05 September 2008 13:31 [Source: ICIS news]
By Stephanie Wilson
LONDON (ICIS news)--Fourth-quarter European titanium dioxide (TiO2) contracts could rise €80-100/tonne ($114-143/tonne) in line with spot market hikes and upstream costs, market players said on Friday.
DuPont, Tronox and Huntsman announced proposed hikes of €50/tonne effective on 1 September and German producer Kronos also announced rises of €50/tonne effective 15 September or where contracts allow.
“Titanium dioxide producers have been struggling,” said a trader. “The market is moving strangely, and producers are under as much pressure as buyers. Without increases, they cannot afford to keep up production.”
Additional hikes had long been discussed by producers, which maintained that those increments achieved between June and August of between €50-100/tonne were insufficient to recoup losses and relieve pressure on squeezed margins.
The TiO2 market was described as more dynamic, with prices moving upwards at unprecedented rates.
Increases had also been seen on a global basis, with both the Asian and US markets subject to hikes on upstream costs rather than demand and supply fundamentals.
This was reducing import options and further tightening the domestic market, buyers said.
These latest hikes did not come as a surprise to many buyers, who expressed disappointment and vowed to continue to fight for lower prices.
“Producers always try for increases in the last month of a quarter,” said a buyer, “whether or not they will achieve it is another matter entirely. I cannot see it happening.”
Producers and traders cited many upstream factors behind the increments and remained adamant that the increases were necessary in order to “catch up” and close the gap between the lag in pricing with the unprecedented hikes in crude, energy and upstream values experienced earlier in the quarter.
The difficulty in sourcing the raw materials of ilmenite and rulite necessary for TiO2 production had also led to a tighter market, according to a trader.
“The ilmenite market is a producers' market,” said the source. “With few options for manufacturers, it’s very difficult to get a reasonable quote, raising the cost of production.”
The sourcing of rutile had also been exacerbated by the sinking of the 80,000 tonne/year Solondo rutile dredge in Sierra Leone, West Africa, on 25 August.
Upstream sulphuric acid, necessary for the production of most grades of TiO2, had also been rocketing in value according to several manufacturers.
The buyer source affirmed that producers looking for an extra €50/tonne were being optimistic and were more likely to achieve €30/tonne on smaller contracts.
One contract consumer remained confident that it could avoid the drastic increases due to its longstanding relationship with its supplier.
A manufacturer stated that the price hikes were simply the market realigning itself with upstream costs amid strong demand.
“The hikes [upstream] take time to filter through. Buyers are eager for us to hold off the increases and phase these in slowly, but they want instant action on decreases.”
($1 = €0.70)
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