20 February 2013 14:31 [Source: ICIS news]
LONDON (ICIS)--AkzoNobel expects prices for titanium dioxide (Ti02) to remain around their current levels, but that oil and oil derivatives will continue their current rise, the CEO of the Netherlands-based specialty chemicals company said on Wednesday.
Speaking in London, AkzoNobel CEO Ton Buchner said: “In 2011, titanium dioxide, one of our raw materials, had a squeeze in the market and as a result reached a price that went above normal trading conditions.
“Ti02 has come down in the recent timeframe, and we expect it stay relatively similar to where it is today on the basis of supply and demand in that market,” he added.
Although AkzoNobel and other producers of paints and coatings have benefited from Ti02’s drop in price, it has been cited as one of the key factors impacting quarterly earnings of several producers of the material. Finnish water chemistry specialist Kemira reported that weak Ti02 pricing had a significant impact on the company’s €40.6m ($54.1m) net loss during the fourth quarter of 2012.
The company has since sold its stake in loss-making German Ti02 specialist Sachtleben to joint venture partner Rockwood Holdings, which is planning to exit the business or reduce its holding to a minority position by the end of 2013.
Ti02 business also weighed down Rockwood’s fourth-quarter 2012 results, with a 90% fall in Ti02 earnings before interest, tax, debt and amortisation (EBITDA) contributing to a 66% fall in net income for the company to $21.2m. Deutsche Bank analysts also identified Ti02 as the main drag on earnings per share for US chemicals giant DuPont.
However, crude oil prices hit a nine-month high on 8 February and are expected to continue to rise, according to Buchner, who added that AkzoNobel has introduced measures to monitor developments and likely future trends for its raw materials, increasing its ability to anticipate and respond to significant shifts.
He said: “A much larger part of our raw materials is oil and oil derivative products, and we see an upward pressure there, so that may affect our supply costs going forward. We have introduced strong processes to do value product margin management assessment on a continuous basis, and that includes raw material fluctuations that are done through central procurement.
“We can predict forward indicators much better through central procurement and that, as an input to the businesses that need these materials, is a significant improvement on the past,” he added.
($1 = €0.75)
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