Hello, everybody. Thank you so much for coming. We really appreciate you all taking the effort to come to our first ever investor day. It's been a lot of work, and we hope you get a lot of insight into the company and our growth plans for the future. My name is Wendy Wilson. I've probably seen you on a lot of Zoom calls over the last couple of years, so it's nice to meet everybody in person. This is our famous slide. You've all seen it. We'll go right past it. This is our agenda for the day, but a couple of housekeeping issues or not issues I'd like to point out is for our Q&A session today, we're not gonna be using a microphone and taking questions from the floor.
You all have a QR code on your tables. For the people virtually attending today, there is a tab where you can ask questions. You can start asking your questions now. You can ask them as they pop into your head during the presentations. That way we can get more questions in and addressed after our presentation is completed. Please feel free, and we'll try to get through all of them by the end of the day today. Our speakers are all here. They will introduce themselves. Corning will introduce them as well. I just wanted to mention that we have another person from our management team who's here today, Bob Hrivnak, our Chief Accounting Officer.
I think some of you, if you've been on our earnings calls, have interacted with him, but I just wanted to say that he's here again today. With that, I would like to turn over the presentation to Corning Painter, who is ready to go and locked up in his hotel room.
Thank you, Wendy, and welcome everyone to our Investor Day. It's a pleasure to be with you virtually. For those of you who are in the NYSE and those who are attending today. I personally was hoping not to be a virtual attendant, but yesterday morning I had the dreaded positive COVID test. Such is life and things move on. Let's go ahead and get started. We are really glad that you are with us today, and we are eager to share with you some of our excitement for the company. I'm gonna start out by just providing some background for people who are new to the Orion story.
On this slide, you can see we are the number one global player in the specialty market, and we are the number three global player in the rubber carbon black market. At the bottom of that page, you can see we have a number of plants and labs spread out around the world. Now, quite a distributed company for a firm our size. The key point here is that we are where we need to be to serve our customers. Now, despite that geographic distribution, we are a very focused company. Next slide, please. On the left-hand side of the slide, you can see that specialty applications, they take 7% of the carbon black market. That's all they're worth, right? For us, right, it's 27% of our volume goes into specialty applications.
We are nearly 4.0x overweighted into specialty, and that specialty generates over 50% of our EBITDA. To have such a strong position in specialty, we have certain anchors. Of course, most important are our people, our know-how, the relationships with customers, but also important is our production assets. Slide, please. At the top of the next slide, you're gonna see the furnace reactor. That's the workhorse of the modern carbon black industry. That's what most of the carbon black in this world is made with that technology, and we use it a lot ourselves. We also have those four other production methods. If you look at them, it's a very different kit. They have different raw materials, sometimes very different raw materials. Critically, you end up making different products, different structures.
I mean, everything we do, right, it's carbon, but the differentiation is in the shapes and the distribution of the shapes and the sizes, the morphology of these materials. That makes a huge difference in how they're gonna perform in the customer application, in the customer formulation. Dave Deters is gonna give you a very vivid example of this in just a few minutes. In addition to those four other production technologies, we also have the ability to modify the surface chemistry of our material to further enhance its performance in the customer formulation. 'Cause in the specialty materials space, you wanna have just the right performance in their end market, in their chemistry themselves.
To give you a sense of how differentiated, how uncommon this production capability is, if you look at just the areas on this slide shaded in that gray area. For this year, we expect to earn over $80 million of EBITDA from that with over 40% margins, even at today's energy prices. This is a very unique, very special, like a hidden gem within the portfolio of Orion. Okay, we've talked a lot about some numbers and some equipment at this point, but the most important thing is our people. Let's go to the next slide, please. I'm very pleased to be joined today by, in addition to Wendy and Bob, but also Dave Deters, who leads our innovation team. Sandra Niewiem, who leads our global specialty business and the EMEA organization.
Pedro Riveros, who leads our global rubber business and the Americas organization, and Jeff Glajch, our Chief Financial Officer. Next slide. One more general comment, and that is if you're new to Orion, you're unfamiliar with carbon blacks, let me just say they're everywhere. They're ubiquitous. Almost any man-made material that's black in color has got carbon black in it. It is so widely used because you could not just provide color to a material, you could strengthen a material, you can control electrical or optical properties. You can give a product or an ink a certain sort of prestige feel to the look and feel of it. It's a versatile material, and as I said, by controlling those structures, we can customize it to work well in a specific formulation. Let's go a little deeper. Next slide, please.
Our business is just so well positioned. Like we are set up to really benefit from some mega trends that are out there. These are mega trends you see, you hear about every day. You can't open up Bloomberg or WSJ or wherever you get your news, you're gonna hear about, especially the first two, electrification and sustainability. I mean, it's just undeniably like two big themes of the modern era. What you might not be as familiar with is how well-positioned we are to take advantage of these two mega trends. Electrification, I mean, obviously it means EVs versus internal combustion cars, but also, energy storage. Let's think about intermittent renewable energy.
The combination of those two drives a huge need to massively upgrade the electrical grid in North America, in Europe and really all around the world. What does this mean to us? It means a huge increase in the demand for conductive additives. In addition to that, enhanced tire wear for people who are using EVs. If we go down one, this is sustainability. Another thing we all know that's a theme out there today. One aspect of sustainability is electrification, and that drives everything I just talked about. One thing you might not think as much about is a circular economy under sustainability and specifically tire recycling. If you worked in the tire industry, you would. You can look up any of the tire companies.
You can look up their joint statements about ESG priorities, creating a circular economy where old tires are recycled and used for new raw materials. That is a big theme for this industry. What's the result for us? On the right-hand side, again, conductive additive demands and strong interest in tire-derived carbon blacks. On the bottom of the page, when we talk about growing consumer demand, and I don't just mean post-COVID-19, but if we think about even running up to that, you know, like a growing middle class around the world. As consumers have more discretionary income, you know, some of their priorities go to, let's say, ethical or sustainable shopping and sort of aspirational purchases.
I think the combination of those two is partially responsible for the success of EVs in Asia and in Europe, and in general, a sense of consumers trading up. Products like ours that can convey a sense of prestige to an end customer product or the packaging or the coating associated with it, that's a real driver for us as well. Okay, you guys, by and large, everybody who's watching this, you are a professional investor. You go to many of these sessions, and I know they can all kinda blend together after a certain period of time. I wanna give you a chance to visualize our business in a different way with a real focus on specialty materials. You know, everybody wants to be in specialty materials, and people like the margins, the sense of a moat, right?
A competitive moat between you and your competition, the sense of a really sticky product customers don't wanna change. Next slide, please. When people talk about it's almost like they're talking about some sort of like a beautiful beach, right? Everybody wants to be on this beach. Let's think of this beach as specialty materials. Everybody, you know, everybody wants to sort of like own a part of that beach. They wanna be on it, whether you're the manufacturer or the investor. What I would say to you is if you wanna be on the specialty beach, you need to care about the sand. Slide, please. The sand in the sense that each one of these grains of sands, these little things, they're like little individual specific end markets.
When you're in specialty materials, you need to have the best performing material in the customer chemistry, in the customer formulation, right? That's what they're really looking for in the specialty space. You know, we're, for example, we support coatings. If you're interested in coatings, you have to think, though, do you mean architectural? By the way, by that do you mean professional? Do you mean do it yourself? You know something you get at a big box store? Do you mean marine protective? Do you mean automotive? If you did mean automotive for coatings, well, there's the undercoat, there's tinting, there's the top coat. There's solvent-based chemistries, there's water-based chemistries. There's the paint that's gonna be applied at the OEM versus the paint that's gonna be applied at a refinish shop. The formulations around all of those different things is gonna be different.
You need to have the best material for each one. You need to care about each and every one of them. That's a lot of work, but of course, there's some rewards. One reward is, well, with so many small, little individual micro-markets, you know, if the economy is weak in one area, it's often strong strengthening in another. There's a certain stability in the business. Another thing that comes with a lot of hard work, next slide, too, is that you're able to create something like competitive moat. Sticking with our little visuals here. Think about a moat. Let's think about a seawall, right? That we're able to claim a part of that beach 'cause you have some unique capabilities, some sticky products, some deep customer relationships, and that gives you an element of a seawall.
If you think back a few slides where I showed you those different production techniques, right? That are not widespread on this planet, right? Their uniqueness. That's part of our seawall. That's how we are able to carve out some space. With our new investment around acetylene conductive materials, right? That's also gonna build up its own seawall around that market location. Now, there's a limit, of course, to this analogy, right? 'Cause not every market's the same size, and some markets are bigger than a grain of sand. There's, you know, there's rocks, there's stones. Going with that, I mean, there's like a new, huge application. Maybe it's not a new application. There's been connectivity before, but like the market demand for it is just dramatically different. It's like a whole new opportunity has emerged. Slide, please.
You can think of, on this slide, is our like a representation of just like, wow, it's a significant market opportunity out there for connectivity. Sometimes when I talk to investors, they talk about it as though it's a monolithic opportunity. They're kinda like, "Well, do you think that's gonna be carbon nanotubes?" It's specifically they're thinking of lithium-ion batteries. Do you think that's gonna be carbon nanotubes or more of a three-dimensional carbon conductive carbon particle like what we make? What I would say is, if you look at the same rock, but from a different. Slide, please. You could see it's really two opportunities. Really now zooming in on lithium-ion batteries. In those electrodes, which is where this material is used, there is both carbon nanotubes and three-dimensional carbon particles.
There's trade-offs between them, and Dave and Sandra will talk about that, but the trade-offs are such that the optimal solution is using both. Just about every lithium-ion battery manufacturer does use them both. I believe you can add in silica, you can go solid state, whatever. You're still gonna need conductive additives for those electrodes, and you're still gonna want a mix of these two materials. We'll show you more about that in a moment. Okay, we're gonna leave the beach analogy for a moment. Next slide, and we're gonna talk about sustainability. I think we went ahead two slides. Just back one, please. Okay. For sustainability, this is a slide you're gonna see several times today, and there's three themes to our sustainability platform. Number one, enabling carbon. This is where our carbon black improves the sustainability performance of our customer's material.
Number two, recycled carbon. Think about that circular economy, end-of-life tires, that sort of thing. Finally, renewable carbon. Think about the natural CO2 cycle, and if we can extract some CO2 from that cycle, from a biological feedstock, in other words, that's what we're talking about here. Now, I wanna be really, really clear. We are not pursuing these out of a sense of defensiveness. We make an essential product. We are a good steward for that product. We co-generate a lot of electricity, we provide district heating and so forth. Our raw material is an industrial byproduct. It is super carbon rich, and if we don't use it. When we use it, right? We are extracting that carbon and capturing as much of it as we can into a solid form. If we're not doing that, it's gonna go to a boiler.
It's gonna be burned, it's gonna release a hell of a lot of CO2 and for steam, and the CO2 footprint of that steam is gonna be immense, right? We're not doing this defensively. We are interested in these three options because our customers are. We see a business opportunity in this. I would say, if you're an ESG investor, and you're looking for an opportunity to both get a return on your investment and be part of something positive, then I would say you should invest in a company like Orion that makes an essential material and is working towards a better future in this regard. Okay, let's sum up what we've covered here, and it's just two main strategies that we're gonna focus on today, right? Very easy to understand what we're executing against for you as well as everybody in this company.
