Inorganics: TiO2 buyers seek alternative supply options

20 February 2012 00:00  [Source: ICB]

Painting, Rex Features
Coating companies worldwide are reducing TiO2 amounts in paint
US paint and coatings companies Sherwin-Williams, PPG Industries, and Netherlands-based AkzoNobel have all been taking initiatives to reducing their titanium dioxide (TiO2) usage either through reformulation or substitution to lower feedstock costs.

In an interview with ICIS on February 7, AkzoNobel CEO Hans Wijers said the company aims to significantly cut its usage of petrochemical and energy-intensive feedstocks such as TiO2 over the next 10 years.

"TiO2 uses an awful lot of energy. Nature makes very white surfaces from a material based on nanofibers. Can we model or mimic it? We're posing the challenges. We're not saying to TiO2 producers, 'We don't want to work with you,' but there might be a better solution," said Wijers.

In December 2011, PPG announced an initiative with global suppliers to secure and enhance its TiO2 supply through technical collaborations, joint ventures, licensing, technical assistance opportunities, and other strategic commercial initiatives. The company said it intends to leverage its intellectual property and expertise in the production and finishing of TiO2 pigment.

PPG said it expects to be able to reduce the amount of TiO2 used in its paints by 4-6% in 2012, and by 10% or more in 2013. "This is not a challenge that we threw out lightly to our organization," said PPG CEO Charles Bunch during the company's fourth-quarter-earnings conference call last month.

"We feel that's an appropriate target level for us in our formulations. It's still early in the year but we are tracking it and we feel that we will hit these targets."

CHLORIDE VERSUS SULFATE

PPG said it has now started using sulfate-based TiO2 for its formulations in North American and Western European markets, which typically uses chloride-based TiO2. Most sulfate-based TiO2 grades come from China. More than 10% of PPG's overall TiO2 purchase is now sulfate-based, said Bunch.

"That's part of the targets that we have for improving our utilization of TiO2 in the formulas. Through both acquisitions and our own activities, we have learned how to work with those grades much more effectively. We have higher usage of sulfate TiO2 in Asia Pacific and in the developing/emerging region," he added.

As for Sherwin-Williams, the company is targeting to reduce its TiO2 requirement by 5-10% over the next few years through the use of lower-grade sulfate-type TiO2, internal reformulation or sourcing some emerging technologies. Industry analysts estimate that TiO2 pigments account for 26-27% of Sherwin-Williams' raw material spending.

In its earnings call last month, Sherwin-Williams CEO, Christopher Connor, noted that it is still below the target range.

"The expectation would be that over the next years, we would work to get in there. Any decisions we make to replace, reduce and reformulate TiO2 go through a very rigorous field testing process," said Connor. "We're going to lag a bit to move in this range. Nevertheless, it's work worth doing, and there's opportunities there and I feel that we're on target of where we should be."

Other coatings producers such as France-based Arkema and US-based Dow Chemical now offer partial replacements for TiO2.

Last year, Dow rolled out a second version of its TiO2 extender Evoque, a pre-composite latex polymer designed to enhance the opacity of TiO2 in coatings and allow paint formulators to use 20% less TiO2.

Last month, Arkema's coatings resins business introduced Celocor, also a latex-based opaque polymer that functions as a partial replacement for TiO2. Arkema said the polymer provides an effective way to reduce raw material costs and improve hiding in a wide range of products including interior or exterior coatings from flat to semigloss.

"We recognize that the cost and availability of TiO2 are among the most important issues that coatings formulators are facing today," said Eric Kaiser, global marketing director for Arkema Coatings Resins.

Kaiser added: "In speaking with our customers, we found that they are very interested in having more options for TiO2 reduction while maintaining a good balance of performance and attributes in their products."

Sherwin-Williams expects continued significant cost headwinds in 2012 primarily from TiO2. Connor estimates cost increases for their raw material for 2012 to be in the single- to low double-digit percentage range.

INDUSTRY INCREASE

PPG noted a 35% industry increase in TiO2 pricing in 2011. Price hikes from Western chloride TiO2 producers are continuing in 2012, albeit at a more moderate pace, said Bunch.

Industry analysts and TiO2 producers expect TiO2 price hikes in 2012 to again gain traction in the first half of 2012 after weak TiO2 demand was seen in the fourth quarter of 2011 driven by fiscal tightening in China and uncertainty in the eurozone.

"TiO2 demand, on average, tends to follow gross domestic product [GDP] growth, and with no major tranches of new capacity coming on in the next 24 months, we expect this market to remain strong," Ellen Kullman, CEO of US-based TiO2 producer DuPont said during the company's fourth quarter earnings call last month.

TIO2 table TIO2 table TIO2 table

DuPont implemented a $200/tonne (€152/tonne) TiO2 price hike in Asia, effective January 1, and effective February 1, a $330/tonne hike in North America, $250/tonne in Latin America, and €200/tonne in Western Europe. Other producers implented more or less the same price hikes for the first quarter of 2012.

Producers' fourth-quarter price hikes last year did not fully go through, said Andrew Cash, analyst at global investment bank UBS. "We believe that half of the 25 cent/lb North American price increase was successful, while Europe and Asia saw about one-quarter to one-third of the proposed €450/tonne and $500/tonne increases, respectively."

TiO2 price increases for the first quarter of 2011 are building, said Jeffrey Zekauskas, analyst at global investment bank J.P. Morgan. "Average regional TiO2 prices translated into US dollars and weighted for regional exposure improved $400/tonne from $3,727/tonne in December 2011 to $4,011/tonne in January 2012," he said.

"We believe producers will work hard to achieve these recent price increases," said UBS's Cash. "Datastream reports that TiO2 prices in North America were up by $220/tonne in early February over January but Asian prices were flat," he added.

DEMAND RECOVERS

ICIS assessed Asia TiO2 prices at $4,000-4,200/tonne CFR (cost and freight) as of February 10, the same level seen since December 2011.

The lackluster demand for TiO2 in Asia is gradually recovering with a potential rebound in mid- or end-March, a supplier said. A buyer in southeast Asia also noted that current downstream demand remains slow but is expected to improve in March.

Major global TiO2 producers are expected to announce price increases in the near term amid cost pressure stemming from escalating values of feedstock titanium ore, market sources said. In Europe, producers said there are signs that demand has improved since January but order levels are still not as strong last year. Several players are waiting, as demand is expected to pick up towards the end of March when paints and coatings season traditionally starts.

ICIS assessed European TiO2 prices at an average $4,220/tonne FD (free delivered) NWE (northwest Europe), and North America TiO2 prices at around $4,300/tonne FD. Market sources said that the February 1 price increase is still being digested by the market and there is not yet much serious negotiation regarding the price hike, which is slated for April 1, given the 90-day price protection clauses in many of US consumers' supply contracts.

  • Additional reporting by William Beacham and Amandeep Parmar in London, Larry Terry in Houston and Feliana Widjaja in Singapore.

By: Doris de Guzman
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