Price and market trends: Tronox confident on titanium dioxide outlook for 2013

22 November 2012 20:25  [Source: ICB]

Tronox is confident that titanium dioxide (TiO2) pigment demand will improve next year, even as its 2012 third-quarter pigment sales fell by 30% and demand is expected to stay weak in the fourth quarter of 2012 and the first quarter of 2013, the CEO of the US-based producer said.

Tronox reported third-quarter pigment sales of $279.8m (€221.0m), down from $399.4m in the 2011 third quarter because of lower volumes, particularly in Asia, and unfavourable foreign currency translation.

Painting Rex Features

Rex Features

Demand for Tronox's pigment products has been weak

"While demand for our pigment products has been weak, we believe the fundamental conditions underlying the demand for these products have begun to recover and [that] sales will begin to increase next year," CEO Tom Casey told analysts during Tronox's third-quarter results conference call.

"We remain convinced that demand will recover in 2013, and we strongly believe that our vertically integrated structure gives us a material cost advantage," he said.

Casey said Tronox's customers in the paints, coatings and plastics industries have completed or soon will complete their destocking. Meanwhile, US housing and construction markets are gaining strength, and demand in China should grow following the transition to a new leadership, he said.

"US housing is clearly recovering, reflected in both new home construction and existing home sales," Casey said. North America accounts for about 40% of Tronox's total pigment sales.

In China, the most recent reports on GDP growth seem to indicate that economic performance is improving in that country, he said.


The stronger Chinese economy will boost Tronox's direct TiO2 sales there. At the same time, Chinese TiO2 exports to Asia-Pacific and Europe will fall as Chinese production meets rising domestic market demand, Casey said.

"This should have a positive effect on pricing in the region, into which that surplus [Chinese TiO2] supply has been shipped over the last year," he said.

Tronox's margins will improve with higher plant utilisation rates and the benefits from its feedstock integration, Casey said.

"As the market strengthens in the second half of 2013 and into 2014, we believe these advantages will contribute to a more rapid recovery and higher margins, cash flows and net income for us than other firms not similarly structured," he said.

However, ongoing short-term economic uncertainty persuaded Tronox to hold back paying out special dividends for the time being, Casey said.

"We think there will be strengthening in the market in the second half of [2013], but we cannot predict what happens with the 'fiscal cliff' negotiations in the US, and what happens with Greece and Spain and other eurozone considerations, or what happens with the effects of the leadership transition in China," he said.

"The prudent course for us was to say, we are not going to [pay special dividends] now, and whether we will be doing it in the future will be a function of the cash we generate," Casey added.

In June, Tronox said it was considered issuing a special dividend to return capital to shareholders.

  • Additional reporting by Muhamad Fadhil in Singapore

By: Stefan Baumgarten
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