Number one, expanding our conductives business, right? The material reality of that is the recent announcement about the new acetylene project here in the United States in La Porte, Texas. Number two is leadership in the sustainable transformation of the rubber business. Progress there, I think, is gonna be more stepwise, a percentage of recycled material, that kind of thing. Not quite as dramatic. Now we'll go a little bit deeper on each one of those. First on the conductives. If you look at the green power play on that we've already talked about that, right? Some of the things that drive the market for us. Then we've talked about, hey, look, there's two different ways you could approach this, right? In terms of carbon nanotubes or three-dimensional. We've talked over that.
Let's focus on the right-hand side. Why are we starting in the three-dimensional Kappa space? The answer is, if you think about carbon nanotubes, I mean, it sounds really sexy. I mean, actually, as a chemical engineer, I'd say it is really pretty cool stuff, right? There are some technical barriers to making it. The truth is, there's a lot of people playing in that space. Many of those players are in China, right? You can just Google this for yourself. If instead I think about where we are, we're making the really high-end, very high purity, right, a gaseous feedstock, very clean feedstock. If you think about what we're doing, there's technical barriers for sure to being able to do it. In addition to that, there's supply chain barriers, right?
It's not that easy to contract for a long-term supply of high purity acetylene like what we just did. I believe that means this is gonna be a more durable, more sustainable, highly differentiated market. I think like essentially, the sea wall around this space is gonna be really pretty fantastic. That's why we're so interested in it. Doesn't mean we'd never do anything in carbon nanotubes. Doesn't mean we wouldn't collaborate with carbon nanotube manufacturers, but that's why we start here. Next slide, we talk about sustainability in tires. Look, again, it's simple, and it begins with the very top. OEMs want sustainable content. That's a fact. The tire customers want a solution for end-of-life tires, right? Today, end-of-life tires, they end up getting burned in cement kilns. The tire manufacturers know that's not a good long-term solution.
It's not what they want in terms of the future of this. They want a different answer. The solution, you know, is circular and renewable paths forward. There's gotta be an element of circularity here to really address that issue around ELTs. That's why we're so focused on it. What's it gonna mean? Well, it's gonna mean you'll see we're able to make those products today, and it's just a matter of modifying our technology to enhance the efficiency when we make these different materials. Next slide. I've talked a lot about strategy, and now I'm just gonna talk briefly about some of the operational things we're working on. We'll start out from a plant perspective. Next slide, please.
On this one, you can just see a number of different themes that are available to us in terms of improving our current plant performance, all of which are gonna make an improvement for us in terms of our financial performance as a company as well. No shortage of opportunity there. We go to the next slide, we come to pricing, which is just near and dear to my heart. You know, it begins with knowing that you're entitled to a fair price for your product, which means getting a return on capital that you invest and providing training to our people and tools and analysis, price discovery, and so forth. In addition to all of that, like we are right now just in an incredible pricing environment.
North America's been brewing for a long time. There's been people onshoring tire capacity here, but I don't think anybody's added a new reactor for the rubber carbon black. In fact, actually, at the end of this year, one factory is gonna close. This is gonna get tighter, and we'll see over time, Monolith will come in with a new facility. This is gonna become tight, and that makes the North American market, even with the Monolith, I think a very tight and very attractive market for us. If we shift over to Europe, well, Europe used to more or less be very tight in supply-demand balance, including Russia as a supplier to Europe. Right now, nobody's very comfortable with that Russian supply chain.
I think that makes a highly favorable market, not just in terms of pricing, but let's say also in terms of overseas shipment and supply into the European market. A super favorable situation there. Now if we think about sort of summing these up, let's go to our next slide. A value creation mindset and a dedication to number one, thinking that what matters in this world is return on investment. Not what kind of margin, not did we raise the price from last year, that kind of thing. Are we getting a return on our investment, our full investment? What you have to invest to hit all the air regs and to keep the plant reliable for the long haul, that kind of investment.
As we also can think about then how are we gonna balance as our cash flow improves, which we'll talk more about today, between strategic investments and returning cash to our customers. Just to give you a sense of that decision framework in action, we just made this significant investment or announcement of a new investment, a new plant in La Porte, Texas, focused on acetylene based Kappa conductive materials. We have a high return project. We shared the financials on that in the past. We have very high confidence in this project. It's a duplicate of what we've upgraded our plant in France to. It's the same supplier as we have in France. You know, it's a great location for the chemical industry. Personally, I believe that the demand for this product is gonna grow regardless of the economy.
I mean, the economy can go into a recession, and the penetration of EVs versus internal combustion engines is still gonna power forward. I think this is gonna be a fantastic opportunity for us going forward. What does this add up to? Next slide, please. If you look at last year, we are at $268 million in terms of EBITDA. Our midpoint of our current guidance is $325 million, right? Pretty significant step up from there. What can we do from here then in terms of our, let's say, mid-cycle Adjusted EBITDA capacity? Next click, please. First of all, we've got the Kappa conductives, right? Basically that new plant, plus getting a bit more out of our current facility, that's worth about $50 million.
Other capacity expansion, really what we just mean here is that plant that we've been working on in China, right? A significant debottlenecking, which we've already talked about, that is gonna be on this year. A full year of Ravenna, where we think about, you know, lapping it for the next year. Some small but very important and attractive expansions in some of our most highly differentiated products. Sandra will talk more about that. Those aren't new projects, by the way. That's all pretty much underway right now. Beyond that, we've got price and mix. Think of that in specialty mainland mix and in rubber mainland price. If you haven't already done the math, that gets us to $500 million, $500 million in terms of EBITDA capacity. That's a 17% CAGR for this company.
I just think this is like transformative for Orion. I mean, it'd be good for any company, but for us, it's ultra transformative. Let's go to the next slide. The sense of the growth threshold, right? The truth is we've crossed the threshold. You could see that in our EBITDA guidance. You can see it in our last quarter. We've talked about the mega trends, right? They're like helping to push us up these stairs. We've talked about connectivity, this great opportunity, right? We're on our way. We've secured the land. We've secured the supply. We're moving forward with an expansion to address that. We've talked about the pricing environment. You put these things together, and it's a significant improvement for us. Orion does not lack for ideas or opportunities.
Orion has lacked for cash, and this is gonna change, right? Between the step up in EBITDA that I've outlined for you and the fact that the mandated EPA spending, that the light at the end of the tunnel is approaching on that. You put those two things together and Jeff will walk you through this later. I mean, our cash flow situation is gonna improve dramatically from here. I think this is just an ultra-exciting time to be part of this company, and it's just very straightforward what we need to do, right? Nothing super magical in any of the slides that I've shared with you. It's just sort of nuts and bolts and a straightforward path for us.
One thing that's important though to making this all work out is having a good innovation platform so that we can remain close to our customers, that we've got the right applications technology. That we're able to put up those sea walls in terms of getting difficult qualifications done, in terms of being able to make just the precise structures of the carbon that our customers want or being able to use renewable sources. For that reason, I wanted Dave Deters to be our second speaker today. With that, Dave, I'd like to invite you to come up to the stage. Thanks, everyone.
Thank you, Corning. Good afternoon, everyone. My name is Dave Deters. I'm the Chief Technology Officer of Orion. I've been with the company seven years now. I'm located in Cologne, Germany. I have more than 25 years running global R&D organizations. I have specific expertise in coatings, specifically automotive OEM, refinish, industrial, powder, marine, protective, and decorative finishes. In addition to that, in my recent past, I've run a global business with profit and loss responsibility. Engineered carbons are more, much more than just making the color black. For example, they reinforce and they fortify rubber, and this allows you to have longevity, so your tire does not disintegrate in normal day-to-day activity. It also provides a strengthening agent for polymer applications and of course, rubber. It absorbs all UV light and visible light.
This is important for things such as your black clothing where you prevent fading in direct sunlight or on an engineered plastic, so the interior of your car, which prevents the embrittlement of that plastic. From a pigment perspective, we put functionality on the surface of the carbon black, and this is extremely important when you're working with crosslink systems such as adhesives, coatings, printing inks. Of course, carbon black is conductive. It's conductive and then for batteries, it's also conductive for polymer applications. What we do at Orion is we tailor make. We design these engineered carbons to work specifically for the end use applications, and we do this by a variety of different ways. We can control the particle size, we can control the structure, we can control the aggregate size distribution, for example.
All of these have a major influence on the end use application. I have a very simple experiment or demonstration to show you. Here I have two identical rubber balls. These rubber balls were made with the identical rubber compound. They were made with the identical formulation. They're made with the same weight percentage of carbon black, which is roughly 25% and the equivalent to a tire today. The only difference is the grade of the carbon black that's put into this rubber ball. What you can see as I drop these, you'll see one. I'll do it on this side as well. One significantly has less bounce back than the other one. The reason that it has less bounce back is because it's absorbing all that energy. I got a secret. This is intentional.
We've done this intentionally, primarily because that application is for a racing tire. When you have a racing tire, what you want is you want that tire to hug the road, and you want it as it heats up during normal driving. It heats up, and by heating up, it provides the maximum dry grip adhesion, which is perfect for a racing application. Corning talked about our key production technologies and the different capabilities that we have. What I wanna try to provide to you is reason why some of these special applications that are unique to Orion, what do they do differently, and why do they allow us to broaden the product portfolio for the specialty market? Gas Black, for example.
With Gas Black, you can produce a very rich, very deep color black, and it also has special characteristics that make it applicable to the coatings and the printing inks world, for example. Lamp Black is the oldest production process that we have. Here, if any of you have bought a new vehicle in the past couple of years, you'll notice there's a unique feature of that vehicle, whether it's a truck or a car. When you come to a traffic light, all of a sudden your engine quits. Then when you re-press the accelerator, the engine starts back up, and you go on your way. The purpose of this is to reduce the environmental emissions of your vehicle, so it's controlling CO2 emissions. In that vehicle is what they call a start-stop battery.
The start-stop battery is actually predominantly using a Lamp Black 101 as its conductive additive in that operation. Thermal Black has natural gas as a feedstock. What does that do? Natural gas provides a high-quality, zero-defect material which is actually quite applicable for window seals and door seals on automobiles. Acetylene gas is our latest addition to our production portfolio. Acetylene gas, as Corning had alluded to, provides a number of advantages in terms of purity and other aspects. A current use of Acetylene Black today is in the manufacturing of a tire.
What happens in a tire manufacturing plant is they first inject a rubber compound into a mold, and then they take what they call a tire bladder, and it's like a balloon, and this balloon is filled with forced air, and it pushes out the rubber compound into a uniform distribution throughout that tire mold. In the process of this, there's also, they inject steam, and they bring the heat up of that mold to start the vulcanization process. This tire bladder has to both expand as well as contract in this process, so it has very high elastic characteristics, and it has very high resiliency to come back to its normal position. This is a key characteristic of why Acetylene Black is a critical component of this operation.
It expands, contracts thousands of times before it has to be replaced. That's one key application today. What we're excited about as Orion is Acetylene Black or our Kappa conductives is a place where the lithium-ion battery has a unique home at this point, and I'll explain that in more detail in a couple of minutes. Another critical aspect of what we have which makes Orion unique as well is we post-treat carbon black. We can post-treat any of our materials out of any production process. What are we trying to do? We're trying to enhance performance.
