OUTLOOK ’11: North America TiO2 demand, supply to keep market tight

30 December 2010 15:22  [Source: ICIS news]

By Larry Terry

HOUSTON (ICIS)--The North American titanium dioxide (TiO2) supplies will remain pinched throughout 2011, most markets sources said, keeping prices on an upward trajectory.

“2011 is going to start with demand exceeding offers,” a producer said. “And some TiO2 users will attempt to increase inventories more on protection from insufficient supply than from price increases.”

The producer said it had struggled to ship current orders by the end of the year, and “we know already that there are more orders on our books for January than we can or want to ship. We can see no slowdown early next year.”

While buyers have been loathe to submit to steady and sizeable TiO2 price increases in 2010, suppliers have will have achieved 20% in price gains by early January if current North American initiatives of 8 cents/lb ($176/tonne, €134/tonne) are fully implemented on 1 January as expected.

Buyers conceded that producers had the upper hand in 2010 and would continue their strong position as the new year begins. Given strong demand for TiO2 in Europe and Asia, material continues to be exported, as well.

In a recent report from Deutsche Bank, analysts predicted that current tight supply, unexpectedly good demand and low inventories would underpin TiO2 price gains of as much as 10% in 2011 and 2012.

Buyers have warned that an unchecked increase in pigment pricing in 2011 would begin to erode demand. Few argued, however, that supply constraints and recovering architectural coatings demand would continue to pressure TiO2 prices upward.

Producers were bullish about domestic economic recovery in 2011 and beyond, while most buyers are more cautious, describing recovery as “fragile”.

“Sellers say shortages will last three to five years,” a buyer said, “but I say maybe one and a half to two years if they are lucky.”

The TiO2 market was healthier at the end of 2010 than participants expected at the outset of the year  - growing by high single-digits over a dismal 2009, during which supply pressure never really eased after capacity was idled and inventories destocked toward the end of 2009.

Meanwhile, current North American prices were assessed by ICIS at $1.30-1.44/lb, pending broad market settlement of the fourth-quarter initiatives proposed in September and October 2010.

New initiatives of plus 8-10 cents/lb announced for 1 January would be implemented on or about 1 March 2011 if successful.

North American TiO2 producers include Tronox, Cristal, DuPont, Kronos and Huntsman.

($1 = €0.76)

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By: Larry Terry
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