Huntsman TiO2 acquisitions will shift market balance: sources

Chris Barker

14-Oct-2014

Focus article by Chris Barker.

Titanium dioxide (TiO2) pricesLONDON (ICIS)–Huntsman Corporation’s acquisition of titanium dioxide (TiO2) assets from Rockwood Holdings will be pivotal to future price trends in the European market, and could open up new possibilities for Chinese producer Henan Billions Chemicals, which acquired a portion of the business in a European Commission-induced sell-off, sources said on Tuesday.

It was announced on 1 October that Rockwood had completed the sale of its TiO2 assets to Huntsman for $1.275bn, including $225m in pension obligations.

According to ICIS data, the sale will give Huntsman control of nearly 40% of total TiO2 production in Europe, with more units being devoted to sulphate than chloride grades.

Most market players agree that the concentration of assets in the hands of Huntsman will considerably change the balance of power. Huntsman could not be reached for comment.

One buyer said: “I think it will mean a price increase on the sulphate products. [Huntsman] will be a [more] major player… they couldn’t go and double the price, but if they increased by 5-10% over the course of the year I think it would be allowed.”

“It depends in the short run if they want to get rid of a lot of stocks- then they will be pushed to lower the prices. It is also a matter of what their philosophy is- do they want market share or high profitability? It is too early to say what the effect will be,” the buyer added.

A buyer said via email: “We expect right now a rollover on Q1 prices or perhaps a further limited decrease [from the one they expect in Q4].”

It added, “However, for us it very depends on what approach the merger of Huntsman and Sachtleben will [take]- do they need to push quantities or maintain price level?”

However, another player argued that Huntsman would find it hard to significantly affect price trends in Europe due to the competitive market, stating: “Competition [is] very high from Eastern Europe and China- [Huntsman] can’t raise the prices.”

There is normally a considerable delta between Chinese and European prices, which would create some headwind on efforts by European producers to target increases.

As a condition of the deal the European Commission required Huntsman to sell its TR52 ink grade business, which was purchased by Chinese chemical major Henan Billions Chemicals Co., Ltd.

TR52 is one of the major grades for ink-printing applications. The production unit which Huntsman sold to Henan has a nameplate capacity of 30,000 tonnes/year. Henan Billions could not be reached for comment.

A buyer said that the acquisition is likely to have positive knock-on effects for Henan’s production of other grades of TiO2, in addition to allowing them to produce the new ink grade.

It said: “The Chinese producers don’t have the same knowledge of coatings; therefore dispersion and brightness are not as good…What coating is and how it is applied tends to differentiate producers, so it a closely guarded secret.” 

“This will allow them to improve [their] existing grades, and also give them customer contacts. It would not surprise me if they do improve their existing products for selling to customers.”

It added: “This will be a positive [thing] for buyers.”

However another buyer disagreed that the acquisition would have a wider effect on TiO2 production, stating: “In the production line they will only use the technology in the inks market- [the] impact on coatings and plastics will be minor.”

Sources expect that it will take several months for the impact of these changes to be fully felt on the market.

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