What we basically do is we can preferentially surface treat the chemistry of a carbon black to make it much more applicable to that end-use application. We have a couple of different oxidation agents, and utilizing them, depending upon the end use application, we can preferentially treat and get different surface groups, which make these systems very, very compatible in different applications. An example of that is the automobile in the top left-hand corner. Here are the automotive OEM manufacturers. They're looking for the deepest, the darkest, the richest, the blackest, the highest jet finish that you can make in the world. That's still not good enough. What they also want is they want, when you're looking at that finish at, in a glancing angle, that it has a bluish undertone.
This combined portfolio of additives really creates a high elegance, something that is visually attractive, that consumers like, that the automotive manufacturers want. By doing this, you're creating additional value for that product. By creating that premium finish, if you will, we, as Orion, are able to sell that as a premium product with higher margins and higher price. We have four innovation laboratories strategically positioned around the world, the largest one being in Germany, and the role of the German innovation group is. This is where all the technology development occurs. New technology, new products, new process development, all is housed within this main laboratory. Then after we have a product or a process which is applicable for commercialization, we now send it out to all of our regional laboratories, and their specific role is they customize this.
They make this work in all the end-use customers that are in that regional, the zone. All the customers have a little bit differences in what their end-use applications are, what their performance requirements are, and what their specifications are. These group of people do that modification to make it applicable to the end marketplace. In addition to that, we have really, in all of our facilities, we have state-of-the-art equipment. It's not only state-of-the-art, it's identical to what our customers use and how they evaluate these products in their laboratories. By having the same equipment, we have a very good and strong correlation factor to our results versus theirs. In addition, we normally just hire people who come from the industries, and so they bring another level of credibility to Orion.
Now we can talk in a credible fashion with integrity and the ability to correlate exactly with what the people are talking about in these specific end-use market applications, whether it's a coatings, whether it's a printing ink, whether it's an extruded polymer, whether it's tire testing. We have the capability and we have the equipment to do that. In Cologne, we have our largest innovation group. What you see depicted here in the two dark blue and the orange arrows are really our technical centers. We have the laboratory, which is in the light blue. One thing that's also equally impressive here is in that green arrow. You're looking at the middle of a manufacturing site, and what we have there is a pilot plant. This pilot plant is used exclusively for our entire innovation process.
In fact, we have a couple of different things within our innovation group. In the middle, we have what's called a mini plant. We commonly refer to this as a baby reactor. It's a very, very small-scale furnace reactor, which is the starting point. Between the mini plant and the pilot plant, these are the heart and the soul of our innovation group. Every new product development or process development starts here. After we get a product or a process through the mini plant, the baby reactor, then we scale it up to the pilot plant. Because of our ability to scale up that easily, we can now produce a large enough quantity of material that we can send to customers.
We can do our own internal testing for the end market applications, and there's enough material available. Now, because the pilot plant is in the center of our manufacturing site, we can go right next door and produce this on a full industrial scale. These two pieces of equipment, you'll hear from a testimonial in Pedro's presentation, from our customer, Michelin. They viewed our pilot plant and our mini plant as two key criteria for wanting to work with Orion on the BlackCycle project. You'll also hear from Sandra, who will talk about we have a capacity constraint in Gas Black. We were debottlenecking, and we're also expanding in this region very soon.
Over the past six months, we've used this Gas Black research plant extensively to make sure that our expansion, the material is identical, the quality's the same, and we can produce the exact same grades of carbon black coming off that Gas Black unit for the expansion. Our priorities today are we have a large number of our resources focused on conductivity, a large number looking at sustainability or circularity, and then a further aspect is focused on operations excellence. Here, the primary aspect is looking at how do we improve yield? How do we improve capacity? How do we improve throughput through our traditional processes? We'll talk about each one of those independently now. When we talk about conductive carbons, we can utilize four different processing techniques to produce conductive grades.
I wanna draw your attention to the middle pictorial, which is a microscopy photo of four different processes. They're all at the same resolution or magnification, if you will, 500 nm. I think if you look at that picture on the right, you see something dramatically different than the three pictures to the left of it. Here, you're building an enormous structure from an Acetylene Black Kappa conductive product. What's unique about that is because you now have this high structure, you now have a lot of space to conduct and transfer electrons across. This is a key component to lithium-ion battery operation. If you look at what the ideal battery grade is, one, it has to be conductive. So now you have the ability to do that with a Kappa conductive material.
In addition to that, you need low moisture pickup. Acetylene-based Kappa conductive material is actually hydrophobic. It doesn't absorb water at all. This, from a safety perspective of lithium-ion battery, is critically important because if you have too much moisture or water in your battery, you run the risk that you have a runaway chemical reaction which leads to overheating of that battery. The other key component is you need to have low metal content or low grit formation. This is critical for lithium-ion batteries for the longevity of the battery. If you have too high a metal content, you destroy the life of the lithium-ion battery. By utilizing acetylene gas as our feedstock, we have very pure, very low metal concentrations, typically below five parts per million.
The last component is the ability to disperse it, because you have a whole bunch of materials that are coming together at the same time, and all these things have to intermix, they have to disperse together, and they have to form a homogeneous matrix. By doing that, the better that you can do that, the better the electrical conductivity and the way the better that the battery works. Our Kappa conductive carbon based off acetylene is a very good answer for the battery community. That's why we're excited about it, but our customers are really excited about it. That's why we're building another plant is because we can't supply that volume today.
We also make conductive carbons for other reasons, such as, polymer applications, high voltage wires, even the application on the right, which is something that the majority of us do at least once a week is we fill our gas tank. In this instance, there's a very special requirement for a conductive carbon. Between that filling point in your gas tank is a black rubber hose. The conductive carbon that goes in that black rubber hose has one specific duty is to dissipate static electricity. Every single one of us should be thankful every time we fill our tank and we dissipate that static electricity. The other area that we're focused on in conductives is looking at the synergistic effect of carbon nanotubes with Kappa conductives.
I've already shown in my microscopy photo the large surface area and structure of an acetylene black. What this does, it provides different contact points, as you can see in this pictorial. You have the ability of carbon particles interacting with each other. In addition to that, now if you add a carbon nanotube, now you have very different points. With a carbon nanotube, you can now even further extend this electrical transfer over a longer and longer range. That's really, really important also for a lithium-ion battery because it allows you the ability to discharge the energy in terms of electricity to your vehicle as you're driving it.
On the reverse side, as it's starting to recharge, because you have this long pathway of conductivity and electron transfer, the battery can recharge faster and faster. The combination of the two, the discharge and the recharge, are important characteristics. If you look at the bottom right-hand chart, you can see how the benefits of both a Kappa conductive and a carbon nanotube have. With the ability now you have, you can maximize the performance and the cost by blending these two things together. That's an exciting thing that we're working on, and we're very aware. Also many of you I know hear about the future of the electrochemistry that is going to silicon, is going to some other advanced material. Is going to LFP.
It's going to a whole host of different things, or even to a solid-state battery, ultimately. What we know is that under any one of those scenarios, you will still need a conductive carbon as part of that matrix. And so we feel very strongly, and that's Corning's point around, his earlier comments, which is, this is a key component for now and for the future. On our sustainability front, we're really working in three different areas. If I can focus your attention first to the ELT, which is the end-of-life tire. From that end-of-life tire, that material is going into a tire pyrolysis process. Out of that is coming two work streams. The first one in the center in the light blue is a pyrolysis oil.
This oil, you're able to take and directly reconvert it back into an ASTM grade, which meets the specifications of the tire industry. On the right-hand side of that chart, in the orange, out of the pyrolysis process, you also get a rubber granulate, if you will. It's a combination of usually three different grades of carbon black that went into that tire, but it also comes with a lot of other things. It comes with a high ash content. That ash content could be up to 20%-25%. This is a combination of silica and zinc oxide, among other impurities. To be able to use that in a recycled form, you have to clean those impurities. You have to remove them from that material.
By doing that, then you can take, and you can reblend this recovered carbon black back into an ASTM tire grade in certain concentrations and still meet the performance requirements and the specifications for that grade. There are some limitations because you are mixing roughly three different carbon blacks together to form a single grade. On the left-hand side, in the green, we're working with renewable carbon blacks. Renewable materials that are either based off of wood chips, they're based off plant-based materials, so they could be either vegetable oils or vegetable oil by-products or literally a plant oil. We're converting these into renewable products as well. Corning showed this slide as well.
Our innovation pillars are really looking at how do we develop enabled carbons, recycled carbons, and renewable carbons, all in the same sustainability front. In our case, words are just words. Here, what we have done is we put these into real live practice today. We putting Kappa conductives as enabling lithium ion battery technology. We have a huge group of people working on how do we get new processing techniques to reduce the CO2 footprint and reduce the emissions. We are very active with pyrolysis oils and recycled carbon black. You can see there a number of grades that we've already produced in our plant, either in our pilot plant or in a manufacturing site. These are now within tire and coatings customers today, and they are evaluating this technology as we speak.
In addition to that, we produced a number of materials based off of organic oils or by-product vegetable oils. All of these products are available in tire coatings and printing inks. Again, these are all within our customer base. They're doing product approvals, technology approvals today. The response that we get back so far is extremely positive. These materials are meeting the unused applications that they're designed for. We kind of view ourselves as being the sustainability leader in the carbon black industry today because we're looking at how do we reduce our fossil fuel consumption? How do we make additional products off of recycled materials or renewable materials?
This leads to the other really big initiative that we have, because of this difference, this transformation difference. We are looking at how can we improve the yield? How can we improve the throughput to make more carbon black in the capacity of our existing asset bases? You as the investor community, you model the future financial performance of a company like Orion. You also look at how do you predict the future earnings of this company. We, within the R&D group of Orion, we also do modeling. Our modeling is a little bit different. We're modeling chemical reactions in a reactor. We have modeled every single production line that we have globally in the world.
This is important for us because we want to improve the process, improve the yield, and the throughput and capacity of that unit. Through modeling, if we make some modifications to that reactor on a model, we can predict what's the yield performance of that. For us, if you look at fossil fuels today, the price of oil is enormous. If we can get a 1% yield improvement out of the fossil fuels that we buy today, this is a significant bottom line competitive advantage for Orion. We look to this as a way to enhance the value of our company.
We have a lot of people who are working in this area, but their specific role of taking the renewables and even the circular carbon blacks because the yields are less than what the fossil fuel counterparts are. We're looking at ways of how do we build up that yield and their capability to get better utilization of them. In closing, I'd like to say we really do have the broadest production capability of any carbon black supplier, which then creates the broadest product portfolio, which is especially attractive for the specialty market. We have a world-scale innovation platform, and we also are working very diligently on the sustainability front to create an overall circular economy. With that, I would like to say thank you very much for your attention.
Out in the break room as we take our break, there are the rubber balls out there. If you want to test them yourself or take them home, you're more than welcome. I'm also available for any questions that you might have as well. Thank you very much.
Thanks so much, Dave. For those of you who are virtual, we have a 10-minute countdown clock, so please come back, and we will resume our presentations with Sandra, Pedro, and Jeff.
I hope everyone got the chance to refresh himself or herself. My name is Sandra Niewiem. I'm the Global Head of Orion's Specialty Carbon Black business in the EMEA region. I joined Orion in 2013, and during my time in Orion, I worked in various commercial leadership roles before I moved into my current position in 2019. Prior to working with Orion, I was mainly in the process industries and industrial goods sector. My main objective today is to get you all a little more excited about our specialty business, and let's start with a short video which illustrates really nicely from my point of view, the specialty end markets and applications. Yeah, I think this little clip illustrates so nicely that, specialty carbon blacks are really part of our everyday life.
