Asia TiO2 faces downward pressure, buyers eye lower prices

Alexis Gan

22-Sep-2014

Focus story by Alexis Gan

TiO2 is used in paints among other productsSINGAPORE (ICIS)–Asian titanium dioxide (TiO2) sellers are facing stiff buying resistance despite substantial cut in prices by some major global producers because of weak demand, industry sources said on Monday.

One major North-American-based supplier slashed prices by $100-150/tonne last week in a move to woes buyers, industry sources.

A separate major supplier, based in Europe, offered price reduction between $50-80/tonne to its regular large buyers in southeast Asia.

But both face buying resistance.

In the week ended 19 September, the price of TiO2 was assessed at $2,600-2,900/tonne CFR (cost and freight) Asia, lower by $100/tonne at the high end from previous month.

“They [producers] said Q3 sales volume is not as good as expected,” a large paint buyer in southeast Asia said.

Sources said that buying resistance has been growing in reaction to the price hikes over the past few quarters by major suppliers.

Several buyers in paints sector and plastic applications said they are unable to accept higher prices because of difficulties in passing down their cost increases to the customers.

One coating buyer said it’s finished goods materials were moving lot slower than expected. Typically end-user buying improves after the Muslim holiday of Eid-ul-Fitr, which was observed in the last week of July this year.

However, orders did not pick up from distributors, who usually stock up inventory either before or after the holiday, they said.

An uncertain economic outlook in Asia is weighing down on buying sentiment, they added.

However, demand in certain parts of Asia such as Thailand and India is expected to improve especially after the monsoon season that is almost coming to an end this month, though weakening of local currencies was affecting purchasing powers, distributors cautioned.

“Indonesian rupiahs, Thai baht and Malaysian ringgit have weakened significantly [last] week,” said a distributor in Thailand.

On the other hand, contrary to Western producers move to slash prices to woo customers, major suppliers from China and Japan were trying to raise their prices, because Chinese material was considerably cheaper than deep sea cargoes.

Japan’s Ishihara Sangyo Kaisha (ISK) is targeting a $100/tonne price increment for its TiO2 product effective from 1 October, according to a company statement sent to ICIS on 8 September.

TiO2 from ISK was available at $2,900-3,300/tonne CFR Asia, depending on grades and applications, sources said.

As only selective customers with premium market are currently still using ISK materials, sources were not entirely convinced that higher price is possible for already premium-priced materials.

Nonetheless, selective buyers with strict formulation will have to vie for ISK limited supply level as its’ production capacity was reduced by around 54,000 tonne/year with the permanent closure of its Singapore plant’s in 2013.

The increment is the second consecutive price increase announced by ISK this year.

In June, the company said it was targeting at least a $200/tonne price increase for July 2014 but it was unable to achieve the price hike because of buyers resistance.

Major producers from China have initiated six consecutive price hikes since early Q2 2014, in order to recover margins.

However, sources said the higher prices were mostly driven by export sales rather than domestic consumption. Major Chinese producers move volumes outside China to Europe and the US.

Consumption in Chinese domestic market was still slower-than expected, with no significant upticks despite traditional peak season in China.

Chinese export material was offered at $2,100-2,200/tonne FOB (free on board) China for September and October shipments.

Sources said payment were mostly advanced money transfer for Chinese TiO2.

Domestic prices for sulphate-based rutile TiO2 were at yuan (CNY) 12,000-13,500/tonne EXWH (ex-warehouse).

“Demand in China is growing but the capacities expansion itself is higher than consumption growth,” commented one major distributor in China.

TiO2 production capacity in China stood at around 2m tonne/year, excluding ongoing planned expansion in the country, which can be to the tune of 200,000-300,000 tonne/year sometimes in the foreseeable future.

Demand globally is estimated at around 6m tonne/year, with growth at around 3% in line with the GDP growth rate, according to industry sources.

TiO2 is mainly used in the coatings, plastics and decorative laminates industry. It is also used in ink printing sector.

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

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