What changed in this filing

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Item 1. Business

2022-02-17 compared with 2021-02-18 · 130 added, 149 removed, 163 unchanged (63% of the section changed)

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(“Orion”, “Company”, “we”, and “our”, “OEC”) is a Luxembourg joint stock corporation ( société anonyme or S.A.), incorporated on July 28, 2014 as a Luxembourg limited liability company ( société à responsabilité limitée ).

The Company's registered office is located at 6, Route de Trèves, L-2633 Senningerberg (Municipality of Niederanven), Grand Duchy of Luxembourg.

Our principal executive offices are located in Houston, Texas, U.S.

The Company is a leading global manufacturer of carbon black products.

Our registered office is located at 6, Route de Trèves, L-2633 Senningerberg (Municipality of Niederanven), Grand Duchy of Luxembourg.

Our principal executive office is located in Houston, Texas, U.S.

We are a leading global manufacturer of carbon black products.

Carbon black is a powdered form of carbon that is used to create the desired physical, electrical and optical qualities of various materials.

Carbon black products are primarily used as consumables and additives for the production of polymers, printing inks and coatings (“Specialty Carbon Black” or “Specialties”) and in the reinforcement of rubber polymers (“Rubber Carbon Black” or “Rubber”).

Carbon black products are primarily used as additives for the production of polymers, printing inks and coatings (“Specialty Carbon Black” or “Specialties”) and in the reinforcement of rubber polymers (“Rubber Carbon Black” or “Rubber”).

Our core competencies include the ability to engineer the physical properties of carbon black to meet the functional needs of our customers.

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We operate a global supply chain network comprised of 14 production sites (including a joint venture in Dortmund, Germany) in 10 countries.

In addition to our headquarters in Luxembourg, we have our principal executive office in Houston, Texas (U.S.), as well as offices in Frankfurt (Germany), Cologne (Germany), Shanghai (China), Seoul (Korea), Tokyo (Japan) and other locations.

Our principal research and development (“R&D”) center is located in Cologne (Germany).

We also have laboratories to support our customers in Carlstadt, New Jersey (U.S.), Shanghai (China) and Yeosu (South Korea).

We are a premium supplier of carbon black generating long-term benefits for stakeholders while remaining committed to responsible business practices with a focus on team culture, reliability and sustainability.

Our business is organized into two reportable segments:

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Our internet address is www.orioncarbons.com.

We make available free of charge on or through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the U.S.

We make available free of charge on or through our website, our Annual Reports in Form 10-K, Quarterly Reports in Form 10-Q, current reports in Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the U.S.

Securities and Exchange Commission (“SEC”).

Information appearing on our website is not a part of, and is not incorporated in this Annual Report on Form 10-K.

Information appearing on our website is not a part of, and is not incorporated in this Annual Report in Form 10-K.

Products and Applications

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Carbon black is manufactured in a highly controlled process to produce particles and aggregates of varied structure and surface chemistry, resulting in many different performance characteristics for a wide variety of applications.

The Company manufactures specialty carbon black for a broad range of specialized applications such as polymers, printing systems and coatings applications.

The various production processes result in a wide range of different specialty carbon black pigment grades with respect to their primary particle size, structure surface area and surface chemistry.

These parameters affect jetness, tinting strength, undertone, dispersibility, oil absorption, electrical conductivity and other characteristics.

The Company manufactures specialty carbon black for a broad range of specialized applications such as polymers, printing, batteries and coatings applications.

The various production processes result in a wide range of different specialty carbon black grades with respect to their primary particle size, structure surface area and surface chemistry.

These parameters affect jetness, tinting strength, undertone, dispersibility, electrical conductivity and other characteristics.

Carbon black is an additive that enhances the physical, electrical and optical properties of our customer’s end products.

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Our specialty grades of carbon black are used to impart color, provide rheology control, enhance conductivity and static charge control, provide UV protection, enhance mechanical properties, and provide formulation flexibility through surface treatment.

These specialty carbon products are used in a wide variety of applications, such as coatings, inks, plastics, adhesives, toners, batteries, and displays.

We have a broad Coatings product portfolio, which includes products used for pigmentation in black coatings and enhancement of various other coatings (e.g., automotive base coats and architectural coatings), for conductivity and for tinting, as well as for paints and for light tinting in transparent coatings (e.g., metallic effects and wood glazing).

The diversity of our manufacturing processes allows for the creation of a wide range of specialty carbon black grades with different structures and chemical properties, thereby allowing our products to impart unique characteristics to our customer’s products.

Over time we have demonstrated the ability to leverage our application technology platform to play a substantial role in our Coatings customer's product innovation processes and to meet their demanding requirements.

We supply the full range of Coatings industry participants, ranging from leading global players to mid and small sized customers and have longstanding relationships across the spectrum.

We have been serving several of the key industry players for more than 30 years.

While the Coatings market is relatively fragmented, our top five customers accounted for approximately 36% of our Coatings related volume in 2020.

Our Polymers portfolio provides products to a diverse range of end markets including pipe (e.g., gas, oil, municipal water, sewage), construction, energy distribution (e.g., power cables), automotive, agriculture, and consumer packaging.