Yeah, probably all of us, before even getting out of the house or out of the hotel this morning have touched a dozen of different objects which contained, hopefully, our specialty carbon black. So what's Orion's role in that industry? Corning already outlined we are the leading global producer of specialty carbon black. We are holding a 25% share in the market. In addition to the volume share, we believe our value share is even higher than that. We sell across the world regions, and about 85% of our volume goes into non-automotive end markets such as the construction industries, the industrial goods sector, consumer goods, energy materials, and many other markets. We supply a diverse range of products to diverse range of applications.
We'll talk more about that going forward, and we have a significant growth outlook. Also bear with me a moment, I will talk more about this on the following slides. What's special about specialty? Number one, we serve multiple high-value market segments where we compete by performance rather than by price. This is where we are really good at. We have a differentiated product portfolio, including conductive additives. What we typically do, we take our portfolio and tailor it to our customer requirements, and this is how we win sustainable business relationships. We have a strong platform for growth. We have delivered a solid financial performance throughout the COVID-19 pandemic. This year we target our highest gross profit per ton and our highest EBITDA in the company history.
Still, some of you may say, "Well, there hasn't been so much growth in the past," and that's correct. We have had actually more demand that we could supply, or our capacities were so tight that we couldn't grow with our customers' demand. We have addressed these growth barriers with our strategy, and we have made a couple of announcement and a couple of other initiatives are still in the pipeline. I believe we are really on a verge of a new growth era. This picture here right now with a $146 million-$162 million of EBITDA will become more something like a $250 million or even $275 million EBITDA in a few years from now. I'll show you over the next pages how we will get there. Five strategic strength.
Let me just pick two or three. We have a clear strategic focus. We have a clear product market strategy, a clear capital allocation plan that support our strategy, so we're not going everywhere over the next couple of years. We will do a few things right. We use our global network of manufacturing facilities, but also sales and distribution offices to stay close to our customers. We can meet virtually every customer in person. We make active use of our innovation capabilities. As Dave has shown, we work with our innovation colleagues and use our assets and innovation labs in order to develop the next generation of products, because this is important to stay ahead of the curve in our industry. Let's listen what our customers think about Orion's strength, and we have prepared another video for you.
My name is Sandra Niewiem, and I'm the leader of the global specialty business at Orion. On behalf of the Orion specialty team worldwide, thank you for watching this video. I wanted to take the opportunity to introduce you to our specialty customers who are in the center of all we're doing. Our customers value Orion's products for conductivity, protection, and colorization across a variety of applications, such as EV batteries, coatings, inks for packaging, power cables, engineered plastics, and synthetic fibers.
We are a very global company selling in over 100 countries and producing in 70 countries, so your global manufacturing footprint is critical to us.
Orion is for us a leading producer of specialty carbon black. Considering Borealis' strong position in the energy sector, in particular, specialty carbon black is very critical.
Product range, breadth of products that cut across our business segments and your technical and marketing commercial teams understand our business, which is very helpful, and support our needs.
We have a firm commitment to being at zero by 2050, with a couple of ambitious targets over the next two decades. Orion can help get 100% to green power by 2030.
In order for us to move the needle on our carbon footprint, we need you.
Yeah. A big thank you to our specialty customers who volunteered to participate in this video and share their perspective. Let's talk more about growth. Let's look first into the market opportunities, and second, how we will capture those opportunities and drive Orion growth. There are favorable mega trends, as outlined by Corning, sustainability, mobility, growing consumer demands. I would just like to give a little more color how this impacts our specialty markets by sharing a few examples. Sustainability is closely connected to the electrification trend. Electrification means electric vehicle adoption and growth of batteries, and batteries require conductive additives. Growing consumer demand means everywhere where an economy grows, where a middle class is evolving, or urbanization, or other trends occur, there's demand for consumer products.
Not only consumer products, but also industrial products are required to produce those products. To resume the example of Corning about aspirational purchases and prestigious packaging. If you deliver a product in a prestigious packaging to upgrade the value of your product, you cannot just use any printing ink. You need a special printing ink which contains a specialty carbon black that has the right color. But beyond the color, also the purity. You touch the packaging, your kids may play with this, it may be in contact with food. For this, you need the right technology partner like Orion. This is just an example for how this trend impacts our demand. Mobility. Another example.
Mobility is not necessarily a new trend, but within mobility there are some changes and that lead to growth of certain segments, such as engineered plastics. This is in conjunction with a lightweight trend to save material, to replace heavier metal parts, often with reinforced plastic parts. Again, this is connected with sustainability, saving material, saving fuel. For these engineered plastics, you need certain specialty carbon blacks that we manufacture with a small reactor, with a special beading. Again, another nice example how this impacts our demand. How much does the specialty market grow? According to market experts, around 4%-5% per year over the next five years. It depends a bit on the geographic segment or the industry, ±2%.
There are also micro segments that grow much faster than the average growth rates. Overall, I think this is a very favorable market to be in. We don't have to compete on price or buy market share. We can grow with our customers if we do certain things right. Beyond this chart, there are certain segments which we target and that will deliver higher growth than the average market growth. Our ambition is to grow in line with the market, but to grow our value above the general market growth. What do we do? These are the four elements of our growth plan I would like you to memorize. Conductivity, premium growth, targeted capacity expansion, and EBITDA growth. What does this mean for Orion?
We leverage the sustainability trend and grow with our Kappa conductive additive family. We use the existing products. We develop future generations of this product portfolio, and we will plan with a very favorable environmental profile. Second, premium growth is about targeting specific attractive markets and capturing opportunities in this market, in coatings, in packaging and other high-end markets. Deliver our differentiated and tailor-made growth portfolio. Third, to expand our capacity to debottleneck where it is in support of our strategy, where there are good returns on capital. All of this together drives EBITDA growth. In fact, before we even start an initiative, we always have a review and challenge ourselves, is there sufficient EBITDA growth to support the initiative?
For each of these four elements of our strategy, I have now a slide or two, and let's start with conductivity. There are different growth projections of lithium-ion battery demand growth, depending on the market research company or market expert. Growth rates vary from 15% to maybe 30% or even more per year. That's exponential growth. The good news is these batteries require conductive additives, and we are one of the few players who can deliver high value or high quality conductive additives beyond even our current capacity. What do we do to capture this growth? We expand our capacity. We talked already about our latest announcement on the Houston La Porte plant in Texas, which quadruples our acetylene-based conductive capacity. This is good for us. It prepares us for the future demand growth.
Second, we leverage the EV megatrend and focus on batteries. In addition, we also target other attractive market opportunities such as wire and cable, high voltage cables that require high purity carbon black. In addition, we focus already on the next generation of capacity expansion and portfolio expansion, as this market is so dynamic that we have to think ahead and plan accordingly. In summary, how do we win? We market our Kappa conductive portfolio, which consists of both acetylene as well as furnace-based additives. This makes us unique. No other player in the industry has both. We have customers who buy both additives for different product formulations. We expand our innovation capabilities, so we invest and strengthen our innovation labs in terms of headcount, in terms of equipment.
We have battery labs in China as well as in Germany. We leverage the strong underlying growth outlook of our customers. Nowadays, almost every day, if you go through the internet or read in the newspaper, there's a new gigafactory announced, yeah? With some joint venture, maybe of an automotive OEM with a battery producer. We are in contact with all of the players on discussing their growth plans. In fact, we have just signed a long-term agreement with one of the leading players for acetylene-based Kappa, conductive. Finally, manufacturing facilities which we are going to expand or to build on a greenfield basis.
They will come with a very favorable environmental profile, mainly in the area of emissions low, greenhouse gas emissions, but also, circular water use and overall, a step change in, sustainability improvement, which is also very close to our sustainability pledge. We talk now a little bit about conductivity. Let's shift gears and talk about other premium opportunities in conjunction with capacity expansion. Here's an example, our Gas Black business, which is a very classical portfolio. It's almost 100 years old, and our coatings and printing customer love this product line. It provides a very nice color, but more importantly, it is easy to disperse, and it's almost universally in use. You can use it in different formulations.
The sad thing about this story is, over the past couple of years, we have been too tight in our capacities to supply future growth of our customers. In fact, since I'm with Orion, I observed most of the time that we allocated volumes to our customers. That means if a customer had a demand of a certain product, we gave him only maybe 90% of that product, yeah, or 85% because we didn't have enough just from our assets.
We found now a good way to debottleneck our assets with very limited amount of capital, which will give us around 15%-20% growth for this product line and will deliver $8 million-$11 million, maybe $12 million EBITDA over the next couple of years per annum. From my perspective, good example for a targeted growth initiative in the premium area, high-end coatings, nice color, easy to disperse in conjunction with a debottlenecking of capacity expansion. How does this all come together in terms of financial performance? We will grow our EBITDA from today around $150 million to around $245 million-$275 million in a few years from now.
That's an additional $100 million-$125 million EBITDA or a four-year 15% CAGR. As you can see, the lion's share of this growth will come from our Kappa conductive capacity. Other capacity expansion, largely in the premium area, the $80 million that Corning outlined in the beginning of his presentation, and the remainder will come from a price mix optimization. That's what I have prepared for today. Just to conclude, specialty is truly special. It's exciting to be in the specialty industry. We talk about expansion, sustainability. We are the leading global producer supplying a diverse range of applications, including conductive additives, which is our future, and we have a significant growth opportunity ahead of us. Thank you for your attention.
I look forward to the Q&A session. For now, I hand over to you, Pedro.
Thank you. Thank you, Sandra. Good afternoon to everybody. My name is Pedro Riveros. I am the Senior Vice President for the Rubber Carbon Black business here at Orion, as well as the general manager for the Americas. I've been with Orion for three years, and prior to that, I've managed several different types of businesses, ranging from large industrial gas on-site plants to performance chemicals to supply chain-intensive businesses in North America, South America, as well as in Europe. I firstly wanna thank all of you for taking the time here to understand the rubber carbon black business. I know all of you are very busy. The first question is, what is rubber carbon black?
You've heard a bit about this already from Corning and Dave, but I wanna give a short clip of the different uses of carbon black in rubber compounds. As you can see, and as you've heard also from Dave, carbon black in rubber is used in has several different properties, or it can enhance several different properties. The best example is the rubber balls that Dave showed. To bring it closer to, you know, applications, if you look at a tire, and a tire is actually made of several different rubber compounds in a tire, and each rubber compound serves a purpose, whether it's the carcass, whether it's the tread, whether it's a sub-tread, and each one of them uses a different type of carbon black.
In a single tire, you can find as much as four different types of carbon black inside of it. Each one, with a specific function. What that really means is that rubber carbon black is an essential part of the rubber industry. That word essential can also be used to describe the rubber carbon black business for Orion. It is a very strong cash generator, has a very strong growth outlook that I'm gonna be showing. It has a global position, and it is in a very good position to thrive in a changing landscape that I'm gonna also share with you. If you look at the numbers per se, Corning showed, you know, our position.
