OUTLOOK ’12: Asia titanium dioxide to stay high on firm feedstocks

05 January 2012 03:19  [Source: ICIS news]

AsiaBy Feliana Widjaja

SINGAPORE (ICIS)--Asia’s titanium dioxide (TiO2) market is likely to remain firm in 2012 as increasing raw material prices continue to pressure producers and supply is expected to remain tight, industry sources said.

TiO2 prices surged by $1,200/tonne (€924/tonne) from the beginning of 2011 to settle at $4,000-4,200/tonne CFR (cost & freight) Asia on 30 December, representing an increase of around 40%, according to data from ICIS.

Major international TiO2 producers persistently raised their prices every quarter driven by rising feedstock titanium ore prices and tight supply, which shows no sign of easing in the near term, market sources said.

“The increase in raw material costs is far from our expectation and this has caused our margins to be squeezed,” a producer from Japan said.

Saudi Arabia’s Cristal Global announced a $250/tonne price increase in mid-December 2011, which will take effect from 1 January 2012. Price premiums of up to $200/tonne will be applicable for sales of specialised TiO2 grades that are sold within Asia Pacific.

This follows earlier announcements made since mid-November last year by major international producers of their price hikes for the region, effective 1 January 2012, including Japan’s Ishihara Sangyo Kaisha (ISK)’s $300/tonne increase and Dutch Tronox’s $300/tonne increase.

In addition, US-based firms Kronos raised its prices by $300/tonne, while DuPont hiked its prices by $200/tonne increase and Huntsman, by $350/tonne.

“Raw material ore costs have been shooting up since the beginning of 2011. They have tripled during the year, so we need [to increase the prices] of TiO2,” a producer based in Germany said.

Most suppliers are optimistic that the prices will continue rising because there will only be a few significant capacity additions outside of China in the near term, which are expected to prolong the tight supply situation in Asia.

Thus, the demand for TiO2 is likely to outpace that of supply for the time being, resulting in a shortage of supply in the market.  

“Besides rising raw material costs, we are [expecting] continued demand growth in 2012, which should support the prices,” a Malaysia-based producer said.

DuPont is scheduled to expand its capacity by 350,000 tonnes/year by the end of 2014.

This includes a new 200,000 tonne/year production line at DuPont’s site at Altamira in Mexico and facility upgrades at its existing TiO2 sites in the US, Mexico and Taiwan to yield a combined additional 150,000 tonnes/year.

Meanwhile, the major producer is awaiting approval from the Chinese government to proceed with the construction of a 200,000 tonne/year chloride-based TiO2 plant at Dongying in China.

In addition, Netherlands-based Akzo Nobel is partnering China’s Guangxi CAVA Titanium Industry to build a 100,000 tonne/year TiO2 plant at Qinzhou in China to meet Asia’s growing demand. The plant is expected to be started up in early 2014. 

China has been increasing its TiO2 capacity, but quality issues have prevented China-origin materials from penetrating the global market.

Meanwhile, debottlenecking works globally are expected to add around 2-3% per year of capacity globally, but there will not be any major expansions outside of China because of the tight supply of raw material ore, according to a US-based producer.

Tronox said the debottlenecking and technical advances could raise the capacity at its 90,000 tonne/year plant at Botlek in the Netherlands to about 115,000 tonnes/year, with smaller expansions at its US-based facility at Hamilton in Mississippi and joint venture Tiwest at Kwinana in Australia.  

The company is still developing its brownfield expansion plans and has not made a formal announcement.

In addition, Huntsman is planning to boost its TiO2 output by around 40,000 tonnes/year by debottlenecking its existing plants, which have a total capacity of 560,000 tonnes/year. A timeline for the debottlenecking was not disclosed. 

However, the price rally seen this year is unlikely to be repeated in 2012 as TiO2 demand will be vulnerable to the expected global economic slowdown, which will consequently ease the prevailing tight supply situation, according to an industry source.

TiO2 is mainly used as white powder pigment in the production of paints, coatings, plastics, paper, inks, fibres, food and cosmetics. Approximately 5m tonnes of TiO2 are consumed annually worldwide, mainly in the coatings, plastics and paper industries.

Meanwhile, buyers have been resisting the TiO2 price hikes because of the difficulty in passing the higher costs to their customers.

Furthermore, some buyers are unsure if the supply-demand balance will be tight next year.  

“The market is well supplied, with enough inventory to last past the Lunar New Year holiday in January,” a buyer from southeast Asia said.

In addition, there are concerns about the uncertain global macroeconomic climate and debt woes in the US and eurozone, which may dampen buyers’ confidence and affect demand.

“We are already seeing a slowdown in off-takes in the fourth quarter of 2011. The supply-demand balance should be [easing] now, so the prices should not go up,” a buyer from India said.

($1 = €0.77)

For more on titanium dioxide, visit ICIS chemical intelligence
Please visit the complete ICIS plants and projects database
For more pricing intelligence, visit ICIS pricing
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Feliana Widjaja

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