These specialty carbon products are used in a wide variety of applications, such as coatings, inks, plastics, adhesives, toners, and batteries.

Carbon Black for Coatings — We offer a broad range of specialty carbon black products for coatings, which includes products used for pigmentation in black coatings and enhancement of various other coatings (e.g., automotive base coats and architectural coatings), for conductivity and for tinting, as well as for paints and for light tinting in transparent coatings (e.g., metallic effects and wood glazing).

Orion Engineered Carbons S.A

Carbon Black for Polymers — We offer a broad range of specialty carbon black products for polymers that provide products to a diverse range of end markets including pipe (e.g., gas, oil, municipal water, sewage), construction, energy distribution (e.g., power cables), automotive, agriculture, and consumer packaging.

Certain products within this portfolio provide UV protection against polymer degradation for material such as pipe used for potable water, injection molding, agriculture films and cables.

Other products include standard-to high-performance grades designed and modified to provide electrical conductivity, antistatic and reinforcing properties to many different polymer articles, including high-voltage cables, films, boxes and high-pressure pipes.

Certain of our polymer products have a bluish undertone, which makes these grades especially attractive for high-performance fibers used in textiles, giving them a luxury touch and feel.

The Polymer applications are used in a wide variety of industries and, as such, the customer base for Polymers tends to be wide-ranging from regional and international master batch producers to global integrated petrochemical and polyolefin producers.

Many of these producers are the leading suppliers in each region.

We have been serving certain of our key customers for more than 30 years.

Our top five customers accounted for approximately 27% of Polymers volume in 2020.

We have a broad Printing product portfolio that provides numerous grades for different printing technologies and applications.

Carbon Black for Printing — We offer a broad range of specialty carbon black products for printing products that provide numerous grades for different printing technologies and applications.

We apply different process technologies to offer highly specialized products meeting specific requirements, including compliance with food-contact regulations and specially formulated products that require unique attributes such as color undertone, optical density and gloss.

We focus on Printing products with the highest potential for specialty applications, such as packaging and specialty niches.

Packaging inks require special rheology, dispersion and wetting behavior properties.

Some of our manufactured products used in UV curing inks require special surface chemistry for wetting, flow, color and stability.

UV curing inks are used in products such as special applications for print media, books, posters and brochures.

Our products also support printing ink manufacturers in achieving specific attributes in their products such as optical density, gloss, light fastness and color tone.

These attributes are found in products and services such as display advertising, magazines and high-end packaging.

The global Printing industry has been undergoing consolidation and currently the industry is dominated by a few key players.

Sourcing decisions are largely based on the attributes of specialty carbon black products.

For high-end applications we focus on the required degree of product and technology know-how that make purchasing decisions less price sensitive than the low-end applications which are normally based on price.

We are recognized by customers as a preferred strategic and technical partner.

We have been serving certain of our key customers for more than 30 years.

As a result of the consolidated nature of the printing industry our top five Printing customers accounted for approximately 66% of our Printing volume in 2020.

Carbon Black for Batteries — We also offer a broad range of specialty carbon black products for wide range of energy storage applications such as lead-acid batteries, dry cells, supercapacitors and lithium-ion batteries.

The products, which are manufactured in different production processes, function as tailor-made additives to provide electrical conductivity to increase the performance of batteries.

We are one of the largest global producers of specialty carbon black.

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In MRG, such as hoses, belts, extruded profiles and molded goods, rubber carbon blacks are used to improve the physical performance of the product, including the product’s physical strength, fluid resistance, conductivity and resistivity.

We offer a broad Tire product portfolio, which includes high reinforcing grades and semi-reinforcing grades.

Carbon Black for Tires — We offer a broad range of carbon black products for tires, which includes high reinforcing grades and semi-reinforcing grades.

Fine particle reinforcing grade carbon blacks are used mostly in the tread of tires.

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In addition to standardized grades, we produce advanced grades tailored to meet specific customer performance requirements, such as ECORAX® grades designed to lower rolling resistance and high-performance grades for truck tires and high- and ultra-high-performance passenger car tires.

Semi-reinforcing grade carbon blacks are used in several components of the tire carcass like the sidewall and bead areas of a tire.

We cover the full portfolio of standard semi-reinforcing grade carbon blacks and have a portfolio of special semi-reinforcing grade carbon blacks, which fulfill special customer requirements using special production technology.

These special semi-reinforcing grade carbon blacks are part of our ECORAX® product family.

Given the highly consolidated nature of the tire industry, our top ten customers represented approximately 89% of our Tires volume in 2020.

A significant portion of our Tire products are sold to leading tire manufacturers.

We have longstanding relationships with most of these customers and have the capacity to serve them in major global regions.

We have been serving certain of our key customers for more than 30 years.

We believe that our customers value the quality, consistency and reliability of our operations and are generally reluctant to switch suppliers without due cause.

In addition, because automotive tires have safety implications, tire manufacturers are often required to go through lab and extensive plant approval processes before they change their supplier of carbon black.

