Expansions for TiO2

06 April 1998 00:00  [Source: ACN]

The next phase of brownfield expansions could start within four years, say producers

Asian titanium dioxide price levels are nearing those needed to justify brownfield expansions, producers said. One Asian producer predicted that the next phase of brownfield expansions could start in 3-4 years' time if prices justify such investments.

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Chloride titanium dioxide capacity is running flat out in Asia and with Asian sulphate titanium dioxide supply starting to tighten, the industry is now at the start of an upswing that could see an announcement for additional capacity when the Asian titanium dioxide price reaches US$2300-2400/tonne cif Asia, a producer said. This could happen within two years, he added.

Tioxide's Jon Dean, general manager for marketing, sees very little new capacity coming onstream in the next 24 months and expects the market to remain tight because planned expansions were cancelled or postponed due to low prices in 1996 and 1997.

However, Artikol consultant Reg Adams* expects brownfield expansions in Asia to start up as early as next year.

Although Adams predicts that prices will continue to rise linearly over the next seven years (see graph), the producer believes that a straight-line upward price forecast is unrealistic and that the industry is more likely to see fluctuations which could disrupt plans for capacity additions.

Adams said Asian prices have been increasing steadily from US$1550-1700/tonne cif Asia in Q1 1997 to US$1750-1850/tonne cif Asia in Q4 1997.

Prices are now at US$1850-2050/tonne cif Asia and Adams predicts they will continue to rise.

Producers were planning to raise prices by US$100/tonne for Asian buyers starting 1 April to US$2150/tonne cif Asia for Q2 contract prices, ACN was told.

It is unclear whether they will succeed because of the Asian financial crises and the slowdown in the construction industry (ACN 23 Mar, p28).

However, the US$2500/tonne level that is required for brownfield expansions is unlikely to be reached until 2005 (see table) and the industry is unlikely to see a great rash of brownfield expansions before then, Adams said.

Companies with sites in Asia which are suitable for expansion will be best placed to expand in the region, Dean said.

The Asia Pacific was a major net importer of titanium dioxide in 1997 with approximately 20% of consumption being met by imports from Europe, the Americas and the rest of the world, Dean added.

The decision on where to site new investment will be strongly influenced by relative capital and operating costs of investing further in Asia, compared with further expansions on existing sites elsewhere in the world, he said.

The industry is unanimous in its view that prices are unlikely to rise to the US$3000-3500/tonne cif Asia needed to justify greenfield investments for at least 10 years.

One player estimated that Asia has the potential to add 350 000 tonne/year of new brownfield capacity to the existing 800 000 tonne/year, assuming the DuPont plant in Taiwan, the Millenium Inorganic Chemicals plant in Australia, the Tioxide plant in Malaysia and the Tiwest plant in Australia have the capability to double their existing capacities.

This additional 350 000 tonne/year would be sufficient to serve the Asian industry's needs for at least the next seven years, assuming an average 6% annual Asian demand growth over the next 10 years, the source said.

Adams expects expansions at some of these plants but does not see all the plants doubling their capacities. He expects annual Asian demand growth to be 4-4.5% over the next decade.

In 1999, Adams expects to see capacity additions by DuPont, Millenium Inorganic Chemicals and Tiwest.

He also expects smaller plants of less than 5000 tonne/year capacity each to be built in India and China.

Adams does not, however, expect to see expansions at the 50 000 tonne/year Tioxide plant in Teluk Kalung, Malaysia, and the 45 000 tonne/year Ishihara Sangyo Kaisha (ISK) plant in Jurong, Singapore.

DuPont is likely to acquire the sulphate-route Tioxide plant in Malaysia. As the major prefers chloride capacity, it is therefore unlikely to expand the plant at Teluk Kalung, Adams reasoned.

Moreover, the site is disadvantaged from the raw-material supply standpoint. Local ilmenite feedstock supply has contracted significantly and the company has been importing its feedstock from Australia for some time, Adams pointed out.

DuPont would also prefer to serve the Asia Pacific from its Taiwanese plant backed up by continuing exports from the US, especially since the Taiwanese plant is the lowest cost producer of all Asian facilities, Adams said.

DuPont's Taiwanese plant is front-end designed to be a typical 150 000 tonne/year DuPont unit.

