TiO2 Outlook Remains Mixed and Hinges Largely on the Economy

02 June 2003 00:00  [Source: ICB Americas]

The weak economy is pressuring the titanium dioxide (TiO2) market, although discipline by producers is keeping inventories at regular levels, and domestic pricing remains relatively flat. Pricing in Europe is significantly higher because of the appreciation of the euro against the dollar, although European demand is also fairly weak.

"The main issue facing the TiO2 industry is the economy and its impact on prices," says Jim Fisher, CEO of IBMA Inc., a consultancy based in Hilton Head Island, S.C. "The industry is pushing for price stability. If the economy picks up, there is a potential for a price increase in the second half."

He adds that the pigment business is slow in terms of volume. Through April, sales of TiO2 were down 14.1 percent, although Mr. Fisher notes that sales during the first quarter of 2002 were exceptionally strong. Inventories are at 47 days, a level he considers reasonable.

Domestic pricing is flat or down slightly. European prices, in euros, went up at the start of the year and have since come down, although they are up for the year overall. Measured in dollars, however, European pricing has surged and is about 10 cents per pound higher than pricing in the US. Selling prices to the market are in the mid- to high-80s (cents per pound) in the US, according to Mr. Fisher, and the mid- to high-90s in Europe.

European consumption is off 8 to 12 percent, depending on the country, but consumption in China has grown at a double-digit pace, and demand is also strong in South Korea and Taiwan. Latin America is recovering, led by Argentina and Brazil, and demand in Africa and the Middle East is also solid.

Bruce Zwicker, former vice president of Millennium Chemicals, says the paint industry is being squeezed by raw material suppliers raising their prices, or attempting to, and the difficulty of passing on price increases to paint consumers. "Nearly all raw material suppliers are focused on price increases after suffering margin erosion for a long time," he comments. "Paint makers are worried about rising raw material costs but more worried about the potential for failing demand. Some paint makers have announced earnings warnings, and there will likely be more warnings. So far, it seems that 2003 is shaping up to be another lackluster year, like 2002, with the hope for a stronger second half being spoken yet again. US GDP forecasts are being reduced with US predicted growth of less than 2 percent in the first half of 2003 and about 3 percent in the second half."

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