Mechanical Rubber Goods

We produce a wide range of MRG products for a variety of end-uses, including automotive production, construction, manufacturing of wires and cables, as well as certain food, consumer and medical applications.

In the area of MRG products that fall within the standards of ASTM International (“ASTM”), a global standard-setting body for a wide range of materials including carbon black, and non-ASTM blacks, we offer an extensive portfolio of “PUREX®” grades.

Carbon Black for Mechanical Rubber Goods — We produce a wide range of carbon black products for a variety of MRG end-uses, including automotive production, construction, manufacturing of wires and cables, as well as certain food, consumer and medical applications.

These grades have an exceptionally high purity and high consistency and satisfy special requirements needed for smooth surfaces and electrical resistance.

These grades also disperse well in rubber compounds used in parts like window seals, automotive hoses, transmission belts, damping elements and electrically conductive and antistatic rubber goods.

We serve customers across the entire value chain and the full range of MRG applications, including parts and component manufacturers and automotive system suppliers.

The MRG industry is fragmented in nature and supports a large number of suppliers.

Our top ten global customers accounted for approximately 50% of our Mechanical Rubber Goods volume in 2020.

We have a diversified geographic presence with significant exposure to the European, North and South American and Asian MRG markets, supplying numerous leading industry participants.

We are one of the leading global producers of rubber carbon blacks.

We compete with four companies that operate globally and numerous other companies that operate regionally, a number of which export product outside their region.

The smaller regional suppliers mainly participate in standard and MRG applications and are less likely to provide specialized products used in higher end tire and MRG applications.

Competition for our rubber carbon black products is generally based on product quality and performance, technical innovation, and customer service.

Drivers of Demand

Besides general global economic conditions, certain specific drivers of demand for carbon black differ among our operating segments.

Specialty carbon black has a wide variety of end-uses and demand is largely driven by the growth and development of the coatings, polymers and printing industries.

Specialty carbon black has a wide variety of end-uses, and demand is largely driven by the growth and development of the coatings, polymers, printing and batteries.

Demand for specialty carbon black in the coatings and polymers industries is mainly influenced by the levels of industrialization, automobile original equipment manufacturer (“OEM”) demand, infrastructure development, consumer spending and construction activity.

Demand for specialty carbon black in the printing industry is mainly influenced by developments in print media and packaging materials.

Demand for specialty carbon black in the batteries industry is driven by electric vehicle penetration, growth of consumer and industrial batteries, and energy storage systems.

Demand for rubber carbon black is largely driven by the growth and development of the automotive tire, commercial tire and MRG industries.

Demand for rubber carbon black in tires is mainly influenced by the number of replacement and original equipment tires produced, which in turn is driven by (i) vehicle trends, including the number of vehicles produced and registered, and the number of miles driven, (ii) demand for high-performance tires, (iii) demand for larger vehicles, such as trucks and buses, (iv) consumer and industrial spending on new vehicles and (v) changes in regulatory requirements.

Orion Engineered Carbons S.A

such as trucks and buses, (iv) consumer and industrial spending on new vehicles and (v) changes in regulatory requirements.

Demand for rubber carbon black in MRG is mainly influenced by vehicle production and design trends, construction activity and general industrial production.

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We sell carbon black under the following two main categories of contracts based on price adjustment mechanisms:

• Contracts with feedstock adjustments (indexed contracts).

This category includes contracts with monthly or, in some cases, quarterly automatic feedstock and/or energy cost adjustments, which cover approximately 70% of our global volumes.

• Non-indexed contracts.

This category includes short-term contracts (usually shorter than three months) where sales prices of our carbon black products are not linked to carbon black oil market prices.

Many of our indexed contracts allow for monthly price adjustments, while a small portion (by volume sold) allow for quarterly price adjustments.

• Contracts with feedstock adjustments (indexed contracts)— This category includes contracts with monthly or, in some cases, quarterly automatic feedstock and/or energy cost adjustments, which cover approximately 70% of our global volumes.

• Non-indexed contracts— This category includes short-term contracts (usually shorter than three months) where sales prices of our carbon black products are not linked to carbon black oil market prices.

Many of our indexed contracts allow for periodic price adjustments, while a small portion (by volume sold) allow for quarterly price adjustments.

These contracts have enabled us to reduce the impact of fluctuations in oil prices on our margins;

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See “ Item 1A.

Risk Factors—Risks Related to Our Business—We are subject to volatility in the costs and availability of raw materials and energy, which could decrease our margins and adversely affect our business, financial condition, results of operations and cash flows .” Sales prices under non-indexed contracts are reviewed on a regular basis to reflect raw material and energy price fluctuations as well as overall market conditions.

Risk Factors—Risks Related to Our Business”—We are subject to volatility in the costs, quality and availability of raw materials and energy, which could decrease our production volumes and margins and adversely affect our business, financial condition, results of operations and cash flows.

Sales prices under non-indexed contracts are reviewed on a regular basis to reflect raw material and energy price fluctuations as well as overall market conditions.