We're the third largest global producer in a very, you know, very good distribution in terms of geography. This global footprint really allows us to have strong relationships with our global customers, our global tire customers, global mechanical rubber goods customers across all the regions, as well as working with the local tire producers. I also wanna draw the attention to the center pie chart. The center pie chart talks about where the carbon black goes to. 60% of carbon black goes into replacement tires, whether for truck, whether for passenger cars or buses. Now what that means, it really is that it is a resilient demand. Through different recessions, we've seen that carbon black with replacement tires the demand continues.
Even if we look at COVID, and all the time that we were stuck at home, you know, passenger car miles driven declined. However, the demand for carbon black for truck tires actually did not decline and started to increase. That's the advent of e-commerce, the home deliveries. It really shows the resilience of the demand for rubber carbon black. If we look at the financials, and look at 2022, we are very glad to be putting numbers that expectations of numbers that are gonna exceed pre-COVID levels, 2019. Part of that is due to the expanding margins that we are achieving. I'm gonna talk a bit more about it, but clearly a first step in our growth projections for over the next few years.
When we talk about growth, what are the drivers behind that growth? I would bracket them or I would put them in two main buckets. What we've seen in rubber in the rubber industry and the rubber carbon black is the traditional drivers, miles driven, tire production, OEM production. Those have historically driven demand and will continue to drive demand. We're also seeing an increase in importance and in relevance on these emerging mega trends. Whether it's making carbon black with sustainable feedstock or whether it's the EV penetration, the growth of EV vehicles, and also tire design. In each one of these, carbon black can play a role and will play a role. Take an example of the EV vehicles. Tire design is evolving as a result of EVs.
They're heavier, the torque demand is much higher, so the whole performance characteristics are changing. If you look at mechanical rubber goods, sound insulation in the electric vehicles becomes a much higher, a much more important matter, and that's where carbon black can really differentiate in terms of the, of the rubber goods that are used for sound insulation. If you translate that into numbers in terms of growth projections, we're talking around 4%-6% growth rate in terms of carbon black, over the next few years globally. While a lot of the demand, a lot of the growth is gonna come from Asia, I wanna also point out the growth projections for Europe and for North America, which are in the 4%-6%, 3%-5% range. Why is that, you know, very similar to the global numbers?
That is a growing trend that has happened actually before COVID, and it's expected to accelerate post-COVID, is insourcing. Tire production moving back to the large consuming markets. Whether it's in North America, whether it's in Eastern Europe, that is, we're seeing that with several companies announcing new production plants in these regions. What happens with that and what's the, what, you know, what's the main reason behind it is obviously automation, and also just proximity to market and minimizing supply chain risk. But the consequence of that is a growing significant supply and demand imbalance. If we look to North America, to start with North America, and where we see the blue line is capacity, the green line is projected demand and projected demand.
Right now in North America, demand is outstripping supply, and is expected to continue to outstrip supply, as we are seeing, production actually coming down next year, due to another producer shutting down an asset. Even after a new plant comes in, a few years ahead of us, even then, you still have a shortfall. That's a pretty big deal because carbon black for rubber is significant amount of volumes, significant amount of quantities. These are shipped in rail cars. The logistics to bring rubber carbon black into the country, into the U.S., is not that simple. It's possible, but it's not that simple.
If we move to Europe, and we look at the bottom chart, and we exclude Russian capacity, which has been pretty much capacities being supplied in the European region, that imbalance is even higher. It's in excess of 30%. What that really says, and obviously Russian supply continues to flow, albeit very intermittently, there is clearly a from our customers, a desire to ensure that they have a reliable source of supply. We are in a very good position given our plant footprint, both in North America as well as in Europe. If you add all those factors, what are the main priorities for the rubber carbon black business? There's four main priorities that we're focusing on.
First one is optimizing our portfolio and looking at the product mix and purposely changing our product mix to maximize the return on our assets and provide the products that our customers, our mechanical rubber goods customers and our tire customers are looking for. Second point is operational excellence. When I talk about operational excellence, it's about reliability. It's about improving efficiency. It's about improving our energy integration with our existing cogeneration and our future cogeneration plants that we're gonna be building in over the next coming years. Third lever is strategic pricing, and looking at pricing and looking at the return on capital given all the capital that we have deployed and will continue to deploy whether it's in North America and other regions. The last one is developing and deploying sustainable solutions.
I'm gonna talk more specifically on this one in a few minutes. If I were to then look this by region and break this down a bit more in by region and what are our priorities. Clearly in North America, pricing to recover all the capital that we have spent, and we're gonna be spending still this year, is paramount. We see the market conditions really allowing us to achieve that return on capital. We're also gonna continue to obviously drive efficiencies and looking at debottlenecking our existing capacity, our existing plants, and looking at incremental expansions at those sites. If you look at Europe, it really is addressing this supply-demand imbalance brought by the very unfortunate, you know, Russia-Ukraine situation.
This is looking at obviously the pricing and seeing whether we are, you know, the pricing is consistent with what the value that we're bringing to our customers. Also looking at long-term strategic relationships, and what I mean here is long-term agreements. We have achieved these long-term agreements in South Africa. What I talk about long term is five years plus. We are seeking to see where we can achieve that in the European region, given really the insecurity of supply. I mean, clearly, our customers are looking at mitigating their that risk in terms of supply, and we see that as an opportunity. We're also looking at our plants and our capacity. We went on stream with our new plant, new line in Ravenna, Italy.
I can say that our plant, that line is fully loaded as of the beginning of operation. That really was you know part of our plan was really to address the growing rubber and specialty market, but obviously the situation in Russia accelerated that. Really that also brings to the point that you know reliability of supply is very clear in our customers' minds. We are currently negotiating contracts for 2023 now in June, and that is not something that we usually do. Clearly this is in the minds of our customers. We're gonna continue to look at debottleneck projects, quick wins at our existing assets here in Europe, but also looking at our global supply chain and looking at where we can leverage our global assets.
Which really gets me to Asia, where we're very excited about bringing in a new plant in Huaibei at the beginning of 2023, which really is built to address the growing rubber demand and growing sophistication of tire performance in China. Also in the short term is leveraging that new capacity to support the shortfall and the desire of our customers to get more carbon black, both in North America as well as in Europe. We have several lines in China and Korea that we share with the specialty business, and we're gonna continue to look at optimizing those lines on what's the best grades that we can make to our customers and in turn, the best return on our assets.
Clearly a lot of exciting activities and obviously with a few nuances by region. If I move to sustainability, we start with the voice of the customer. We are heavily engaged, hearing very loudly from our customers the priority of making their raw materials fully sustainable. When they talk about sustainability, they're also talking about circularity. Several companies have made very public statements around achieving fully sustainable raw materials by 2050 or earlier. This is something that for carbon black, as Corning mentioned, is an incredible opportunity. Carbon black in a tire normally represents between 5%-8% of the total cost. In terms of mass, it is between 20%-25%. The opportunity to make a tire sustainable is very much hinged on carbon black.
We see this as a tremendous opportunity to really capitalize on it. How we're going about it is we're going at this as you've seen with Sandra, as you've seen with Dave, focusing on these pillars. On enabling carbons, on making sure that we can develop carbon black that can make their product more sustainable, by looking at recycled carbon, recycled carbons, looking at renewable carbons. It all starts by understanding what our customers need. What our customers need in terms of performance in the tire, performance in a mechanical rubber good, what is the quality, what is the consistency, what's the reliability? It all starts there.
Once we have that clearly understood, which we have, and our technical expertise, whether it's on our innovation labs or whether it's with our team out in the field, with that, we then focus on what are the different technical pathways. Dave shared this slide as well, and what I wanna emphasize here is there is no single magic solution. There are several pathways to get to a recycled carbon or to a renewable carbon. If you look at the orange circle, recovered carbon black, it starts from ELT, end-of-life tires. Clearly addressing circularity.
Recovered carbon black, which has existed in the market for quite some time, has a lot of issues, has a lot of impurities, so the use of recovered carbon black right now is fairly limited. Our purpose and our mission is to, through R&D, find ways to remove that impurity, find ways to make the addressable market for that recovered carbon black much larger than what it is today. If we move to the center, the blue circle, that is again starting from end of life tires, going through a pyrolysis process and taking the liquid, taking the oil out of that process, and putting it back into our existing plants, our existing capacity, and putting that to make pure carbon black. Multiple grades, different types of grades that can fully replace a standard grade that's being used today.
We have demonstrated that. We've already announced different types of carbon black that we have made through that process. The third circle, the green circle, is taking different types of bio circular, plant-based oils, and again, putting it in our furnace process, our existing plants or existing furnace processes across the globe and making, again, different types of carbon black. We did this first time 10 years ago. Our specialty business developed a plant-based oil carbon black. We've leveraged that know-how, that technology, and brought it into the rubber industry. Now we have produced several different types of grades with several different types of feedstocks, whether it's plant-based, whether it's waste oils. We have proven that we can make this.
The technical challenge that we're working on is improving the efficiency of making that with these oils. In order to do this, it's leveraging several aspects. First of all, R&D capabilities that Dave described. It's also working in collaboration projects and different types of projects with different companies around the globe. One example of this type of project is the BlackCycle project. Jean-Michel Douarre from Michelin, one of our key customers, who leads this project, has kindly shared some words about this project, and he's really the best one to talk about this. I'll start the video for him.
For the BlackCycle project, Michelin wanted to have the best partners. For the carbon black part of the project, we were looking for a big player in Europe of the carbon black business, willing to innovate on sustainable carbon black. However, innovate on sustainable carbon black is not enough because we know that the quality of the carbon black has a great impact on the tire performance. Developing a new grade of carbon black requires a very high level of technical and scientific skills. Moreover, having an equipment to produce carbon black at different scales, the lab, the pilot, the plant, is key to develop and to scale up a new grade of carbon black.
Based on those criteria, and based also on the experience of collaboration between Michelin and Orion, we thought that Orion was a good match for the BlackCycle project, and so we chose them. What we can tell is that after 18 months of work in BlackCycle project, Orion proved us to be right because they made the first sustainable carbon black from pyrolysis oil of end-of-life tires. That's a great technical achievement. Of course, now the project is not over yet, but we do believe that Orion will go along with Michelin on the road of sustainable mobility.
Thank you, Jean-Michel. So why do we believe we're in the best position to capitalize on this? Start with our R&D platform. Orion has a very strong specialty carbon black business. In order to thrive, you need to have a constant innovation. We're leveraging that innovation, that capability, that DNA, and bringing it into the rubber business to overcome the technical challenges that we've just talked about. We understand the customer requirements. We understand what they need in terms of performance, in terms of quality. We can model, we can replicate what they need in our labs. We have the range of scale from lab to pilot to industrial scale, which then really transforms this into us bringing forward a range, a portfolio of products and approaches to address this sustainable requirement.
We can move fast, and we can move with agility. When you put all this together, you put all these facts together and translate this into financials. Well, what does this mean? In 2021, the rubber carbon black business achieved $120 million of EBITDA. By 2025, we expect to have an earnings capacity that's double of that. What we are right now in 2022 on a very good path to. Actually, we're ahead of plan in terms of achieving that. This growth is gonna come through the growth investments that we are doing in China, the debottlenecking that we are doing across our plants, and just the overall growth of where we can serve in the different parts of the world, as well as pricing.
