Price and market trends: US TiO2 firms see prices rebounding in Q1 2013

09 November 2012 11:34  [Source: ICB]

US titanium dioxide (TiO2) producers expect the pigment's downward pricing trend will come to an end and that the market will rebound early next year.

TiO2 prices have been softening for about 12 months and will likely continue to decline through the end of the year. However, many producers expect the market to bottom out and TiO2 prices to start increasing.

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"We believe that destocking will be completed by the end of the fourth quarter, and demand will stabilise and gradually pick up in the first half of 2013," said Peter Huntsman, CEO for Huntsman, a pigment producer.

Both fellow pigment producers DuPont and Rockwood said the demand for TiO2 will increase along with the recovery in the housing market, which is a key downstream consumer sector for paints and coatings.

In its semi-annual housing forecast, the National Association of Home Builders said single-family housing starts in 2012 will increase by nearly 22% from last year.

In addition, the economy in Europe will stabilise, and China is expected to spend more on infrastructure as the government transitions to new leadership, said Karen Fletcher, investor relations vice president at DuPont, another TiO2 producer.

"With improved demand in China, the expected pick-up in the housing sector in the US and our customers' need to replenish their inventories, we continue to be optimistic about the future of this business in the long term," Rockwood CEO Seifi Ghasemi said.

DUPONT EXPANSIONS

DuPont said it remains committed to its planned TiO2 expansions, which could start up in late 2014 or early 2015.

The company plans to add a 200,000 tonne/year production line at its site in Altamira, Mexico, as well as make upgrades at sites in the US, Mexico and Taiwan to yield an additional 150,000 tonnes/year capacity.

As a result, a rebound may also be passed along to TiO2 buyers.

"We are expecting growth next year - somewhere around 10%," said an architectural coatings producer. "And we do not plan to have as much inventory as in the past. We will also keep our eyes on price increases."

Until then, however, architectural coatings makers said they will be destocking for the remainder of the fourth quarter, given the typical seasonal demand decline during the period.

NA TIO2"We're not planning to buy any TiO2 - or very little - through the end of the year," a customer said. "I am still hoping for lower pricing. Then I will start buying again so we can make paint at lower cost next year."

Major US paint maker Sherwin-Williams will also reduce production but said it typically produces less during the fourth quarter than any other quarter. The company said its competitors are finding ways to reduce TiO2 consumption by as much as 10%.

"We have commented that we don't see it being unreachable for us either," Sherwin-Williams CEO Christopher Connor said.

Meanwhile, the industry is moving aggressively to find replacement technologies, innovative chemistry and other practices, Connor said. Some are looking for ways to reduce its dependence of higher-cost, chloride-based pigment, such as using sulphate-route TiO2 in lower-cost primers.

"As far as TiO2 purchases, I would say we will buy 15-20% less for next spring because of our efficiency in formulation changes," one paint maker said.

Huntsman said with its large position in sulphate-based TiO2 production, the company can take advantage of the lowest-price ores in producing TiO2.

SULPHATE CAPACITY

"If you look at all the capacity that has been added to this industry in the last couple of years, it has all been sulphate, and I have yet to meet a single paint customer willing to pay anything more for chloride than for sulphate," he said.

Still, producers and buyers alike will have to endure the downward pricing for a little longer.

"With the continuing softness in some of these global markets and it continuing to be weak [in the US], history would indicate this commodity will continue to have some softness in pricing," Connor said.

  • Additional reporting by Larry Terry and Stefan Baumgarten

By: Tracy Dang
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