Raw Materials

Raw materials for our products are, in general, readily available and in adequate supply.

The principal raw material used in the manufacture of carbon black is comprised of residual heavy oils derived from petroleum refining operations, the distillation of coal tars, and the production of ethylene throughout the world.

Approximately 56% of our carbon black oil supply is covered by short- and long-term contracts with a wide variety of suppliers.

The principal raw material used in the manufacture of carbon black is carbon black oil comprised of residual heavy oils derived from petroleum refining operations, the distillation of coal tars, and the production of ethylene throughout the world.

Majority of our carbon black oil supply is covered by short and long-term contracts with a wide variety of suppliers.

Natural gas is also used in the production of carbon black.

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Changes in our raw material supplier’s operating conditions and demand for their products could reduce the availability of certain very specialized feedstocks.

We are one of the leading global producers of rubber carbon blacks.

We compete with four companies that operate globally and numerous other companies that operate regionally, a number of which export product outside their region.

The smaller regional suppliers mainly participate in standard and MRG applications and are less likely to provide specialized products used in higher end tire and MRG applications.

Competition for our rubber carbon black products is generally based on product performance, quality, reliability, price, service, technical innovation, and logistics.

Our business is generally not seasonal in nature, although our results of operations are generally weaker in the last three months of a calendar year.

We enjoy a long-standing reputation within the industry for carbon black product and process technology, applications knowledge, and innovation.

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We maintain product applications and process development centers in Europe, Asia and the Americas.

Our Innovation Group is divided into applications technology and process development teams.

Our Innovation Group is divided into applications technology and process development teams, which cover both Specialty Carbon Black and Rubber Carbon Black.

The applications technology team works closely with our major clients to develop innovative products and expand the applications range for carbon black products.

The process development team works closely with our manufacturing and procurement teams to improve production processes, product quality and cost structure.

Our leading center of excellence is located in Cologne (Germany) to support and enhance our global Innovation Group activities.

This center includes carbon black technologists, applications technology laboratories and process development staff, co-located with our pilot process development facilities.

Staffing in our Cologne technical center includes physicists, chemists and engineers who can effectively and efficiently collaborate to create and analyze various carbon black properties with a goal to develop new products to meet customer requirements.

Common processes and information technology tools further enhance coordination and communication with our regional technical centers located in South Korea, China and the U.S.

Applications Technology

Our goal is to remain at the forefront of the industry in terms of product development by having dedicated applications technology facilities.

Our Innovation function’s leading center of excellence is located in Cologne (Germany) to support and enhance our global Innovation (research and development or “R&D”) function activities.

This center includes applications technology laboratories and process development staff, co-located with our pilot process development facilities.

Orion Engineered Carbons S.A

develop new products to meet customer requirements.

Common processes and information technology tools further enhance coordination and communication with our regional technical centers located in China, South Korea and the U.S.

• Applications Technology— Our goal is to remain at the forefront of the industry in terms of product development by having dedicated applications technology facilities.

Success relies on close collaboration with customers, often through long-term R&D alliances, which create superior technical interfaces.

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Methods are developed centrally and deployed worldwide to relevant production and applications laboratories to assure consistency in measurements and reporting.

Intellectual Property

We consider intellectual property development and management as a source of strategic competitive advantage.

• Intellectual Property— We consider intellectual property development and management as a source of strategic competitive advantage.

We initiate and maintain patents and trademarks, with varying expiration dates, on a number of our products and processes.

We sell our products under a variety of patents and trademarks we own and take reasonable measures to protect them.

In connection with the separation of our business from Evonik, Evonik assigned to us its intellectual property that was exclusively used in its carbon black business, as well as certain intellectual property rights that are still in use in its retained business.

In connection with the separation of our business from Evonik Industries AG, Germany (“Evonik”), Evonik assigned to us its intellectual property that was exclusively used in its carbon black business, as well as certain intellectual property rights that are still in use in its retained business.

However, we may be restricted in leveraging our intellectual property that we use on the basis of a license from Evonik or the intellectual property that is subject to grant-back license to expand our business into fields outside of carbon black.

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Risk Factors—Legal and Regulatory Risks—We may not be able to protect our intellectual property rights successfully.”

Our business is generally not seasonal in nature, although our results of operations are generally weaker in the last three months of a calendar year.

Human Capital

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carbon black.

Our success depends on attracting, recruiting and developing a diverse, talented global workforce.

We are committed to providing our employees with equal opportunities for learning and personal growth in an environment where creativity and innovation are encouraged.

Our success depends on attracting, recruiting, training, and developing a diverse, talented global workforce.

We are committed to providing our employees with equal opportunities for learning and personal growth in an environment where their voices can be heard and creativity and innovation are encouraged.

To this end, our aspiration is to be the employer of choice in our industry.

With this in mind, we have reviewed our existing talent management programs and have started taking actions to augment and modify the existing programs to provide an effective platform for all of our employees to be trained and developed and to provide them with an opportunity to grow and achieve their individual aspirations.

