TiO2 plant rates to rise as market depletes supplies - US Tronox

09 May 2013 22:14  [Source: ICIS news]

HOUSTON (ICIS)--Utilisation rates for titanium dioxide (TiO2) plants may rise in the second quarter as demand continues to increase and inventories continue to decline, setting the stage for a recovery in pigment prices during the second half, the CEO of US-based Tronox said on Thursday.

US TiO2 prices have fallen by nearly 27% since reaching a high of $2.06/lb ($4,541/tonne, €3,451/tonne) in August 2012, according to ICIS. They now stand at $1.625/lb.

Prices had fallen as buyers worked through inventories, a process that is winding down.

In fact, TiO2 demand is recovering, said Tom Casey, Tronox CEO. He made his comments during an earnings conference call.

Tronox pigment sales volumes in the first quarter rose by 23% versus the 2012 fourth quarter, he said. In fact, pigment sales reached their highest level since Q3 2011, he said.

However, Tronox's inventories were at 71 days at the end of March, Casey said. A more normal level is at the mid 50s.

"We want to get rid of inventory," he said.

To help work down inventories, the company's plant utilisation rate was about 70% during the first quarter, he said.

Utilisation rates will need to rise before prices can recover, as Tronox sees any price increase occurring through a four-step process.

First, sales volumes will increase because customers have finished destocking, Casey said. Prices will still decline, because the increase in customer demand will be met by producers' inventories, he said.

As those inventory levels become normal, prices will start to stabilise, he said.

In the third step, utilisation rates will begin rising as producers deplete their excess inventory, Casey said. Margins should automatically increase because of the higher utilisation rates.

Once utilisation rates rise and inventories return to normal, prices could start rising, he said.

"I doubt that we are at that level right now, in terms of prices increasing right now," he said. "But we see the possibility of it coming in the second half."

($1 = €0.76)

By: Al Greenwood
+1 713 525 2645

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