to from Asia to Russia.

But that’s that’s more speculation on what happens in Ukraine. Sustainability. We are we are actually the leader. We believe we’re the leader within the carbon black area and sustainability in a couple of ways. One, on the specialty side with the high value specialty high value, high purity specialty products that go into EV batteries, for example, that’s a key driver market for us going forward.

Also, if you look at sustainability from a rubber market side, we have tired we’re working with EU, we’ve worked with Michelin on a project called Black Cycle, which focused on how do you take and recycle old tires. We are continuing work in that area of sustainability with some work that we’ve got with that’s been funded by both the German government and the EU. So we finished 2024 and now we’re looking at 2025 and beyond. I’ll talk a little bit about 2024, but more importantly, where we’re headed in 2025. So as I noted earlier, we had our third year of EBITDA of $300,000,000 or above.

First time we ever did that was 2022, so we’ve got three years in a row, but we’re really pleased despite the fact that there’s been some pretty significant headwinds in our in our end markets. And one of the key things or one of the key metrics we look at is even with that higher level of EBITDA, we’re looking at rubber demand 15% below where it was pre COVID. Why? Imports into The United States and Southeast Asia, imports into The EU from China. Both of those have been pretty significant headwinds even though consumer demand has improved on the tire side because it has to because you have to replace tires.

Reality, they’re buying cheaper tires from imports. We think that will change over time. I think another important point I talked about a little bit earlier, we have $100,000,000 of available capacity within our system, $80,000,000 of that on the rubber side, $20,000,000 of that on the specialty side. If we can fill up our existing plants, we can move that EBITDA number from the low 300s to the low 400s just simply by that demand. And then if we include the plant that we’re building in La Porte, Texas, there’s another $40,000,000 of EBITDA opportunity there.

And then we have some additional opportunities to grow profitability by upgrading the quality of our product portfolio. Biggest challenges, consumer confidence and inflation. Consumer confidence has been a headwind in both The Americas and in Europe and inflation has driven people to lower value tires. What does that mean, lower value tires? They buy cheaper tires.

They don’t last as long. Their long term cost of ownership may actually be higher, but their short term, like, what do I have to pay today to buy a tire is lower. That that trend needs to change. And then, finally, customer forecasting. You know, when when you put out guidance at the beginning of the year, you’re always challenged and if you have to adjust it as the year has gone on as we’ve had through the last year and a half, it’s really a function of our customers looking at their view at the beginning of the year and then their view at the end of as the year goes on and it has been falling, falling, falling.

Hopefully, that’s been stabilized and that won’t be as much of an issue going forward. Market observations in 2025, the replacement tire market, I’ve talked about that already on the car side. On the freight side, we we believe if we start to see an improvement in manufacturing at some point, perhaps not early, but at some point that can help the freight market. The geopolitical, there’s a lot of uncertainty there. We talked to I talked a little bit about the the war in Ukraine, but there’s there’s just uncertainty whether it’s tariffs.

We’re not planning for tariffs. Tariffs are a benefit to us perhaps, but we’re not planning for tariffs. And just that uncertainty out there, so our view is we can’t affect that uncertainty. That’s beyond the control of what we can do, but we’re gonna we’re gonna we’re gonna be agile in our business, and we’re gonna make sure that we can affect what we can change and what we can improve and we’ll address the market if it changes. And then finally, the specialty market, we saw growth in 2024.

That was a good thing, but most of the volume growth was at the lower end of the portfolio of our products. We believe going into 2025, we’ll see additional growth, but it will be at the higher end. Why will it be at the higher end? Partly the end markets and partly some debottlenecking projects that we’ve done over the past couple of years that have given us additional available capacity of high end products. In fact, so we’re focused on what can we do.

There’s a lot of stuff we can’t control. We can’t control the end markets. We can’t control foreign exchange. What we can do though is the things that we that can improve our business. So our rubber contracts, we’ve seen a significant improvement in our rubber business over the past couple of years as pricing has improved in the rubber area.

We continue to focus on how do we get additional lines from our customers as well as how do we make sure that the pricing improvement that we’ve seen is not a spike. We don’t believe it’s a spike. We believe it’s a change in the structure of the market. We put a cost reduction program in place at the end of twenty twenty four, early ’20 ’20 ’5. That’s been essentially completed now and we’re moving forward.