Orion is made up of over 1,400 employees with operating assets, laboratories and offices in 23 locations across 13 countries in all 3 regions (Americas, Asia/Pacific (“APAC”) and Europe/Middle East/Africa (“EMEA”)).

Aligning employee engagement and enablement is integral to the continued success of Orion.

We have built a value system around a foundation of appreciating our employees through trust, respect and development.

To ensure our employees are both motivated to do their work and are equipped with the right tools and training to be successful, we start with listening.

We use employee surveys and listening sessions to help ensure all the voices of our employees are heard.

We used the feedback from our employee surveys and listening sessions to prioritize our human capital strategy and make investments in a new learning platform and performance management system.

Further, we have upgraded our talent management and development programs, focusing on specific actions to improve attraction, engagement, learning and development, and retention.

Orion is made up of over 1,475 employees with plants, laboratories and offices in 23 locations across 13 countries in all 3 regions (Americas, Asia/Pacific (“APAC”) and Europe/Middle East/Africa (“EMEA”)).

Inspiring the entire Orion workforce to function as one team is critical to our success.

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and we strive to put this into practice when hiring, developing and retaining talents.

At Orion, talent management and development are an interactive process between individual employees and the company so that the individuals can have a fulfilling career at Orion while taking on roles and assignments that are aligned with the company’s strategy.

We have upgraded our talent management and development program, focusing on specific actions to improve Attraction, Engagement, Learning and Development, and Retention.

In support of these efforts, we made significant investments in both a global e-learning training platform and a human resources system platform which include focused modules for learning and development, succession planning and performance management that will allow Orion to better train and develop all our employees.

A renewed focus on promoting from within has led to increases in internal fill rates and the involvement of business leaders across the organization in talent reviews to assess employees on performance and future potential.

These talent reviews have helped to uncover talent gaps, identify high potential employees, build bench strength, increase retention, and to identify our future leaders and innovators.

A focus on promoting from within has led to continued increases in internal fill rates and the involvement of business leaders across the organization in talent reviews to assess employees on performance and future potential.

These talent reviews continue to uncover talent gaps, identify high potential employees, build bench strength, increase retention, and help us identify our future leaders and innovators.

We uphold the freedom of association and fully recognize the right of collective bargaining.

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We value exchanging information and views with the local unions and works councils with the view to finding solutions to our common issues and ensuring success for both our employees and the company.

Orion Engineered Carbons S.A

Labor Relations

Our employees are represented by labor unions, industry groups and works councils in accordance with local law and practices.

Membership in employee labor unions varies in accordance with the business area, local practice and country.

We have entered into collective bargaining agreements with employee labor unions either directly or as members of industry-wide unions or employer organizations.

Approximately 73% of our employees are covered by such agreements.

These agreements typically govern, among other things, terms and conditions of employment and reflect the prevailing practices in each country.

We believe we have stable relations with our employees and voluntary turnover is low.

In 2017, 35 of the former employees in our closed facility in Ambès, France filed claims with the labor court of Bordeaux contesting the termination of their employment and seeking damages.

Of these claims 31 are pending in the courts and our results of operations reflect accruals made by us to satisfy our best estimate of these claims should the former employees prevail.

Environmental, Health and Safety Matters

Protection of humans and the environment, fair treatment of our partners and a clear alignment to the needs of customers are essential components of our activities.

Therefore, we strive not only to comply with all applicable laws and voluntary obligations, but to continuously improve our performance and management systems.

Our integrated global management system with established standards and processes is based on the principles of the Responsible Care, ISO 9001 Quality Management System, ISO 14001 Environmental Management Systems, and the Occupational Safety and Health Administration’s (“OSHA”) OSHAS 18001 Safety Management Systems.

All of our operating sites are third-party certified by the International Organization for Standardization (“ISO”) ISO 14001 and ISO 9001.

The global management system outlines our processes and procedures practiced in relation to environmental protection, occupational and process safety, health protection and quality management including sustainable compliance, social accountability and product stewardship.

Protection of people and the environment, fair treatment of our partners and a clear alignment to our customers’ needs are essential components of our activities.

We strive not only to comply with all applicable laws and voluntary obligations, but to continuously improve our performance and management systems.

Our integrated global management system with established standards and processes is based on the principles of the Responsible Care, International Organization for Standardization’s (“ISO”) 9001 Quality Management System, ISO 14001 Environmental Management Systems, and ISO 45001 Safety Management Systems.

All of our operating sites with the exception of our facility in France are third-party certified to ISO 14001 and ISO 9001 standards.

Our facility in France is ISO 9001 certified and we plan to get ISO 14001 third party certified in 2022.

The global management system outlines our processes and procedures practiced in relation to environmental protection, occupational and process safety, health protection and quality management as well as sustainable compliance, social accountability and product stewardship.

Our sustainability report is accessible on our webpage:

www.orioncarbons.com.

Our operations involve the use, processing, handling, storage and transportation of materials that are subject to numerous supranational, national and local environmental and safety laws and regulations.

Our operations involve the use, processing, handling, storage and transportation of materials that are subject to supranational, national and local environmental and safety laws and regulations.

