Europe TiO2 buyers brace for large price hikes

11 July 2008 23:59  [Source: ICIS news]

LONDON (ICIS news)--Players in the European titanium dioxide (TiO2) market were set for the latest wave of large price increases for July business, many buyers and sellers said on Friday.

 

Many sources confirmed further hikes following rising feedstock costs and healthy global demand.

 

The market also saw the implementation of new energy surcharges of €40/tonne in western Europe after record-high crude costs were announced last week.

 

The hikes were generated by a series of events upstream and outside of the TiO2 arena, including long-time rising crude costs which were now filtering down into the inventory pipeline.

 

Major German TiO2 producer Sachtleben was the latest to announce price increases of €120/tonne ($180/tonne) effective from 15 July on a global basis, taking the lead from major European player Kronos, who announced rises in their TiO2 prices last week.

 

The rises, according to a statement by Sachtleban, were “intended to balance out at least partially the drastic recent increases in costs for raw materials, energy and transport”.

 

Other producers also maintained they could not afford to shoulder the financial burden alone and must pass on increases to their buyers.

 

Many said they were anticipating that further rises would be needed over the coming months if demand and feedstock costs were to rise.

 

"This is only part of the increases coming, these are [currently] not sufficient to cover costs," one supplier said. 

 

It also went on to state that further increases would be “significantly higher than the first hikes implemented".

 

A production source spoke at length about the difficult position it was now finding itself in and of the sensitivity it was employing to break the news of the rises to its clients, underlining it was not trying to take advantage of the situation. 

 

Major suppliers were stressing that the €40/tonne surcharge on top of price rises of approximately €50/tonne were non-negotiable,and that buyers were more concerned with acquiring the product rather than the price.

 

Consumers, therefore, were now accepting the increases with little resistance, although this could not be confirmed by buyers themselves.

 

With TiO2 so heavily linked to the construction industry, booming economies in South America, eastern Europe and the Middle East have offset the losses of the North American market, bolstering strong global demand, one supplier stated.

 

Surprising July demand is attributed to consumer pre-buying in anticipation of the price increase, according to the majority of players.

 

Market sources also speculated that demand had been helped by production problems in Australia and China, although neither theory could be confirmed by the market.

 

A buying source stated further price increases could signal the end of long-running trade contracts and connections as customers looked for the lowest prices on a weekly basis, stating that "loyal customers will be lost and it will be very difficult to build lasting relationships. We will not know who we are trading with".

 

($1 = €0.63)

 

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By: Stephanie Wilson
+44 20 8652 3214

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