Global TiO2 production lags behind demand recovery - suppliers

22 April 2010 06:15  [Source: ICIS news]

SINGAPORE (ICIS news)--Global titanium dioxide (TiO2) production has been lagging behind the rebound in demand for the material in recent months, creating a supply tightness that could last into next year, producers said on Thursday.

Worldwide TiO2 demand was likely to recover to pre-financial crisis levels this year but production capacity, hampered by plant shutdowns and operating rate cuts, were still 6-7% below 2007-2008 levels, major TiO2 suppliers said.

"The pace of the recovery has taken everyone by surprise. If you look back now, producers over-reacted and cut production too aggressively when the financial crisis hit," said a TiO2 producer based in Asia.

Global demand and supply, in terms of nameplate capacity, were roughly balanced at 5m tonnes/year each in 2008 before the financial crisis erupted, suppliers said.

Amid high inventory levels and dire predictions of a global depression last year, 10-15% of the production capacity was either temporarily or permanently shut. Demand, however, only fell by 5-6% from 2008 to 2009, suppliers added.

TiO2 demand was expected to recover by around 8-10% in 2010 to reach close to 5m tonnes/year. However, while producers had begun to restart capacities in the second half of 2009, around 300,000 tonnes/year remained shut currently, market players said.

"Some plants were closed because of bankruptcy issues and will probably remain that way for a long time," said another TiO2 supplier.

The demand-and-supply balance was likely to tighten considerably as a result of this production lag, exerting a strong upward pressure on TiO2 prices worldwide for the rest of the year, producers said.

Prices of TiO2 imports in Asia had risen by 6% since the start of the year to $2,510-2,600/tonne (€1,883-1,950/tonne) CFR (cost and freight) Asia last week, according to global chemical market intelligence service ICIS pricing.

A major buyer in Asia said it did not have its own estimates of global demand/supply figures but agreed that TiO2 supplies appeared to have tightened considerably in recent months, judging from the shipping lead times.

However, the buyer noted that the price hikes, if implemented relentlessly, were likely to dampen TiO2 consumption and readjust the supply-demand balance.

TiO2 is a white pigment used in paints and paper, among other products.

($1 = €0.75)

For more on TiO2 visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Ng Hun Wei
+65 6780 4359

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