Our production facilities require operating permits that are subject to renewal or modification.

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Environmental

One of the main environmental challenges of a carbon black plant is the management of exhaust gas from production processes.

This exhaust gas contains a number of regulated pollutants, including carbon monoxide and sulfur compounds.

Air Quality— One of the main environmental challenges of a carbon black plant is the management of exhaust gas from production processes.

This exhaust gas contains a number of regulated pollutants, including carbon monoxide, nitrogen oxides and sulfur compounds.

The most common method for controlling these gases is through combustion, which produces useable energy as a by-product.

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The primary air pollutants of concern include sulfur dioxide (“SO2”), nitrogen oxides (“NOx”) and particulates.

In order to maintain compliance with emission requirements, we utilize various desulfurization and de-NOx processes in some of our plants.

In order to maintain compliance with emission requirements in certain jurisdictions, we utilize various desulfurization and de-NOx processes.

We control the particulate matter by using our bag filter technology.

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In addition to the IED Directive and its implementation, European jurisdictions in which we operate may provide for further regulations regarding emission reduction and safety technology standards that apply to our facilities (for example, the German Emissions Control Act).

The EU Commission is currently doing a revision of EU measures addressing pollution from large industrial installations, as announced in the European Green Deal.

The aims of the revision are to progress towards the EU’s zero pollution ambition for a toxic-free environment and to support climate, energy and circular economy policies.

This includes the revision of the IEC Directive.

In the U.S., we are subject to emissions limitations under the federal Clean Air Act (“CAA”) and a consent decree entered into with the U.S.

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We have incurred, and expect to continue to incur, substantial administrative and capital expenditures to maintain compliance with CAA requirements.

facilities are subject to NESHAPs applicable to carbon black facilities, as well as NESHAPs applicable to industrial boilers.

Pursuant to the CAA, the EPA has developed industry-specific National Emission Standards for Hazardous Air Pollutants (“NESHAPs”) for stationary sources classified as “major” on the basis of their hazardous air pollutant emissions under which we are required to comply with Maximum Achievable Control Technology (“MACT”) standards.

facilities are subject to MACT standards applicable to

Orion Engineered Carbons S.A

carbon black facilities, as well as MACT standards applicable to industrial boilers.

The EPA is promulgating carbon black MACT which will impose operating requirements for our U.S.

plants are generally compliant already and we will start a program of verifying that we meet these new requirements in 2022 with the aim of being fully compliant based on the EPA’s schedule.

In China and South Korea, our operations have been subject to increasingly strict air quality regulations in recent years.

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Those to come may require additional capital and operating expenditures for specific equipment or technologies to control emissions, and we have projects underway to address the new requirements.

Greenhouse Gas Regulation and Emissions Trading

Our facilities also emit significant volumes of CO 2 .

In the European Union, all of our production facilities are subject to the European Emission Trading Scheme (“ETS”) for CO 2 emissions.

Industrial sites to which the ETS applies receive a certain number of allowances to emit GHGs and must surrender one allowance for each metric ton of greenhouse gas (“GHG”) emitted.

Greenhouse Gas Regulation and Emissions Trading— Our facilities also emit significant volumes of CO 2 .

In the European Union, all of our production facilities (except for our manufacturing site in France) are subject to the European Emission Trading System (“ETS”) for CO 2 emissions.

Industrial sites to which the ETS applies receive a certain volume of allowances in metric tons to emit greenhouse gasses (“GHGs”) and must surrender allowances in equivalent volume for each metric ton of greenhouse gas (“GHG”) emitted.

Carbon black production is currently listed on the carbon leakage list, which allows receiving the significant share of needed emission allowances free of charge.

The design concept of the South Korean ETS is similar to the European ETS.

Currently, we purchase emission rights for an insignificant amount in South Korea to cover our excess requirements.

From January 1, 2021, the EU ETS has stepped into its Phase 4 period running until 2030.

However, as part of the EU Green Deal the EU has adopted a climate law enshrining its new climate targets of at least a 55% reduction in greenhouse gas emissions by 2030 compared to 1990 levels and net zero by 2050.

The European Commission published its first part of the “Fit for 55” package in July 2021 to enable the EU to meet those targets.

The actual EU ETS is expected to be subject to regular reviews and possible changes in order to ensure the way to achieve those climate reduction targets.

The design concept of the South Korean ETS is similar to the European EU ETS.

We may need to purchase emission rights to cover the shortfall where emissions exceed the quantity of free allowances, incurring additional costs.

In the United States, the EPA regulates GHG emissions under the Clean Air Act, and has adopted rules that require reporting of GHG emissions by owners and operators of facilities in certain source categories, which include our facilities.

At the state level, approximately one-half of the states have already taken legal measures to reduce emissions of GHGs, primarily through the planned development of GHG emission inventories and/or regional GHG cap-and-trade programs.

There is no assurance that the current level of regulation will continue at the federal or state level in the future, or that future changes would not materially affect our operations or require material capital expenditures.

At the state level, some states have already taken legal measures to reduce emissions of GHGs, primarily through the planned development of GHG emission inventories and/or regional GHG cap-and-trade programs.

