24 November 2011 15:40 [Source: ICIS news]
LONDON (ICIS)--European titanium dioxide (TiO2) prices in 2012 will be heavily dependent on how the US and China markets develop next year, sources said on Thursday.
While few expect European values to soften in the first half of next year, buyers and sellers are looking to external markets to indicate whether prices will remain stable or rise.
Domestic producers have hinted they will target hikes of around €200–300/tonne ($267–400/tonne) for first-quarter 2012 contracts because of a potential doubling in upstream ilmenite and rutile prices, but buyers state this is unrealistic given how weak demand is.
On top of that, lacklustre buying interest in China has seen cheap Asian material flood the European market, with offers coming in at €2,300–2,600/tonne FD (free delivered) NWE (northwest Europe), compared with €2,950–3,300/tonne offered by domestic manufacturers this quarter.
Most players do not expect Chinese demand to recover until after their new year in February, and even then there are questions over how strong the recovery will be, given the tightened monetary policy of the country's government.
This could draw even more product to Europe, exerting a significant downward price pressure on domestic material.
“They need to place the material somewhere in the market, and the Chinese New Year is two months away,” said a European consumer.
A producer said: “Asia will certainly be pulling the cart.”
European players are also eagerly waiting to see if manufacturers will be successful in their targeted increases of 15 cents/lb ($331/tonne) in North America early next year.
If US prices rise then European material will be much more competitive on the global stage, which will mean fewer imports and more exports.
“All eyes are on the US increases posted to go into effect in February. If they get that then they will probably get it in Europe,” said one European customer.
He added: “The longer US [buyers] can hold off the price increase the better off [European] buyers will be.”
The fourth and first quarters of any year are traditionally weak months for the European TiO2 market, as it is low season for the downstream coatings and construction sectors.
This trend has been exacerbated in 2011 by fears over the eurozone debt crisis and recession fears, and end-users in typically non-seasonal sectors – such as plastics – are seeing sales drop by at least 10% compared with the corresponding period in previous years.
Most buyers are confident that prices will hold in the first quarter, before increases in the second quarter – when the coatings season usually starts up again – but are unsure what these rises will be.
“We predict a rollover in the first quarter, but if the US price increase goes through then we are fearful for a second-quarter European price increase,” a buyer said.
($1 = €0.75)For more on TiO2 visit ICIS chemical intelligence
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