N America TiO2 sellers repeat survival argument with 5-cent hike

08 October 2009 19:53  [Source: ICIS news]

By Larry Terry

HOUSTON (ICIS news)--North American titanium dioxide (TiO2) sellers attempted their third price hike since May with nominations of plus 5 cents/lb ($110/tonne, €75/tonne) - arguing that the industry needs the increases to survive, sources said on Thursday.

“The market is not pretty,” one producer said. “TiO2 producers are losing millions every quarter … so why wouldn’t producers try to increase prices?” he said.

“We have to move pricing forward. If we don’t, we won’t be here,” he said.

“At the end of the day, it’s not about supply and demand right now. It’s about running a profitable business," he said.

The latest increases would become effective on 1 October or as contracts allow.

A buyer in the plastics compounding market said he has heard the profitability argument ever since he entered the TiO2 business several years ago. He is sympathetic to the suppliers’ plight, but said that when price-hike efforts run counter to supply and demand, he seeks alternative suppliers to keep his costs down.

Another buyer said that when capacity exceeds demand, a supplier usually tries to lower the price to gain market share. Sellers now want to increase prices to improve their margins, the buyer said, while customers are still trying to get the best prices based on supply and demand.

"Sure, they’re operating on thin margins,” a buyer said of TiO2 producers. “But everybody’s margins are tight these days."

The buyer added: "With three price letters out there, prices could move up some, but they haven’t yet.”

He said nothing short of tight supply or a remarkable increase in demand would be able to push near-term prices upward for most medium to large buyers.

However, one seller said buy-side sentiment has evolved from “blunt refusal” to negotiation and that it has implemented some increases in paints and plastics in the vicinity of about 3 cents/lb.

While buyers confirmed some price gains for less-than-truckload volumes in smaller or more specialised market segments, mid-sized to large buyers in the architectural coatings market continued to say that broad market gains were unlikely in the near term.

Some suggested the demand picture would not change until at least the first quarter, when buying interest may begin to improve in advance of the spring coatings season.

The October initiatives were announced by most sellers in late September, and they bring the total increases sought to 10-12 cents/lb. The latest price efforts come despite widespread destocking anticipated among buyers, given the seasonally weak fourth quarter and a drop in coatings sales expected to begin in the northeast within a couple of weeks, one large paint manufacturer said.

While demand for TiO2 pigment into the architectural coatings market was still appreciably down from the same period in 2008, demand from the plastics-compounding sector has improved since the second quarter, a buyer said, particularly in the area of consumer electronics.

Although the buyer is seeking to qualify more suppliers for its business needs, it has accepted 1-2 cents/lb in price increases for general purpose TiO2 for its largest volumes, and as much as 5 cents/lb for highly specialised grades.

Current North American TiO2 prices were 109-119 cents/lb, according to data from global chemical market intelligence service ICIS pricing. 

US TiO2 producers include Cristal, DuPont, Huntsman, Kronos and Tronox.

($1 = €0.68)

For more on TiO2, visit ICIS chemical intelligence
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By: Larry Terry
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