Currently none of our plants are located in states that implemented GHG cap-and-trade programs, but there is no assurance that future changes would not materially affect our operations or require material capital expenditures.

The adoption of legislation or regulations that require reporting of GHGs, establish permitting thresholds based on GHG emissions or otherwise limit or impose compliance obligations for emissions of GHGs from our equipment and operations could require us to incur costs to obtain and comply with permits, reduce emissions of GHGs associated with our operations or purchase carbon offsets or allowances.

There are also ongoing discussions and regulatory initiatives in other countries in which we have facilities, including Brazil, regarding GHG emission reduction programs.

Water Quality

Our plants are net consumers of water and are generally subject to laws and regulations related to water management.

There are also ongoing discussions and regulatory initiatives in other countries in which we have facilities, regarding GHG emission reduction programs.

For instance, South Africa has adopted CO2 tax regime.

Water Quality— Our plants are net consumers of water and are generally subject to laws and regulations related to water management.

Most of our plants recycle a substantial amount of the water used in the manufacturing process, which is used as “quench water” in the cooling process.

Contamination

As we handle chemicals that could cause water or soil contamination, we may be subject to remediation obligations under national law.

Contamination— As we handle chemicals that could cause water or soil contamination, we may be subject to remediation obligations under national law.

Additionally, third parties may be able to file claims for personal injury and property damage allegedly caused by the release of hazardous substances or other pollutants into the environment.

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We could incur significant costs in connection with investigation and remediation activities or claims asserted at current or former facilities or third-party sites.

Non-hazardous and Hazardous Waste

In some jurisdictions in which we operate we are subject to provisions regarding waste management and the handling and storage of hazardous substances.

We generate hazardous waste in the form of spent solvents at our plant labs.

In addition, coal tar fractions, a common raw material at some plants, are considered hazardous waste if spilled or otherwise require disposal, as are certain refractories that contain hexavalent chromium, which are generated infrequently.

Non-hazardous and Hazardous Waste— In some jurisdictions in which we operate we are subject to provisions regarding waste management and the handling and storage of hazardous substances.

We generate both hazardous and non-hazardous wastes at our facilities that we manage in accordance with applicable regulations.

Waste streams generated at our facilities include but not limited to office trash, carbon black, solvents, refractory materials, catalyst materials, and non-saleable sulfuric acid.

Certain facilities have on-site landfills permitted for the current disposal of non-hazardous solid waste.

Energy Surcharge

The German Renewable Energies Act (“EEG”) grants above-market payments to the producers of energy generated from renewable sources.

To balance these payments, an energy surcharge is imposed on the consumers of energy.

Certain exemptions regarding that surcharge are provided in the EEG, in particular for energy intensive industries and self-consumption of self-produced energy.

It is expected that the exemption from the energy surcharge regarding electricity generated for the Company’s own consumption will continue to be grandfathered.

Energy Surcharge— The German Renewable Energies Act (“EEG”) grants above-market payments to the producers of energy generated from renewable sources.

To balance these payments, an energy surcharge is imposed on the consumers of such energy.

Certain exemptions regarding that surcharge are provided in the EEG, in particular for energy intensive industries and captive usage.

It is expected that the

Orion Engineered Carbons S.A

exemption from the energy surcharge regarding electricity generated for the Company’s own consumption will continue to be grandfathered.

However, there is no assurance that we can maintain the exemption status permanently.

Chemical Regulations

Some jurisdictions we operate in have established regimes to regulate or control chemical products to ensure the safe manufacture, use and disposal of chemicals.

In the European Union, the Regulation on Registration, Evaluation, Authorization of Chemicals (“REACh”) requires chemical manufacturers and importers in the European Union to register all chemicals manufactured in, or imported into the European Union in quantities of more than one ton annually.

Registration has to be made at the European Chemicals Agency (“ECHA”), and the use of certain “highly hazardous chemicals” must be authorized by ECHA.

Chemical Regulations— Some jurisdictions we operate in have established regimes to regulate or control chemical products to ensure the safe manufacture, use and disposal of chemicals.

Registration has to be made with the European Chemicals Agency (“ECHA”), and the use of certain “highly hazardous chemicals” must be authorized by ECHA.

Furthermore, REACh Regulation contains rules on bringing substances to the market that have been identified as substances of very high concern.

In the United States, we are subject to federal and state chemical regulations.

In particular, we are subject to the California Safe Water and Toxic Enforcement Act, which imposes labeling and record keeping requirements.

In particular, we are subject to the California Safe Drinking Water and Toxic Enforcement Act, which imposes labeling and record keeping requirements.

In South Korea, under the Chemical Control Act, coal-based feedstock oils such as crude coal tar (“CCT”), coal tar distillate (“CTD”) and soft pitch oil (“SPO”) containing more than 0.1% quinoline are treated as hazardous chemicals requiring production sites to be duly licensed.

We are a member of the International Carbon Black Association (the “ICBA”), which currently consists of representatives from carbon black manufacturers in Europe, North and South America, Asia and Africa.