We reduced our headcount of our non manufacturing personnel by about 6%. Just something that you have to do every once in a while, you have to look and say, if we added a little bit too much, maybe we need to cut back some. We’ve had some operational issues at our new plant, particularly in China. Of those, we believe are now resolved. We expect to pick up $10,000,000 in EBITDA this year from our plant in China.

We believe there’s another $10,000,000 at least available to us beyond 2025. So we’re focused on things that we can control and focus on growing our specialty business as I talked about before with our debottlenecking projects that we’ve done and trying to improve our product portfolio. And then finally, the last thing is operational excellence. We’ve been investing in maintenance capital the last couple of years. We will continue to invest in maintenance capital.

This is a business that historically as an industry had been under investing in maintenance. We’ve changed that tune going in the last couple of years and we will continue that going forward. That will give us additional capacity. It will also give us additional productivity. I’m going to pass on the slides.

I’m a little tight on time. Very quickly, our guidance for the year is $290,000,000 to $330,000,000 of EBITDA. The $290,000,000 is a little bit lower than last year. The part of it is really driven by foreign exchange. If you took last year’s results adjusted for foreign exchange when we set our guidance, it would have been about $290,000,000 So what we’re saying is on the downside is a flat market, on the upside is growth in the low double digits.

Very, very important story for us going forward is free cash flow. And free cash flow starts with profitability and then follows with where do you spend your where do you spend that cash that you earn. And if you can see here for the past four or five years, we’ve spent a lot of money in capital. We spent over $200,000,000 a year most of the last four or five years. We spent on maintenance.

We will continue to do that. We had to spend on the EPA projects. Those are done. Those finished up at the end of twenty twenty three. We’re done with our EPA capital spending.

A couple of our competitors still have spending going on both in The U. S. As well as in Canada, which what that will do is have them not only them spending cash, but that will also help us in the mark us in the market because as we all spend capital, ultimately, the end users pays for that by higher prices. So that will help us. We’ve also spent a lot on growth capital in the last four or five years.

I talked about the plant in China at our Huibei facility. We made an investment to expand our facility in Italy in 2021 and 2022. And now the La Porte, Texas acetylene based product plant that we’re building right now will be finished by the end of this year. We’ll be started up in 2026. That’s been a significant usage of capital in the last couple of years.

It’s a significant use this year. It’ll be done going once we’re done in 2025. What does that mean? You can see our capital spending from ’24 to ’25 is reduced almost $50,000,000 That’s going to become free cash flow for us. And then another $50,000,000 as we go into 2026.

And our expectation beyond 2026 is this lower level of capital spending, which will generate more free cash flow for Orion. My last slide is really just looking at the free cash flow story. And this is the inflection point in the business. This is the from an investor standpoint, this is probably the most important thing. You’ve gone from in 2024, where we had a use of cash of about $40,000,000 to 2025, we’re improving that about $100,000,000 Half of that is lower capital spending.

There’s a little bit we believe we’ve got a little bit of improvement in working capital, a little bit in our taxes, and a little and the EBITDA number is relatively the same, but $100,000,000 improvement in free cash flow. And And then as you go to 2026, another $50,000,000 beyond that, which is that reduction in capital spending. Now if you look at this, we say higher EBITDA, but we don’t put a number on it because I’m not going to put our guidance for next year. I’ve already put it out for this year. But if that if the EBIT if the benefits of the investments that we’ve made are able to come to fruition as well as the improvements in some of our operating in some of our end markets, we believe that that free cash flow number will grow even further as EBITDA grows and that $100,000,000 can be much, much higher in ’twenty six and beyond.

So with that, if there are any questions.

Wayne, Unidentified role: Okay. So we’ll open up to questions. I’ll start off if you want to join me here. So you mentioned the resilience the resilient resiliency of the tire market. You can’t put off replacing tires forever.

I know that all too well driving up from Long Island to our office in Rye every day. But there’s been headwinds with, as you mentioned, the Chinese and South Asian tire imports into Western markets and Europe. With all the tariff noise going on right now, can you discuss any impacts on Orion and with the EU and U. S. Potentially looking at, antidumping actions?

When can we see action on that? And is that baked into guidance for this year? Or any potential benefits that you could have from that?

Jeff Gleich, CFO, Orion: Sure. Great question. So a couple of things. First off, if you look at the Western Tire markets and we are overweighted in the Western Tire markets, The U. S.

Has already tariffed Chinese tires out of the market. So what’s comes into The U. S. Comes from Thailand, comes from Indonesia, comes from Vietnam, primarily in the Southeast Asian countries into The U. S.