Clearly, we expect our pricing to continue to move forward given, you know, the supply-demand imbalances that I've talked about and the need for better return on our assets, given all the capital we've deployed. In conclusion, when we talk about the rubber carbon black business, this is an essential business. It's one that we have a global footprint, a leading global footprint. We are a very strong cash generator. We continued and we'll use that cash to fund the growth that we aspire to. We are very well positioned to thrive in a changing landscape that we are seeing in the rubber industry. With that, I wanna, again, thank you for your time, and I'm gonna pass on to Jeff to give more specifics about our financials. Thank you.
Thank you, Pedro. My name is Jeff Glajch. I'm the Chief Financial Officer of Orion. I've been with Orion just a few months. I'm fortunate to follow Corning, Dave, Sandra, and Pedro. My part of the story actually is quite easy after you've listened to the building blocks that they have all laid out. A little bit about my background briefly. I've been in the manufacturing industry for about 30+ years or so, in the chemical market and the energy market, in the U.S. defense market. Most recently, I was a CFO of a small public company for the last 13 years or so, and I'm educated as a chemist and a chemical engineer, so this all makes perfect sense to me. It seems like a good fit. We've talked...
Corning started out talking about our value creation mindset. Within that, we talk about how do we make sure that we're getting a return on our investments? How do we make sure that we're growing the value of this company and that we're running it smart and investing well? How are we generating more profitability? We use EBITDA as our proxy for profitability. Importantly, we need to generate cash. We will start, as you'll see, to generate this very significant amount of cash as we look forward. Finally, using that cash, one of the ways we use that cash is to invest in growth. We're clearly at an inflection point in this business. When you talk about inflection point, a lot of times people talk about it as they're just getting to it.
We're actually at that and have already started down that path, and I think you'll see that very, very clearly going forward. Let me give you a little bit of history, recent history around our profitability and some of our financial metrics, just to give you a little bit of grounding. If I start in the bottom left-hand corner, looking at Adjusted EBITDA, Orion has historically been bracketed in the EBITDA range, just under $270 million prior to this year. I had a little dip in 2020 when everybody was locked up and couldn't go anywhere, but that $270 million was kind of a cap for us.
Clearly, in 2022, we're taking a huge step forward at $325 million, which is the midpoint of our guidance, which is growth of 21% year-over-year. Second area I'll have you focus on is on the top right, the volume. You'll see the volume is relatively consistent other than a little dip in 2020. We're basically tapped out of volume right now. Now, we've got a couple of capacity expansions in works right now, specifically the Huaibei facility in China. We'll have a little more volume from Ravenna since we didn't have a full year of it this year as we get the full year impact of that. Then, of course, the Kappa conductives facility in La Porte, Texas, when that comes on stream in 2024.
Volume is not the big driver, it's everything else. Look at sales. Sales, big step up in sales in 2022. Why? Oil prices. Oil prices have ramped up very dramatically. We've seen a very significant impact in revenue, and you see an impact in EBITDA profitability. Now for you, for those of you who spend a little bit of time in front of a Bloomberg terminal, one of the metrics that's out there is your EBITDA percentage, your EBITDA margin, your percentage margin. You'll see that actually for us, as oil prices have gone up, that actually declines a little bit. Now, why does it decline? We get over recovery on oil costs, but we don't get enough over recovery on a percentage basis to fully keep us at that same EBITDA level.
Don't focus as much on EBITDA percentage. Focus more on absolute EBITDA and focus on our gross profit per ton. You can see our gross profit per ton has really stepped up from 2021 to 2022. Let's talk about this transition, this inflection point. In the past few years, we've been constrained by cash. We've been constrained by cash because we weren't generating as much, and we have the huge needs for our EPA-mandated pollution control. That EPA work is nearly done. By the end of this calendar year, we will have spent more than 90% of the $300 million that we have to spend there. We've got about $25 million in 2023, and then we're done. Secondly, maintenance capital.
We've had a lot of maintenance capital. Our maintenance capital in the past, though, has really been, we've got a problem, what's the lowest cost way to fix it, and we fix it. Well, that's okay, except it really doesn't provide that best long-term cost of ownership. We've been refocusing there and now looking at if we've got a maintenance issue, whether it's an immediate maintenance issue, whether it's a preventative maintenance issue, we make sure that we invest for the best long-term cost of ownership. That might cost you a little bit more in the near term, but ultimately, it's the right way to for us to perform maintenance and to keep our plants running, to improve their reliability and perhaps to get some productivity out of them.
Going forward, again, this value creation mindset, getting a return on our investments. Corning talked about it a little bit, Pedro has talked about it a little bit. We put a lot of money in the ground for EPA. We need to get a return on that capital, and we are starting to see that return on that capital coming. Going forward, we're gonna invest in growth. Now we have a lot of cash flow coming. That doesn't mean we're gonna spend all our cash flow on growth. We're gonna pick out those right growth projects. A perfect example is the Kappa conductives project, which we're gonna spend a little bit of money this year, spend a lot next year, spend a little bit more in 2024.
Those are high return projects that we want to be able to do that we haven't been able to do in the past. We've been limited by cash. Now it's what is our capacity to actually execute on those projects. Then finally strengthening our operating productivity. I talked a little bit about our mindset change on maintenance, but it's also looking at improvement projects. In our last investor call, Corning Painter had a slide that showed $20 million in capital this year, which was gonna generate about $10 million of ongoing EBIT. To think about that, $20 million of capital, and you're getting a return, getting a payback in two years, and you've got many more years to generate a return on that.
Part of that's the concept of preventative maintenance, part of that's the concept of improvements in our capital spending in our plants. You've seen this data before. I just wanna talk through it again 'cause I think it's important in Sandra and Pedro's presentations. If you look at the specialty business, our EBITDA last year was $148 million. We're looking at some amount of growth in 2022. Then as we look forward, we've got the Kappa conductives investment in La Porte that Sandra talked about. It was announced last month. Most of that $50 million is going to come from that investment. Secondly, we've got other capacity investments, specifically, again, a full year of Ravenna.
The Huaibei facility is the Gas Black facility or the Gas Black production. We've got significant capacity investments there. Then finally, price and mix. In the specialty side, it's more mix. Both Sandra and Dave talked about some of the product substitution, product improvements that we have. We think that will give us some additional profitability and ultimately take this business to $245 million-$275 million of mid-cycle capacity. Now what does mid-cycle capacity mean? It means in 2025, if we're in a mid-cycle, which we think there's a very good chance we'll be at, we have a capacity to get $245 million-$275 million of EBITDA from the specialty business. That number is essentially equivalent to what we got from the whole company in 2021.
Now let's look at the rubber business. Pedro showed this earlier. We had $120 million of profitability last year of Adjusted EBITDA. We've got 35%-45% growth this year alone. How? We got it from pricing because oil prices went up, sure. We've also got it from strategic pricing as well as some additional volume. As we've seen the market get tight from a supply standpoint, we have an opportunity and quite frankly, a responsibility to our shareholders to raise prices and to drive the profitability of this business. The capacity expansions, the same ones, at least on the full year of Ravenna and Huaibei, that will help the rubber business. Then finally, price and mix.
In that regard, for the rubber business, it's much more price than it is mix. Now, one thing you won't see on either of these charts is actually productivity. I talked about productivity a little. We're gonna invest in maintenance. We're gonna invest in improvements. We're gonna invest in productivity. The reason we haven't put them here is we believe there is, as we're seeing today, some significant cost inflation occurring in our business that we believe that productivity will offset that cost inflation. Now, if we get more productivity, great. That's upside. But we're trying to be a little bit conservative here. Again, you look at the rubber business, and it's $230 million-$260 million of Adjusted EBITDA, double where it was last year, equivalent to the whole company where it was last year.
We've got a nice pathway there, and obviously we've started out very well. Let's combine these, and this is very similar to this. This is a slide that Corning showed earlier. Step up from $268 million to our midpoint of our guidance is 21%. On that 17% CAGR, we started ahead of the game. A lot of people show a chart like this, and they say 17% in the first year is at 12%, and they're gonna ramp it up. We started at 21%. The Kappa Conductive capacity comes in place in 2024. How fast do we get that on stream? We'll see. If you look at what happened in Ravenna, it was pretty darn fast. Perhaps this comes on also pretty darn fast.
The other capacity expansions that are occurring over the next couple of years, most of which are already announced, so specifically Huaibei and the full impact of Ravenna and the Gas Black, that doesn't need additional capital that we haven't already announced. There's a pretty big step up. The price mix. That $500 million target, other than what's been announced to date, there's not a significant amount of capital to get to that $500 million target. That's important because as we talked in a couple of slides, you saw we have additional capital that we might consider using for growth, that we wanna consider using for growth, that will help us get well beyond that number, beyond that 2025 timeframe. Investing in growth. Our mindset is very, very clear. We are prioritizing our investments based on return.
We wanna get strong return projects, whether it's the Ravenna expansion, whether it's the Huaibei project, whether it's the Kappa investment, whether it's those operational investments that we get a quick return on. That's what's gonna drive our investment thought process: how do we get a financial return? We deserve a financial return. Our shareholders deserve a financial return. We're clearly focused on the CapEx, conductive and other sustainable opportunities. Sandra talked about those, Dave talked about those, Pedro t alked about those. Those are all areas that we wanna focus and direct the company going forward. Then finally, this is really important, to strengthen our project management capabilities. As we look forward and we look at these investments, we need to make sure that we're executing well on projects.
We've supplemented our current team with a few individuals to help strengthen those project management capabilities, and I think those are fantastic additions and will help us execute on this plan going forward. Now, we've been talking about EBITDA, and I've kind of danced around cash flow. Let's talk some numbers on cash flow because this is critical. I've got a slide here that talks about mid-cycle discretionary free cash flow. Let me explain how I define discretionary free cash flow. It's Adjusted EBITDA minus maintenance capital, and the maintenance capital, as you'll see in another slide, will be up a little higher because we're investing proactively, we're investing in preventative maintenance. Minus EPA capital, which we have $25 million of going forward, which will all be next year.
Minus dividends, minus interest, and of course, minus taxes. This is our after-tax free discretionary cash flow. If you look back the last few years, there hasn't been a lot of it. Despite not having a lot of it, we've put some money in the ground from a growth perspective, particularly in 2021 and 2022, and to help grow the business. Let's look forward. In the next three years, we have $700 million-$800 million of discretionary after tax, and it's important, after tax, free cash flow. Think about that, $700 million-$800 million, and then you look at the market cap of the company and you go, "Wow, that's a really darn big number." We wanna use that $700 million-$800 million.
There's a piece of it, a significant piece of it for growth, but then we also wanna look at what our other opportunities, whether it's returning to shareholders, whether it's additional growth or organic growth, whether it's inorganic growth, M&A opportunities. We have flexibility going forward that we didn't have looking back. Now let's talk about that $700 million-$800 million and what we're thinking about right now. Again, this is looking at capital spending, just capital spending. If you looked at the previous three years, and you look by color, you see a lot of blue on there. What's the blue? The blue is maintenance and productivity. There's a good amount of maintenance and productivity in the last few years. We're gonna have that going forward also. We've got placeholders in there for about $90 million a year of maintenance and productivity.
Remember, my $700 million-$800 million had already taken that out. We have the EPA CapEx. Well, most of that has been spent to date, a little bit more in 2023, but that was outside of the $700 million-$800 million. What's the $700 million-$800 million gonna be used for? Well, we've got about a little over $80 million of growth capital in 2023. Most of that is the Kappa conductives facility. We've got some Kappa conductives spending this year. We'll have some in 2024, but most of that $80 million is the Kappa conductives facility. Look at 2024 and 2025. We put in placeholders of $100 million per year.
