23 November 2012 12:58 [Source: ICIS news]
LONDON (ICIS)--European titanium dioxide (TiO2) prices in the first quarter of 2013 could drop to levels last seen in the second quarter of 2011 because of exceptionally low demand and potentially lower feedstock costs, sources said on Friday.
Buyers and traders said contract prices could drop to about €2.50-2.60/kg ($3.21-3.33/kg) free delivered (FD) northwest Europe (NWE) in the first quarter next year. The last time prices were that low was in April 2011.
Several sources this week said because TiO2 sales fell drastically during the year, demand for their feedstocks, rutile and ilmenite, have also fallen. As a result, TiO2 producers will likely ask for price reductions when it comes to 2013 annual feedstock contract negotiations.
One buyer said it thinks TiO2 prices will drop by at least €0.15/kg in January, but if feedstock costs fall drastically then there is scope for more.
However, one producer said the €0.15/kg discount is unrealistic and would bring the prices to unsustainably low levels.
"At current margins there is almost no point producing, so if we don't manage to reduce our costs, [including feedstocks], then the next option is to shut plants down," a producer said.
Already, plant utilisation rates have been cut to about 65-70% of nameplate capacity, sources said. If utilisation rates go below 75%, profitability comes into question as the lower the output, the less profitable it becomes to run energy-intensive factories. Inventory levels are high and the European market is oversupplied.
TiO2 is used in the production of paints, plastics, masterbatches and other materials used by the construction, packaging, paper, ink and automotive industries. Demand for TiO2 in most of these derivative markets is weak as the macroeconomic situation has worsened in Europe during 2012.
First-quarter contract discussions will begin next week.
($1 = €0.78)
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