10 September 2012 00:00 [Source: ICB]
Titanium dioxide (TiO2) is mainly used as a white powder pigment because of its brightness and high refractive index. It is used in paints and coatings, including glazes and enamels, plastics, paper, inks, fibres, foods, pharmaceuticals and cosmetics.
As TiO2 is resistant to discolouration under ultraviolet light, it is often used in plastics and sunscreens. Another growing outlet is in photo catalysts, where it is used in applications such as light-emitting diodes, liquid crystal displays and electrodes for plasma displays.
Its main end-use industries are split as follows: paints (57-60%), plastics (20-22%) and paper (10-12%). Because most of these downstream industries are highly linked to economic performance, consumption of TiO2 follows general economic trends.
As a result, after the 2008-2009 economic downturn, TiO2 consumption fell and some producers stopped production. This led to shortages in the market, which in turn pushed prices up when demand for TiO2 increased in 2010 and 2011.
In January 2011, TiO2 prices were €2.30-2.55/kg FD NWE, but as a result of shortages during the year, prices shot up to €3.00-3.40/kg by January 2012. The upward price trend seems to have stopped now, mainly driven by a macroeconomic downturn in Europe. As a result of public and private spending cuts, paint sales have fallen, slowing TiO2 demand. Estimates indicate that TiO2 sales to the paint industry have fallen by as much as 20% this year.
TiO2 prices are expected to decline in the fourth quarter because of falling consumption and long supply.
Most sources said that Q4 contracts will be at least €0.10/kg below Q3 levels, but some expect prices to fall by as much as €0.20/kg. Negotiations will begin in mid-September.
Producers said they will stick to their guns and will not give large reductions because they are still pressed by high feedstock ore prices, which restricts the amount of discount they can give to their customers.
However, buyers are seeking lower prices because demand is weak and the market is oversupplied. Most buyers are operating strict inventory management and are only buying TiO2 as and when needed.
Most TiO2 buyers are likely to remain on the sidelines this year as downstream paints and plastics demand is expected to be weak during the fourth quarter.
TiO2 is produced from ilmenite, rutile or titanium slag. Titanium pigment is extracted by using either sulphuric acid (sulphate process) or chlorine (chloride process). The sulphate process employs simpler technology than the chloride route and can use lower-grade, cheaper ores.
However, it generally has higher production costs and the infrastructure is more expensive to build than a chloride plant.
The chloride route produces rutile-form TiO2, a purer product with a tighter range of particle size using rutile as feedstock ore. The sulphate process tends to use ilmenite as feedstock ore and produces rutile-form or anatase pigments.
A number of producers have reduced output to about 80% of nameplate capacity, and some are considering further cuts where possible.
Several sources said they will not increase purchases in the fourth quarter. On the contrary, some are considering cutting volumes because demand from the decorative paint sector is so poor. In addition, demand is weak from the steel, metal, construction, automotive, plastics, paper, paint and coating sectors.
Demand from the road-marking sector is steady, although one road-paint maker expects this section will slow as well because of cuts to transport budgets.
Improvement is not expected for the rest of the year as the high season has passed and paint manufacturers traditionally wind down for the winter.
TiO2 manufacturers have enough stocks to last for up to 120 days, close to double the usual amount, sources said.
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