Into Europe is primarily Chinese tires. If there were actions on tariffs, not in Chinese, but on Southeast Asia into The Americas or from China into Europe, if there’s actions either way, that will benefit our business because we have particularly in The Americas, we have excess available capacity to meet that. We haven’t planned that. We believe that planning on a on a tariff or government action that has an unknown idea, an unknown time frame would would be foolish on our part. That’s something that’s ultimately gonna have to get pushed by the the administration, whether it’s here or the EU, as well as perhaps the unions sometimes are also driving that to push the administration.

So there is significant upside. That $80,000,000 of available EBITDA from Rubber, you could get a significant amount of that if we saw tariffs either from Southeast Asia into The U. S. Or from China into The EU.

Wayne, Unidentified role: So what else would it take to get to that full 80? Sure.

Jeff Gleich, CFO, Orion: I think the other thing that would have to happen is that import level would have to come back to normal. If you look historically, and I’ll use The U. S. As an example because the data is probably the best data we have. Typically, you see about 52% of tires being imported into The U.

S. And that’s a pretty constant number. In the last year, year and a half, that number has raised up to close to 60%. If we could get back to that normalized number in the low 50s, that alone would give us significant additional volume on the rubber side that would help us. How does that happen?

Certainly tariffs is one way convincing the consumer to buy the tire companies convincing the consumer to buy more expensive tires, but one that will last longer and ultimately their long term cost of ownership will be lower. That’s another way that can happen. And then a third way is perhaps some of the higher end tire companies. It’s great to have an 80,000 mile guarantee on your tire, but there’s a lot of people out there who don’t want to buy a tire that has an 80,000 mile guarantee. Perhaps marketing their second tier brands that have a 30,000 or 40,000 mile tire a little harder that also can drive demand.

So there’s a lot of things that can drive that incremental demand, which is incremental supply for us on the carbon black side.

Chris Kapsch, VP of Investor Relations, Orion: It’s probably worth adding one thing also these our tire customers are committing capital to reshoring activity. So they’re spending more money making their tire factories onshore in North America or in Europe. And so that commitment suggests that the demand that they see the currently elevated level of imports is somewhat transient.

Wayne, Unidentified role: I could use the $80,000 guarantee.

Jeff Gleich, CFO, Orion: But pay for the

Wayne, Unidentified role: full. Yes. With reshoring dynamics in The U. S, there’s entire production being brought online. Is there any risk to more carbon black production being brought on?

And can you talk about kind of your competitive moat there?

Jeff Gleich, CFO, Orion: Sure, sure. If well, there are right now there’s a little excess supply in The Americas market. Should we have that movement toward less imports and more production and more onshoring that will quickly get eaten up. No one has made an announcement or made a decision to build additional carbon black capacity in either The Americas or in EMEA with a few very minor exceptions. And that is we made a small expansion in Italy A Few Years ago.

One of our competitors added 200 KT around the world. They added 40 kT into their into an existing plant in Hungary. Forty kT by the way in the European market is 2% of the market, so very, very small increase. Nothing in The Americas with the exception of there’s a private company called Monolith that is looking to rather than using the bottoms of a refinery or using coal tar as the raw material, they’re looking to use methane as the raw material of

Shane, Unidentified role: the

Jeff Gleich, CFO, Orion: field that to make carbon black and also to make hydrogen. There’s been a number of articles in the Wall Street Journal about it. Their capital cost compared to building a carbon black plant, pure carbon black plant is multiples of what it would cost to build a carbon black plant. We kind of think of something in the range of $2,000,000 per tonne to build the Carbon Black plant. So if you were building a Carbon Black plant that they’ve announced of 180 kt, it would cost you $350 to $400,000,000 According to the Wall Street Journal article of about a year ago, their plant was going to cost $1,400,000,000 so four times that.

Now they also would manufacture hydrogen and they get the hydrogen credit from the IRA Act a couple of years ago. However, they haven’t broken ground yet. So we don’t know where that’s at. But the fact that they are out there and they and we and others believe they can make product the way that they’re going to make it, is an impediment to others to want to make an investment in Carbon Black capacity. So right now, other than that, in The Americas, there really isn’t any significant expansion of capacity either in The Americas or in EMEA of Carbon Black.

Wayne, Unidentified role: And with that, I have a bunch more questions, but we’re bumping up on time. But we’ll, we really appreciate you being here and we’ll continue to follow the story and I’ll be following up with a lot more questions and Jeff’s around if anyone wants to follow-up. Thank you so much, everyone.

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