Price and market trends: PPG anticipating flat to moderately higher TiO2 pricing in 2013

25 January 2013 10:45  [Source: ICB]

PPG Industries expects flat to moderately higher North American titanium dioxide (TiO2) pricing in 2013, the US-based chemicals and coatings firm says.

"We're looking for a more balanced outlook for raw materials as we look ahead," CEO Charles Bunch said in the course of an earnings call.

building painting Rex Features

Rex Features

The US spring coatings season should boost demand for TiO2

"Even though we're seeing a declining trend in TiO2 pricing, it's being offset by continued inflation," he added. "We have seen TiO2 declines since the beginning of the second quarter of last year when they hit a peak."

The company is looking at more balanced or flat raw materials, with declines in TiO2 offset by what appears in the first quarter of 2013 to be some pressure on the organic side of the raw material basket, he said.

PROPYLENE RISES

Sources said January propylene contracts are poised to increase by as much as 15 cents/lb. And Bunch said PPG likely will implement some price increases this year to recoup upstream gains.

The company reported that its fourth-quarter 2012 net income rose 5.1% year on year to $227m (€170m) on strong coatings business performance. PPG said it will also continue to reduce its dependence upon TiO2.

"When we made those announcements regarding improvements in using TiO2 more efficiently in 2012, we said 4-6%," Bunch said. "In 2012, we accomplished that at the lower end of the range, and we think we still have in 2013, an opportunity to improve our utilisation at the lower single-digit target level."

For the full year, the company is optimistic that positive trends are going to continue in 2013, including housing and construction data, Bunch added.

NEW HOME INCREASE

"We're seeing a lot of anecdotal information about certain markets," he said. "The housing resale market is strengthening, and there is an increase in new-home construction permits and starts. Overall, I'd say we're pretty optimistic."

US TIO2Earlier, North American titanium dioxide (TiO2) fourth-quarter contract values dropped again late in the period by an average of 10 cents/lb ($220/tonne, €165/tonne).

The second round of price cuts was expected, following identical reductions earlier in the quarter. "Volume is very weak, while production and inventories are still strong," a buyer said. Typically, end-of-year TiO2 demand is weak.

Fourth-quarter pricing continued to weaken well past the usual negotiation period, sources said, reflecting the third-quarter trend seen in July and August.

Although most architectural coatings makers saw reductions of 5-10 cents/lb, depending on volume and current price, a plastics compounder said it did not participate in the secondary reductions.

Averaging 10 cents/lb, the second round of cuts took the fourth-quarter price range down by a total of 20 cents/lb to a new range of $1.55-1.70, as assessed by ICIS. However, one producer conceded a total fourth-quarter reduction of only 15 cents/lb.

Several sources said they would begin first-quarter negotiations with their suppliers within the next two weeks. But one buyer said it had already received an offer of still-lower pricing for January.

A seller insisted, though, that pricing would be flat during the first quarter, with price-hike talks beginning in the second quarter.

Two buyers said that although the upcoming US spring coatings season is expected to be stronger, price gains would not be justified until mid-year, at best.


By: Larry Terry
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