04 January 2013 11:23 [Source: ICB]
Titanium dioxide (TiO2) prices in Asia are likely to soften in the first three to six months of 2013 because of weak regional demand, market players say.
In early December 2012, prices fell to the year's low of $3,000-3,500/tonne CFR (cost and freight) Asia - down by about 21% from the start of the year, according to ICIS.
Buyers continue to seek deals for TiO2
"The market is well-supplied, and continues to be well-supplied. If supply continues to outstrip demand in 2013, prices will fall further," according to a trader based in the Middle East.
In April to May 2012, tight supply drove up prices to an all-time high of $4,000-4,300/tonne CFR Asia. Prices eventually started easing off highs as availability of material increased.
By June, end-users that were rushing to buy material had stocked up on supply and stayed away from the market.
"Prices fell and fell from July. The market is really softening. Expect prices to fall further next year after the Lunar New Year in China," a southeast Asian buyer said.
TiO2 is used as white powder pigment in paints, coatings, plastics, paper, inks, fibres, food and cosmetics production. An estimated 5m tonnes of TiO2 are consumed annually worldwide.
In 2011, major international TiO2 producers implemented a quarterly price hike on the back of rising cost of feedstock titanium ore, as well as tight supply.
Producers did the same in the first half of 2012, with Saudi Arabia's Cristal Global announcing a $150-200/tonne price increase for Asian and Middle East TiO2 markets in March 2012. Japan's Ishihara Sangyo Kaisha, on the other hand, announced in May that it will raise prices for the Asia-Pacific market by $300/tonne.
The round of price increases, however, stopped in July as demand significantly weakened because of an oversupply in the market. Weakening downstream demand for the pigment from Asia and Europe also affected purchasing activity.
Come 2013, producers may refrain from nudging up prices, at least in the first half, amid a persistent softness in demand.
"Such [price hike] announcements turn buyers off especially in a bearish market. They serve little purpose when buyers are looking for the lowest possible prices," a South Asian-based market player said.
Global TiO2 sales volumes significantly declined in 2012, leading to weaker earnings for major producers. US-based Tronox reported third-quarter pigment sales of $279.8m, down from $399.4m in the 2011 third quarter because of lower volumes, particularly in Asia.
Another US-based producer Kronos reported a net income of $35.2m in the third quarter of this year, down 59% from $85.9m reported for the same time last year because of lower sales and higher operating costs.
Still, producers said they are optimistic of higher profits in 2013, citing tighter supply-demand balance. "Buyers will need to purchase material at some point. Though demand is not expected to grow significantly, prices should remain steady-to-firm because of tighter supply in Asia," an Asian producer said.
"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 we believe sales will begin to increase next year," Tronox CEO Tom Casey was quoted as saying in November 2012.
Global TiO2 producers have also indicated they will complete destocking by early January 2013 at the latest, to stabilise the supply-demand balance.
US-based Huntsman, whose own earnings came under pressure in the third quarter of 2012, said its destocking activity should come to an end by Q4.
Most market players said the TiO2 industry will be vulnerable to global macroeconomic conditions. Demand will weaken significantly and prices will fall if China continues to slow down; US economic uncertainties remain; and debt concerns in the eurozone persists.
"There is often a direct correlation between macroeconomic factors and the TiO2 market. If a slowdown occurs in US or China, the TiO2 industry will be badly hit and will take a long time to recover," an Asian trader said.
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