US Tronox sees TiO2 supply constraints as key market driver – CEO

01 August 2012 17:10  [Source: ICIS news]

HOUSTON (ICIS)--Supply constraints are the key driver for titanium dioxide (TiO2) markets in coming years, the CEO of US-based producer Tronox said on Wednesday.

“The industry continues to face significant constraints in expanding production over the medium to long term,” Tom Casey told analysts during Tronox’s second-quarter earnings call.

The supply constraints will become clearer once demand recovers from its current softness, Casey said.

Casey would not speculate when exactly demand for TiO2 - which correlates tightly with GDP growth - will regain normal levels again.

However, he said Tronox is encouraged by signs that US housing may be recovering even as US GDP was not doing well.

At the same time, China’s move towards a more stimulative economic policy should help drive pigment demand, he said.

“So, the question is, when [will] US housing and China stimulation begin to flow through the economy,” he said.

Tronox does not see that happening in 2012, “although there is at least some possibility we may see it towards the end of the year,” Casey said.

Meanwhile in Europe, marco-economic risks continue to affect business in that region, he added.

Tronox reaffirmed its previous full-year 2012 guidance of pro-forma revenues of between $2.5bn and $2.6bn and earnings before interest, tax, depreciation and amortisation (EBITDA) margins of around 35-37%.

Tronox’s guidance assumes flat 2012 second-half volumes and slightly lower pricing, compared with the first six months of the year.

Hassan Ahmed, head of research of New York-based equities firm Alembic Global Advisors, said “the TiO2 story is a supply constraint rather than robust demand story.”

As such, there will be supply/demand tightness in the market for the next three to four years, even in a relatively weak demand environment, Ahmed said in research note to clients.

By: Stefan Baumgarten
+1 713 525 2653

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