China may boost TiO2 exports on rising prices, better demand

Focus story by Alexis Gan

SINGAPORE(ICIS)–China may continue beefing up its titanium dioxide (TiO2) exports in the months ahead on the back of rising prices of the product and improving demand from India, industry sources said on Wednesday.

For the first five months of the year, China shipped out 225,330 tonnes of TiO2, representing a 55% surge over the same period a year ago.

“India is getting more and more Chinese-origins TiO2 because of the attractiveness in [product] pricing,” a distributor said. (Please see table No 1)

Over a three-month period to June, Chinese TiO2 producers have hiked prices by a cumulative yuan (CNY) 900/tonne ($145/tonne) because of low inventory, and have kept production low because of high costs, industry sources said.

“The average price was at yuan CNY15,000/tonne EXWH (ex-warehouse) last year. Everyone is making losses with current prices,” a major local distributor said.

Offers for sulphate-based TiO2 stood at CNY11,600-12,900/tonne EXWH, with prices at the higher end reflecting offers from major suppliers, market sources said.

A few major producers raised their asking prices last week by CNY200-300/tonne amid low supplies, market sources said.

Meanwhile, China’s TiO2 export prices for July stood at $2,050-2,200/tonne FOB (free on board). Tighter inventory may lead to a $50-100/tonne price increment in August, said a southeast Asia-based buyer in the plastics sector.

The country also imports TiO2. (Please see table No 2)

Import prices for TiO2 are being quoted at around $2,600-2,800/tonne CFR (cost and freight) Asia for paint and coatings, and at $2,700-3,000/tonne CFR Asia or higher for plastic, ink, printing and other applications, according to ICIS.

The price gap between Chinese TiO2 – which is mostly sulphate-based – and TiO2 from other countries at around $500/tonne, might have triggered product switching, especially for price-sensitive buyers in the paint and coatings sector, industry sources said.

TiO2 is either sulphate-based or chloride-based.

Import discussion in China, however, reached a stalemate as major exporters were insisting on their high offers, market sources said.

Deviating from western and international practices, Chinese buyers usually negotiate orders on a monthly basis for larger buyers, and lesser orders on quarterly contracts, industry sources said.

Only when demand is on a recovery mode and supply is scarce that Chinese buyers opt for quarterly contract lock-in, they said.

Major exporters to China were asking price increments of $100-200/tonne, but market participants were only prepared to accept only up to a $50/tonne increase, market sources said.

TiO2 producers have been lobbying for price hikes, over the past few quarters, because of squeezed margins, after persistent price declines since two years ago. However, overcapacities and slower demand quashed the campaign to hike prices for a long time.

“We have failed miserably in raising prices since Q2 [the second quarter],” said a major distributor in India.

Typically, demand for ink, printing, laminating, and plastic related applications, for year-end festive goods, picks up in China in August to October.

An improvement in economic data coming from China, a key market, helped boost the overall TiO2 selling sentiment.

China posted a 7.5% annual GDP growth in the second quarter, boosted by government stimulus. In June, the country’s industrial production, which measures output at factories, workshops and mines, increased by 9.2% year on year.

For the first six months of 2014, China’s retail sales – a key measure of consumer spending – increased 12.4% year on year, while fixed asset investment – an indicator of government spending on infrastructure – rose 17.3%, according to official data.

Table No 1: China TiO2 exports by destination

Table No 2: China TiO2 trade in May 2014

($1 = CNY6.20)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections