Global TiO2 destocking pressures margins, prices downwards

01 August 2012 19:58  [Source: ICIS news]

HOUSTON (ICIS)--Global titanium dioxide (TiO2) destocking will continue well into the third quarter, exerting near-term pressure on producer margins and pigment pricing, US-based chemicals producer Huntsman said on Wednesday.

In the third quarter, TiO2 prices and higher feedstock ilmenite ore prices will compress its TiO2 margins by about $350/tonne, Huntsman’s vice president of investor relations Kurt Ogden said during a during a second-quarter earnings conference call.

Globally, second-quarter demand was soft, compounded by the absence of a seasonal increase on 1 July, president and CEO Peter Huntsman said. “Pricing momentum has clearly slowed down,” he added.

“We believe that prices ought to be going up, and we will be pushing prices as aggressively as we can,” Huntsman said. “But when you look at the overall momentum, we can’t … say that prices are going up.”

A company official said demand in the Asia-Pacific region had declined by 25-30% from a year ago, and that North American demand was down by about 20% compared with one year ago.

The official said that a year ago, the industry was operating at maximum rates. Operating rates are now about 80% operating rates industry-wide, he said.

Huntsman said its TiO2 inventory is at about 70 days, 30% below a reported North American average of 100 days.

The pending expiration of many ore contracts - and likely higher ore prices to come - may partly account for rising inventories, the company said.

A company official said he would not be surprised to see more ore purchases before the feedstock prices increase, and then see producers sit on lower-priced TiO2 inventory.

Analysts in the conference call asked about the future of future TiO2 demand.

“Anecdotally speaking, we do not hear evidence from our customers of reformulation away from TiO2 products,” Peter Huntsman said. “However, we have heard of a greater acceptance and use of lower-quality Chinese-produced material.”

He added that sales volumes increased in all regions except Asia Pacific, where Chinese demand for pigments, electronics, wind and power continued to be soft.

“We expect business conditions for these Chinese markets to remain difficult at least through the end of this year,” he said.

Other North American TiO2 producers include Cristal, Tronox, DuPont and Kronos.

($1 = €0.81)

By: Larry Terry
1 713 525 2653

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