Again, there'll be a piece of 2024 that will be Kappa conductives, but the rest of it right now is a placeholder with not necessarily hard-defined projects saying, it's this or it's this. We're working on those. We'll identify the right projects. Let's take the sum of all those years. You got $280 million, a little under $300 million of growth capital in those three years. That $300 million is a subset of that $700 million-$800 million that I talked about on the last slide. Which means if we do spend that $300 million in growth capital, we still have $400 million-$500 million in the next three years to do something with. Again, there could be more growth opportunities, perhaps. Could be return to shareholders, perhaps.
There could be other, organic or inorganic opportunities. We'll have to decide over the next couple of years what the right capital allocation for this business is, but I think it's really important. We've got $700 million-$800 million of cash available. $300 million of it, roughly, is earmarked here. We've got $400 million-$500 million of additional cash coming into this business over the next three years. A completely different story than what we've had in the past. Again, the value creation mindset, how do we provide a stronger return for our shareholders, but first off, profitability, but ultimately that yields, generates and yields cash. We generate a lot of cash. We need to do good things with it.
Finally, we will invest a portion of it in growth, and we'll decide what our right capital allocation is going forward as we're moving through that time period. With that, I'm gonna open the floor. I'm gonna pass it back to Corning, who's gonna open the floor for question- and- answers for all five of us, actually. Corning?
Are we? Can you hear me?
Yes.
Okay, great. Starting out, I said, well, we wanna share some of our excitement. I hope we've done that. It's really hard to do it right when you're sitting here in a hotel room. I mean, it is a super exciting time for this company, right? We are, you know, past the verge, right? We're on this ramp of just getting into a beneficial cycle where we generate free cash flow the way we didn't have it for years, and then we can do productive things with it. I think this is a super exciting time for us, and I'm glad you're all here with us today as investors to have a chance to be a part of that. We'd really like to open up now and entertain your questions.
Sure, Corning. The first question is around Kappa acetylene. Can you please discuss the CapEx Kappa acetylene opportunity out five to 10 years? What is the range for CapEx and EBITDA?
Okay. Well, thank you for that. Sandra had one slide that kind of bracketed where we saw it going from a KT perspective, but Sandra, could you expand on that?
Yeah. By the end of the decade, our Kappa opportunity just for lithium-ion batteries is around $80 million-$100 million EBITDA. That's just for batteries. I believe in addition, for other conductors, we talk about an additional $25 million. In terms of capital, that would require additional capacity expansion, but it's, I think, too early to quantify that, yeah.
Okay.
If we wanted to just think ballpark, right? We said about $40 million-$45 million of EBITDA with our current investment of about $120 million. I think that would give investors just a chance to sort of ballpark what that might look like going forward.
How big-
What's our next question?
How big is your current acetylene Kappa customer? Related to that, how much would a gigafactory consume?
Right. Let me take the first, and then I'll hand off to Sandra. Our current customer wanted a larger quantity than we were prepared to contract. Our desire with our limited current capacity is to qualify as many customers as possible. I think that's the right long-term solution for us in terms of loading a new plant. I think we could easily larger, maybe 4 x as large. Sandra, maybe if you wanna comment on what we think a gigafactory could be, which is a pretty imprecise term, I realize.
Yeah. I think a gigafactory could easily fill the plant that we have in place right now in France. I mean, in terms of conductive additives, that would be around 3.5 KT capacity that we have in France. We have 12 KT of carbon black capacity in La Porte. Depending on the size, it could be then two-three gigafactories, but it's not a very precise figure, obviously. Yeah.
Okay. Do you plan to complement your new Kappa acetylene plant by pursuing any adjacencies, such as production of CNTs?
Maybe I'll just talk generally and then invite Sandra to speak further. You know, we're open. We see the huge opportunity that is conductivity. We are approached by many CNT players around different collaboration opportunities and other opportunities. You know, we see that as a viable option for us going forward. We wouldn't wanna take that off the table. We also don't wanna be super specific on exactly what we would do next in this space. Sandra?
Yeah, I mean, we are, as mentioned, exploring opportunities for portfolio expansion. This includes furnace based additives, acetylene additives, and we are open to explore also alternative technologies.
Okay. Moving to another subject, can you update us on how you see the European situation evolving with respect to Western tire makers and other carbon black consumers looking for alternatives to Russian carbon black? Under what circumstances might the Russian tonnage be subjected to sanctions as it seems that has not happened?
Okay. Again, I'll say a few words and turn over to Pedro. I think one of the underlying questions out there is gonna be, you know, are we gonna invest in Europe? I wanna answer this 'cause I've had the same exact conversation with some of our big tire customers. I would just remind our customer and our investors that we have supported that industry now, right? 'Cause building a new plant is not gonna solve the immediate issue. We've supported them now by reprioritizing how we've used the Ravenna facility. We've supported our current customers by making product available out of other geographic locations, and that supply chain is flowing as we speak. We've got this new plant coming up, two reactor lines in China. We're prepared to use that as support.
In a practical sense, that's what can support these folks near term. In terms of new capacity for us, I think it's clear where our preference is. We just announced a big acetylene facility in the specialty space. We value our customers. We had several customer testimonials as part of this. They're super important stakeholder, but our investors are important stakeholders too, and we need a solution that makes sense for them. In the immediate situation, we don't have plans to invest further in that. Pedro, why don't I let you expand on some of those other points?
Sure. Carbon black is obviously very consequential to the tire production. You know, we can speculate on what will happen with carbon black coming from Russia, whether it's gonna get banned or whether it's not. I think what we're hearing from our customers is that they're looking for security of supply. That's our focus, is being able to provide either from our existing plants or from our global supply chain, a security that they can depend throughout the course of a year, throughout the course of several years, to be able to ensure that they can keep producing tires. That's really where our focus is. It's very difficult to predict what exactly that outcome is.
We can hear from our customers that they clearly want to de-risk that supply chain.
Here's a specific question on a similar subject: How much does it cost to ship rubber black from Asia into Europe?
Well, that's an interesting question, because you know, there's sort of what does it cost in the normal supply chain times and what does it cost right now? You know, normally you talk about, I don't know, $200. Pedro, I think now you're talking quite a bit more than that. What would you say?
Yeah, $200 was the previous reference, but it's obviously higher today, just given all the supply chain outside of Russia, just the whole shipping side. We also have to understand that this is something that entails also a lot of handling because you're bringing in a certain type of package, and then you gotta repackage it and put it in bulk. That's not a very simple supply chain. You know, that's where you know if you look at capacity globally, China is where you would start. You have all these supply chain obstacles that need to be handled, and that's clearly something that the customers are weighing and balancing that out.
When or at what price do you think new industry rubber capacity might enter the market and impact your current pricing position?
I think we have to be careful talking about what our competitors would do in terms of capacity. We really could speak for ourselves. What I guess we'd say is there has been a recent announcement of an expansion by one competitor, interestingly, not in North America, and I personally don't think we're gonna see expansion in North America anytime soon, in part because there's this overhang of the possibility of Monolith, and in part, just as evidence on the ground, right, we are seeing one facility close. But the kind of volumes we're talking about, you know, are dwarfed by the magnitude of, for example, in Europe, the Russian supply situation. I wouldn't see that as really material in that.
To be clear, as long as Russian material can flow, I also don't think we're like, we're gonna achieve like rents or exorbitant fees in Europe. This is gonna have to be a fair price, but a price that does represent a return on capital. I don't know. Pedro, anything you'd like to build on that?
No, I mean, it's obviously, you know, not talking. I think from our standpoint, where we see the quickest win and the best value return is really looking at our existing assets and looking at debottlenecking, looking at different ways in how you can add capacity very quickly to the market was looking for an answer today. In terms of long-term, you know, according to everybody answered, North America. I think in Europe it revolves around discussion with our customers and how are they prepared for to entertain long-term agreements. I think if that is something that is more is becoming more and more possible that that can then start to enable discussions around, you know, longer term capacity. I think right now the focus a lot is on short term.
How much BlackCycle's sustainable capacity can your asset base support today, and what kind of GP per ton can it command?
A key thing about BlackCycle is that someone else is doing the pyrolysis process and creating that oil, and then we're taking that. I'd say that's really a key factor of just simply the availability of this material. Pedro, I know this is near and dear to your heart. Why don't you take it from there?
Sure. In terms of capacity, once the feedstock, the pyrolysis process starts to gain traction, as I mentioned, we're using our existing assets and really is looking at our tire customers, our mechanical rubber goods, and they're looking at this to replace their existing demand for carbon black. We are basically looking at repurposing and looking at our existing assets to give that capacity. Feedstock resolved, we have the technology, and we're focused on is improving the overall yield, the overall efficiency of that, and henceforth the capacity. In terms of GP per ton, today, as with any new technology, the cost of this is higher than what it is, on the normal carbon black.
The pathway, the roadmap, the medium- and long-term roadmap is we do see that getting to a cost position and a profitability position that's similar and better than what we have today.
When you speak about pricing driving rubber black profitability, and you separate the difference between passthrough pricing of feedstock and base pricing and how that flows through into variable contribution margin per ton and GP per ton, is 2022 the peak in GP per ton?
When we talk about pricing in these sessions, we mean pricing that we achieve. We mean a base price, not an effect of the pass-through of raw material costs. Pedro, you can expand on this, but like, there's no way I see 2022 as a peak year in that regard.
Yes. As Corning explained, you know, our pricing in the rubber carbon black simplistically consists of a base price and then a pass-through mechanism. As oil goes up and down, your total price is gonna fluctuate due to price of oil. But the base price, and when we talk about pricing, we're talking about continue to moving that up. From a base price perspective and therefore our overall variable contribution, we expect that to continue to grow. Oil price can go up and down, and that can affect our overall variable margin, but fundamentally, what we're seeing is that 2022 is not the peak.
There have been some recent media reports on a study about particulate pollution from tire wear. One conclusion was that there was a wide range of particulate pollution between the best and the worst. Is this something that you see tire manufacturers being focused on? Is that an opportunity for Orion?
Maybe just one build to the previous question. Because we pass through raw materials, that goes to the point Jeff made. If you're looking at a Bloomberg terminal, and you just look at the margin curve, right? Our profitability, it's effectively diluted by higher energy costs, right? But don't confuse that with decreasing, let's say, quality of the business. If you were gonna look at it as profitability per ton, right, you'd see that we have grown that over this cycle. I mean, just a important point and, like, the standard screen isn't gonna show you that. Regarding tire wear particles, personally, I would see it compared to silica as a minor opportunity for us. Pedro, maybe you wanna expand on that.
Sure. Tire wear particles is a topic that has come up. I think there's still a lot of debate on exactly the extent of it. But what that plays, and Dave can obviously add further to this, is that if you have a tread that lasts longer and therefore emits less tire wear particles, that is something that is clearly a lever. Carbon black plays a role in extending the life of a tread. The higher the grade or the quality of the carbon black, you can influence that. If life of a tire becomes more critical because of tire wear particles, carbon black, and we are very well positioned to benefit from that. I don't know, Dave, anything you wanna add?