We are a member of the International Carbon Black Association (the “ICBA”).

The ICBA seeks to address common environmental, health and safety issues, undertakes research on health implications of carbon black, and serves as the leading advocate for the industry in the regulatory and public-interest arenas.

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Besides the Company, the following companies are members of the cb4reach Consortium:

Cabot Corporation, Cancarb Limited, Birla Carbon, Continental Carbon Company, Tokai Carbon, and Imerys S.A.

Health and Safety

The health and safety of our employees and customers is one of our highest priorities.

Cabot Corporation, Cancarb Limited, Birla Carbon, Continental Carbon Company, Tokai Carbon CB Ltd.

and Imerys Graphite & Carbon.

Health and Safety— The health and safety of our employees and customers is one of our highest priorities.

We maintain very good performance in occupational injury and illness rates.

New employees and contractors working on site are given environmental, health and safety training and we keep track of environmental, health and safety matters.

Employees are required to report and log incidents including near misses into the electronic environmental, health and safety (“EHS”) management system.

New employees and contractors working on site are given environmental, health and safety (“EHS”) training and we keep track of EHS concerns and issues.

Employees are required to report and log incidents including near misses into the electronic EHS management system.

Our sites are required to implement and report EHS leading and lagging indicators for EHS performance.

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Due to its high purity, certain carbon black grades are permitted for use in cosmetics or in products in contact with food.

The International Agency for Research on Cancer (“IARC”) classifies carbon black as a Group 2B substance (known animal carcinogen, possible human carcinogen).

The International Agency for Research on Cancer (“IARC”) classifies carbon black as a Group 2B substance (possible human carcinogen).

We have communicated IARC’s classification of carbon black to our customers and employees in accordance with applicable regulatory requirements.

The Permanent Senate Commission for the Investigation of Health Hazards of Chemical Compounds in the Work Area (the “MAK Commission”) of the German Research Foundation ( Deutsche Forschungsgemeinschaft ), which uses a different rating system, classifies carbon black as a suspect carcinogen (Category 3B).

Other national and international health organizations have not rated carbon black.

To the best our knowledge, other national and international health organizations have not rated carbon black.

Any risk reclassification of our raw materials, intermediates or finished product could result in increased operating costs or affect product lines or sales.

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With ECHA's update of the CoRAP list in March 2016 Carbon black was included in CoRAP for substance evaluation in 2018 though it has been postponed several times.

The most recent ECHA update from October 2019 the substance evaluation is proposed to be further delayed to 2022.

With ECHA’s most recent update from December 2021 the carbon black substance evaluation is proposed to be further delayed to 2024.

The substance evaluation for carbon black was proposed by France.

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These developments may significantly affect our business, including increasing costs of doing business.

According to the recommendation of October 18, 2011 (2011/696/EU), carbon black is defined as a nano-material in Europe.

According to the recommendation of October 18, 2011 (2011/696/EU), carbon black is defined as a nanomaterial in Europe.

Afterwards the ISO developed the ISO TC 229 “Nanotechnologies,” which considers carbon black as a “nano-structured material.” Other countries (such as, US, Canada, France, Belgium, Sweden, Switzerland, etc.) have implemented notification schemes related to nano materials.

In Europe, Commission Regulation (EU) 2018/1881 as of December 3, 2018 amending the REACh regulation introduced new information requirements for substances with forms meeting the definition criteria of EU COM 2011/696/EU.

The notification of carbon black under the different notification schemes as well as meeting the new nano-related information requirements under REACh requires

capital and resource commitments to compile and file dossiers.

Furthermore, more and more specific requirements for substances regarded as nanomaterials are emerging with Europe.

The notification of carbon black under the different notification schemes as well as meeting the new nano-related information requirements under REACh requires capital and resource commitments to compile and file dossiers.

Furthermore, more and more specific requirements for substances regarded as

Orion Engineered Carbons S.A

nanomaterials are emerging with Europe.

For example, Germany is planning to introduce a more stringent Occupational Exposure Limit for nanomaterials.

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We cannot guarantee, however, that any future changes in the requirements or mode of enforcement of these laws and regulations will not have a material adverse effect on our business, financial condition, results of operations or cash flows.

Labor Relations

Our employees are located in many countries and are represented by labor unions and works councils in accordance with local law and practices, which could provide participation and information rights to those representatives.

Membership of employee labor unions varies in accordance with the business area, local practice and country.

We have entered into collective bargaining agreements with employee labor unions either directly or as members of industry-wide unions or employer organizations.

In particular, approximately 73% of our employees are covered by such agreements.

These agreements typically govern, among other things, terms and conditions of employment and reflect the prevailing practices in each country.

We believe we have stable relations with our employees and voluntary turnover is low.

In 2017, 35 of the former employees in our closed facility in Ambès, France filed claims with the labor court of Bordeaux contesting the termination of their employment and seeking damages.

Of these claims 32 are pending in the courts and our results of operations reflect accruals made by us to satisfy our best estimate of these claims should the former employees prevail.

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What changed 10-K

Item 1. Business