10 May 2013 09:46 [Source: ICB]
There is potential for capacity reductions in the North American and western European titanium dioxide (TiO2) markets as a result of oversupply and low consumption rates, the CEO of business management company IBMA said.
"Smaller sulphate-process plants will shut down as producers will try to reduce overcapacity," Jim Fisher said while speaking at the Barcelona TiO2 summit.
The global TiO2 industry has been through a rollercoaster ride in the past two years with huge reductions in prices and consumption, and high raw material costs squeezing producers.
"There are several issues affecting the TiO2 industry globally," Fisher said. "There is too much pigment capacity; it costs more to shut a plant down than to keep it running; and capacity utilisation rates are low at 75%, which is where they are likely to remain in the near term."
TiO2 sales in Europe dropped sharply during 2012 because of a decrease in demand from the downstream construction, coatings, automotive, paper and plastics industries.
As a result, European TiO2 prices dropped from €3.00-3.40/kg ($1.79-2.03/lb) FD (free delivered) NWE (northwest Europe) in March 2012 to €2.35-2.50/kg FD NWE in April 2013.
TiO2 prices increased during 2011 as supply was short and feedstock costs skyrocketed, making the market tight and prices high.
This changed in 2012 when demand dropped sharply and market participants began to destock and wait for further price reductions.
There is little hope for demand to increase as even the arrival of warmer weather has helped little to improve sales. This is because construction output across Europe has been declining in recent months as a result of the ongoing macroeconomic slowdown.
HOPE FOR DEMAND RISE
However, some delegates at the conference expected demand to slowly start to increase during the second half of 2013.
"The price decreases in 2012 were the result of destocking, which has now stopped, and so I think demand will stabilise during the first half of the year," a major producer said.
It added that global inventory levels have fallen by 20 days since the end of 2012, which has contributed to reducing length in the market.
Earlier, inventory levels had been enough for about 100-120 days, up to three times higher than 40, what is regarded as a normal level.
However, "feedstock supply will need significant investment to maintain price and supply stability", the seller added.
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