23 March 1998 00:00 [Source: ICB]The global TiO2 industry has undergone major changes as the leading players jostle with each other for position. Elaine Burridge looks at the recent restructuring of the industry and its future.
A massive shakeup of the world's titanium dioxide (TiO2) industry is in full swing. Last year three major deals emerged which, when fully completed, will mean that four companies will own 60-65% of total world capacity. DuPont still holds the world's pole position, but other players have been repositioning themselves on the grid.
More consolidation is set to follow in 1998, although experts believe any further restructuring is likely to involve disposal of assets rather than whole company purchases. The Japanese industry is also tipped as the next major candidate for rationalisation.
The only deal outstanding from last year is DuPont's acquisition of European leader Tioxide. The $750m investment will fulfil DuPont's long-held ambitions for a production base in Europe and will increase its European market share from 12% to 37%.
Although European approval has been granted, clearance from the US Federal Trade Commission (FTC) is still outstanding, but this is expected in May. Although no one doubts the deal will eventually go through, US authorities are examining very carefully the implications of the 36% global market share that will result, with particular interest being paid to Tioxide's 50 000-60 000 tonne/year export sales to the US from its plants in Europe. 'The FTC may require DuPont to sell one of its acquired European plants, either Scarlino, Italy, or Huelva, Spain,' notes Artikol consultant, Reg Adams. The deal specifically excludes the sale of Tioxide's 50% stake in Louisiana Pigments at Lake Charles and the finishing plant at Tracy in Quebec, Canada. These assets will be sold once DuPont's purchase has been finalised.
Millennium's $185m purchase of Rhône-Poulenc's Thann et Mulhouse subsidiary moves it up one place in the global positions to number two and doubles market share in Europe. The deal gives the US producer two sulphate-process plants at Thann and Le Havre in France with a combined capacity of 138 000 tonne/year together with speciality chemicals production at Thann. The company says it has no immediate plans to convert the plants to the chloride process.
In total, Millennium now operates 429 000 tonne/year chloride-based and 182 000 tonne/ year sulphate-based TiO2 and owns 14.5% of the global production with 75% of its sales revenue now derived from TiO2 pigments.
Kerr-McGee has moved into fourth place after Kronos after the purchase of an 80% stake in Bayer's TiO2 business. The 130 000 tonne/year sulphate-based production at Uerdingen, Germany, and Antwerp, Belgium, raises the firm's total capacity to 305 000 tonne/year. The US company, which has not operated sulphate plants before, will convert both plants to chloride technology, although no timescale has been announced. Sources believe that Kerr-McGee will own the remaining 20% within the next three years as Bayer's retention of part of the business was to mollify the German trade unions.
###6249###Remaining assets under the hammer include the Tibras plant in Brazil. Bayer owns 43% in the sulphate-based plant at Arembepe, Brazil, together with local partner, Gutierrez Andrade. The plant has been on the market for almost a year and everybody has shown an interest, comments Jim Fisher of consultancy IBMA. However, although a lot of money has been spent on the plant in the past four or five years to improve performance and reliability, more investment remains in the effluent disposal and it is this that has potential purchasers scratching their heads, Fisher says. Uncertainty over the timing and degree of investment is making people uneasy, he believes.
Artikol's Adams says Kemira is a front candidate for Tibras as it wants to build a presence in Latin America. Kemira also has a foot in the door as it is in partnership with Gutierrez in water treatment chemicals and is using iron sulphate waste from the Tibras plant.
Another asset sale is ICI's 50% share in Louisiana Pigments' 110 000 tonne/year plant at Lake Charles in the US. The other half is owned by Kronos, which is viewed as the front- runner, although both Kemira and Kerr-McGee are also interested. 'Kronos dearly wants to buy back its half and does not want to let go of its technology again,' says Adams. Kronos, the world's number three, has lined up cash for the purchase with the sale of its Rheox division to Elementis for $460m in December 1997.
Millennium is still scouting around for further acquisition opportunities. Gary Cianfichi, global business director, coatings, Millennium Inorganic Chemicals, says there are companies with smaller and/or non-competitive operations who no longer view TiO2 as important to their strategy and 'we will evaluate those'.
One country which could provide such opportunities is Japan, where restructuring has been long-awaited. Most of the TiO2 pigment producers, including Ishihara Sangyo Kaisha (ISK), Tayca and Sakai Chemical, have suffered heavy losses and have been trying to diversify. Production has been hit by foreign exchange rates, low selling prices, high costs and the Asian crises. Japan has a production capacity of 350 000 tonne/year, but demand has been stuck at an average 250 000 tonne/year with operating rates over the past five years at 75%, says Adams. Foreign suppliers have been banging at the door and imports have increased to nearly 100 000 tonne/year in addition to new production in Taiwan and Malaysia which has been attacking traditional markets.
ISK, Japan's biggest producer and the only one with chloride technology, has confirmed it is serious about TiO2. It sold its US agrochemicals business to Zeneca for $500m in December and is now well placed to participate in any rationalisation. Adams believes mergers and/or plant closures may be implemented over the next five years to restore profitability. n
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