24 February 2011 14:02 [Source: ICIS news]
By Amandeep Parmar
LONDON (ICIS)--The position of European titanium dioxide (TiO2) customers is set to worsen as manufacturers propose up to €0.25/kg hikes on second quarter contracts, buyers said on Thursday.
DuPont and Tronox have both announced a €225/tonne ($308/tonne) hike, while Kronos is planning to increase prices by €200-250/tonne, depending on grade and market segment, because of long term tight supply.
Customers expressed their disquiet at the size of the increases proposed, but begrudgingly accepted material was scarce and that a price increase was probable, though it was too early to tell exactly by how much.
“There will be a price increase but not by the full amount. Margins are very low and this is a limiting factor,” one consumer said.
Downstream paints, plastics and paper manufacturers were finding it increasingly difficult to pass on TiO2 costs, which have shot up by €0.57-0.65/kg since 1 January 2010, to €2.30-2.55/kg FD (free delivered) NWE (northwest Europe), according to ICIS.
In this time the price of finished products, particularly paints and coatings, have hardly climbed at all so customers were bemoaning further TiO2 hikes on the way.
“Some industries are really struggling and there is a limit to how much [TiO2] prices can go up before customers look for alternatives,” a buyer stated, adding: “We are not there yet but it’s fast approaching.”
Manufacturers were confident the hikes would go through in their entirety however, citing strong TiO2 demand and restricted availability of upstream ilmenite and slag.
This was particularly affecting smaller producers using the sulphate rather than the chlorine process to manufacture TiO2, sources said.
One seller intimated that customers, while shocked at the amount, accepted these reasons behind the price initiative.
“We have no doubts about implementation. The increases will absolutely go through fully,” a producer stated.
Customers saw it a little differently, however, saying the market was structurally short after capacities were wound down during the recession. Now, despite demand picking up throughout 2010 and into 2011 as recovery got underway, manufacturers were reluctant to increase output.
“Producers have learnt their lesson from before, when in the 1990s they increased capacity too fast, which led to a 15-year period of low prices,” a buyer explained.
“The pie has gotten smaller, and the slices have become thinner,” it added.
($1 = €0.73)
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