Just a little addition to that. Of course, I agree 100% with what you said, Pedro. We can extend the lifetime, the wear performance of the tire. I think the primary particles that are being attributed to an issue today are the other components of the tire. There's roughly 100 different chemicals that go into the manufacturing of a tire, and it's some of those materials that are being targeted, at least today, as affecting aquatic life and things of that nature.
Changing the subject, we had another Kappa question come in. What's the timeline for the Kappa ramp-up? I think this is specifically for the new facility. Looks like the bridge assumes it's fully ramped up by 2025. Is that correct?
That bridge is phrased as our mid-cycle earnings capacity. I wanna be clear on that. That's an earnings capacity. What is our capability in 2025? We don't know. Is the world gonna be a good economy, recession, whatever? That's the earnings capacity we should have at that time. Sandra, why don't I let you speak to qualification periods?
Yeah. Depending on the size of the battery manufacturer, approval times are between half a year to one and a half years. Based on our business plans, we project close to full utilization by 2027. However, as we already discussed, given the capacity shortage and given learnings from other recent capacity expansion, that may come earlier, no. Ravenna as an example.
I used to work in the silicon semiconductor supply chain, and they were, too, right? Very long supply chain qualification periods. When there's a shortage, you can get qualified very quickly. Think about Ravenna, right? How quickly that is the fastest loaded plant in my career. Granted, not as strict or difficult a qualification as what we're talking about here. We'll just have to see what the supply-demand picture looks like then.
What options do you have, if Russian energy hydrocarbons is completely cut off?
You know, for us, we don't directly get any raw material from Russia. Within our supply chain, there may or may not be people who have, something from, let's say, the oil side, something that hasn't been banned. I don't see that as a huge thing. If we just expand that, and then we talk about, well, what if natural gas gets cut off? If that were cut off widely in Europe, I think you might see like a really strong ban on all Russian exports, right? I think things are getting very testy in that kind of a situation. In those scenarios, we've got the ability to change some of our reactors from natural gas to firing oil, that kind of thing. That will become more important for us.
I think that, you know, we'll be in a very strong market position in terms of the need for carbon black in Europe in that kind of a sort of far end scenario.
Does your announced CapEx investment support $500 million in EBITDA capacity, or do you need to invest more into your asset base to achieve that?
The $500 million earnings capability that we put out requires us to complete the acetylene-based project, to finish off some, let's say, small de-bottlenecking, but very high return, very impactful projects in the specialty area. Think about, you know, protected by that sea wall in that graphic I used, that Sandra mentioned. But that's it. It's not anticipating really further investment, beyond things that we've currently announced. In that timeframe, I would hope we continue to generate growth opportunities and that we might spend, and Jeff put in some placeholder numbers around what future capital could be. And those are only placeholders and not predictions on what our capital is gonna be even for next year.
You know, those would be really things above and beyond, and perhaps beyond 25 as well when they'd be available to us. I don't know. Jeff, you've been very quiet in the Q&A. Would you maybe like to expand something there?
Sure. Thanks, Corning. Yeah, as Corning said, the Kappa facility is in 2022, 2023, and a piece in 2024. The rest of what's in 2024 and pretty much all of what's in 2025, none of that is needed to generate that $500 million of earnings capacity. That would generate earnings capacity beyond 2025.
On the bridge to $500 million EBITDA, what are the assumptions behind the price mix component? How much is rubber versus specialty?
I think on the individual slides that we used for that was broken out, if you look at Sandra and Pedro' s. Jeff, you can or anyone can jump in. I think that was roughly 35% and 15%. Is that right, guys?
That's correct. It was 35% of rubber, most of that being price, and 15% of specialty, most of that being mix.
What is the oil price expectation underlying the $500 million?
With that, I would say we're at a mid-cycle situation. Mid-cycle, you know, is not a precise number, but I put that more in, let's say, the $80 range. When you think about the pricing in rubber, I mean, clearly the pricing opportunity is larger than $35 million, but I think you'd need to back off a little bit saying, "Well, okay, what if we're at a different oil price?" Jeff or Pedro, would anyone want to expand on that?
Sure. Yeah, in the mid-cycle, I think we use an $80-$100 range. If you wanna midpoint it's probably around $90 or so. And if you think about what we're currently thinking for this year, we've used a $100-$105. Obviously, we're above that right now. There would be a decline in oil price toward that mid-cycle time period.
How much of the $400 million-$500 million cash generated will be needed for working capital needs with oil at $120?
Jeff, why don't I let you take that one?
Sure. No problem. As we've looked at this, we've excluded working capital. There's not a significant of that $400 million-$500 million, not a significant amount that would be needed for working capital. Let's step back to the last answer, which was the oil price today and the oil price in our mid-cycle. There's a reduction between today's price and that mid-cycle price. If you go from $100 to $105 down to $90, there's some working capital recovery. Perhaps we need a little bit of working capital to get to that $500 million. It pretty well balances out.
Can you discuss how your business outlook would be impacted if oil and natural gas were to keep increasing, and how would your business outlook be impacted if both were to decline?
I mean, I think one of the biggest impacts here is just gonna be the general economy, right? We gain a little bit with higher energy prices, but, you know, personally, I'd be totally okay if energy prices would just come down a bit. I think, like for the global economy, and we're not immune from the global economy, that would be a positive for us in that thing. We strive in our agreements with our customers to say, "Hey, look, we are passing this through." Right? Our job isn't oil arbitrage or energy trading.
We're looking really just to pass this through and, you know, have a minimal impact on it. I don't know. Anyone else wanna add some comments there?
No.
No.
Okay.
Got it.
Okay.
One question back to Robert. How much are your contract terms lengthening in this current negotiation cycle?
As I mentioned, we have achieved long-term contracts, and when I say long-term, it's five plus years in certain geographies such as South Africa. In these negotiations, I think that especially in Europe, the Russian situation really has brought to the forefront a discussion that we've been talking about. I would not be surprised if we do sign other long-term agreements, but those obviously are not simple and need to be well structured so that it's properly balanced between the two parties. I think right now our customers' main priority is security of supply, and if that can be achieved through a long-term agreement, then we certainly would be glad to do that.
Okay.
Yeah. I think that, having come into this company talking about it, I think the industrial logic of doing this has never been more clear. Yeah, we'll see where this can go. I think also from our perspective, we don't wanna do a lot of talking until we have this done. We're very pleased to be where we are in South Africa right now. We'll see if the current environment does it. I think the immediate priority of customers though is just a mad scramble for 2023 and wanting to lock that down quickly.
Two related questions on capital allocation. Given the free cash flow generation outlook, why have you not been buying back shares? What's the highest level of net leverage that you would like to see?
First of all, let me just say, we discuss capital allocation and specifically items like buying back shares probably at just about every single board meeting. It's an active topic of discussion. We've had guest speakers on this topic. It's something that we take really very seriously. I think in some ways, the current price compared to as we see the value is very, very attractive. On the other hand, right now, with energy prices where they are, a war going on, you know, nuclear threats, all of this, it's also a time of some caution to think about holding onto your cash. You know, as a board, it's just a requirement to think about the trade-off between those different items. But that's actively worked on. I'm sorry, Wendy, there was two parts to that question.
Could you repeat for me the other part?
Yes. What's the highest level of debt we are comfortable with?
I mean, our goal is 2.0x-2.5x. We're obviously comfortable with that going higher. We went higher during the you know, COVID period, that kind of thing. We've never come out with a "Boy, we take it to here or to there," for example, if we're gonna do a big acquisition or that sort of thing. You know, this company once had much higher debt leverage, and I think we're not slaves to this 2.0x-2.5x range, but that is our targeted range. Jeff, anything you'd like to add to that?
Sure. Actually, I'll add to both of those. The first one on the buyback, I think it's talked about more than every board meeting. The capital allocation. I think what's important there is Corning talked about given the high oil prices, the amount of cash that we need to use in the near term, from a working capital perspective, even with the step-up in our revolver that we announced last week, we're being cautious here because if all of a sudden oil were to jump to $150, $160, $170 a barrel, it starts to make liquidity a little more challenging, so we just wanna be careful there. With regard to the leverage ratio, you're right. The 2.0x-2.5x is what we've announced.
I'm always of the opinion that you wanna have some dry powder. If you've got an opportunity that comes in front of you, and all of a sudden you need to take that, let's say you're at 2.2x-2.3x, and you need to take that up to 3.0x For some reason, as an example, you wanna have that dry powder. If we wanted to go to a much higher level, there's gotta be a really good reason to do so. Otherwise, being within that range is really helpful because it give you that dry powder to take that step up when you need it, when there's an opportunistic reason to do so.
You used to pay a $0.20 quarterly dividend during COVID. Would you ever take it back to that level based on your cash flow excellent?
It was a little hard for me to hear that, but I think the question was about our dividend, and it was higher before COVID. I'd say right now, increasing the dividend back to anywhere near where it used to be is not really where we see a high priority. We see, as we've outlined, really strong growth opportunities as well as from our investors, I'd say different ideas on what's the most efficient way to return cash if we were striking that balance.
Could I read the question to you?
Sure.
How do you think about threshold ROIC growth projects?
Question is, how do you think about threshold ROIC requirements on future projects?
Did you-
Corning, did you hear that?
So-
I'm sorry. Yeah, I missed the coordination there. I thought that was your question you were gonna directly go there with.
Okay.
I mean, I think we look for a return on capital that is significantly above our cost of capital. We've given some indication of what kind of returns we can achieve in our most recent slide deck. Obviously, we're looking to optimize that. I mean, at the floor of that, with the right kind of contract terms, you know, we could go down to, you know, mid-single digits or double digits, excuse me, you know, where there's in the 10%- 15% range. You know, we aim to be above that. Jeff, anything you'd like to add? No, I would concur. Again, the recent Kappa conductives project shows the kind of return that we'd like to see on a significant capital project.
We've obviously have some smaller debottlenecking, incremental projects that we have very, very strong returns on. Those are the kind of investments we'd like to have going forward. You know, ones that are kinda tight to a hurdle rate, not as necessarily as interesting.
On the heels of your 2030 Kappa acetylene black and the desires of customers to procure more product that exists is available to produce, how quickly could you go ahead and build another facility?
I think this is referring really to the Acetylene opportunity. You can look at the timeframe of the current project and say that's about what you would expect. It's gonna depend upon land and permitting, but you're looking at a 24-30, maybe 36 as the outlined kinda timeframe. I don't know, Sandra, anything you'd like to expand there?
Yeah. I mean, you covered it well, Corning. It depends on the right feedstock partner, and we are in discussion with several partners. So it could take the time. In addition, I mean, an alternative is also, and what we also market to our customers is to provide furnace-based additives.
Actually, that was our last question in the queue. If anyone has any other questions, we'll stay and answer them for you. Corning, do you wanna say anything in closing?
Well, look, we really appreciate your being a part of this. I wish so much I could be there in the room with those of you who came down to the NYSE today. Thank you for that. Thank you for everybody who's joined us virtually. This is really an exciting time for us. I hope that came across in just the magnitude of the opportunity and how we're finally, right, getting through some of this mandated spending. Finally being able to grow our EBITDA with some of these growth investments coming online. Just the combination of those just really make for a dramatically improved situation for us as Orion. We're excited with that. We hope you are, and we invite you to be with us for this journey.
Thank you all very much.
Thank you.
Thank you.