The 88 000 tonne/year plant in Kuan Yin has yet to expand because of insufficient pigment finishing and packaging facilities. However, the additional investment required to expand these facilities will not be significant, Adams said.

Adams expects DuPont to increase the capacity of its Taiwanese plant by 32 000 tonne/year to 120 000 tonne/year in Q3 1999.

Expansion to 150 000 tonne/year is likely in the early 2000s, Adams predicted.

Also in Q3 1999, Adams expects Millenium Inorganic Chemicals (formerly SCM Chemicals) to go ahead with its planned 111 000 tonne/year expansion of its 79 000 tonne/year plant in Kemerton, Australia. The expansion was first planned for 1998.

Millenium is already operating above its nameplate capacity of 79 000 tonne/year at 83 000 tonne/year, Adams added.

Adams also expects rival Australian producer Tiwest to expand by 20 000 tonne/year in Q1 1999 its 80 000 tonne/year plant in Kwinana, Australia. A further increase to 120-125 000 tonne/year is also possible beyond 1999.

However, the Tiwest plant, a 50:50 Kerr McGee-Ticor joint venture, is an unlikely candidate for a bigger expansion, Adams said.

Although Kerr McGee has been keen to expand the plant, Ticor has not been able to afford a major expansion. Kerr McGee attempted a buy-out 18 months earlier, but Ticor resisted and held on to its 50% stake, according to Adams.

ISK is also unlikely to proceed with plans to build its second plant in Singapore, for financial reasons. The Japanese company is, however, keen to expand in order to commercialise its own chloride-route technology, Adams said.

Moreover, Singapore is already a high-cost and environmentally restrictive site, Adams added.

But he sees a possible increase in the capacity of this plant to 70 000 tonne/year in 5-10 years' time.

ISK was earlier scheduled to build the 75 000 tonne/year second plant to start up by end-1998 as a 70:30 joint venture with Kemira.

However, Kemira pulled out of the project in mid-1996. The industry has since speculated that Kemira quit the project either because it did not think the ISK process was economical or that the ISK technology was not sufficiently different from the Kerr McGee process.

ISK, which uses the Kerr McGee process for its titanium dioxide production, recently completed a 6000 tonne/year debottlenecking of its 45 000 tonne/year chloride plant in Singapore. It also operates 100 000 tonne/year sulphate and 65 000 tonne/year chloride units in Yokkaichi, Japan.

*Reg Adams, David Moore & Richard Taylor have written a report, TiO2 Pigment: A Dynamic Global Industry, available from Artikol London (fax: +44 181 402 1544) or TZMI Perth (fax: +61 8 9321 5919).

Asia Pacific titanium dioxide projects - capacity additions and reductions after end-1997 ('000 tonne/year, pigment)
Company	Location	Process type	Onstream date	Extra capacity	Capacity
					from	to
Millennium Inorganic	Kemerton,	CP	Q3 1999	111	79	190
Chemicals	Australia
Tiwest	Kwinana,	CP	Q1 1999	20	80	100
	Australia
Tioxide/DuPont	Whyalla,	CP	Never?	60	0	60
	Australia
Yuxiang Chemical	Jinan, Shandong,	SP	Q1 1998	15	0	15
Works	China
Travancore	Trivandrum,	SP	Q2 1998	12	15	27
Titanium Products	Kerala, India
Kerala Minerals	Sankaraman-	CP	Q4 1999	11	22	33
and Metals	galam, Kerala,
	India
Shentracon	Hooghly, India	SP	Never?	15	0	15
Tioxide/DuPont	Thane, Bombay,	SP	Never?	50	0	50
	India
Chemplast/Indian	Kerala, India	SP	post-1999?	30	0	30
Rare Earths/
Hindustan Organic
AO Pigment (Russia) 75%	Chuplin,	SP/CP	Never?	50	0	50
and Indian private	Maharashtra
investors 25%
Hankook Titanium	Onsan,	SP	Q3 1998	22	0	22
Dioxide	South Korea
Tioxide/Malaysia	Teluk Kalung,	SP	Never?	20	50	70
	Malaysia
Ishihara Sangyo	Jurong,	CP	Q1 1998	6	45	51
Kaisha	Singapore
DuPont	Kuan Yin,	CP	Q3 1999	32	88	120
	Taiwan
Thai Petrochemical	Rayong,	SP	post-1999?	20	0	20
Industry	Thailand
Source: Artikol (London)

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