FocusEurope TiO2 buyers resisting targeted €500/tonne hikes

11 August 2011 15:44  [Source: ICIS news]

LONDON (ICIS)--The €500/tonne fourth-quarter hike sought by European titanium dioxide (TiO2) producers on the back of spiking upstream costs is completely unjustified, buyers said on Thursday.

Even competitors were taken aback by the €500/tonne ($714/tonne) increase target from producers Kronos and DuPont, and indicated a smaller rise may be more palatable to customers.

“Looking at raw material development it is not a surprise, but the market has never seen such a one-time increase before,” said one manufacturer.

European TiO2 prices have already spiked by 37%, to €2.75–3.00/kg FD (free delivered) NWE (northwest Europe), over the past six quarters, with €250/tonne the previous largest one-time increase implemented.

These increases were largely put down to market tightness amid undercapacity, and although manufacturers are investing in building new capacities, these will not come on line until the end of 2013 at the earliest.

However, producers are now citing the additional strain of higher feedstock ilmenite and titanium ore costs, which have risen dramatically this year.

While TiO2 customers accept raw material costs are running high and a significant increase is likely for fourth-quarter contracts, they complain of being unable to keep passing these costs on to their buyers.

Many downstream paints and coatings producers have already resorted to using substitutes such as calcium carbonates to reduce TiO2 consumption, but these can only replace up to around 10% before the quality of the final product is compromised.

Customers hope to negotiate a more modest price rise, saying demand is softening and an increasing number of competitive offers are coming from Asia, which should help secure a more modest rise.

Decreasing demand in China is putting prices in the region under downwards pressure, leading Asian sellers to look further afield to offload their product, according to customers.

One buyer said that after 10 months of limited availability from Asia, an increasing number of Chinese companies are offering material in Europe for around €2.80/kg FD.

However, a source at Kronos is adamant that the €500/tonne increase will go through in full in order to retain margins.

“We don’t see an alternative. It is not negotiable,” said the source.

($1 = €0.70)

For more on TiO2 visit ICIS chemical intelligence 
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By: Amandeep Parmar
+44 208 652 3214

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