OUTLOOK ’15: Asia TiO2 to remain bearish through to January

SINGAPORE (ICIS)–The Asian titanium dioxide (TiO2) market is expected to remain bearish until January next year amid ample supply and the year-end seasonal demand lull for the coating sector, which is the major consumer for the material, according to market players.

Major exporters of TiO2 were generally expecting prices to be holding at an average of $2,600-2,700/tonne CFR (cost and freight) Asia, although competitive pricing from China were weighing on overall market sentiment.

By 19 December, prices have fallen by around $50-150/tonne from a month earlier, with price discussion ranging at $2,450-2,800/tonne CFR Asia, depending on volumes, origins and grades.

“Volume is the price leverage now, since the slow economic growth have impacted demand in the third quarter, which is supposedly the peak-season for TiO2,” one distributor said.

The slower-than-expected seasonal demand, particularly in Europe and certain countries in southeast Asia, led to higher stocks in the fourth quarter and prices were lowered to destock by the end of the year and entice buying interest, sources added.

Export prices from China were discussed largely at $1,900-2,000/tonne FOB (freight on board) China around mid-December, as lacklustre responses during the major Coating Show event earlier in the month in Guangzhou, China, prompted some suppliers to drop prices in an attempt to clear stockpiles during the seasonal lull and improve cash flows before the year-end.

A tighter credit policy in China announced in December, in addition to the slump in the housing market, has fuelled further pessimism for demand growth.

A stronger US dollars against regional currencies have also dampened imports sentiment, in addition to a slower economic growth projection in several major Asian economic powerhouse – China, Japan, Indonesia and Thailand.

Buyers related to the plastic or polymer market were particularly more pessimistic given the bearish crude oil market which has affected the polymers sector recently.

Additionally, resins, the co-feedstock in some plastic derivative markets, were on a downtrend, according to several buyers.

A buyer in the polyvinyl chloride (PVC)-related sector was expecting TiO2 prices to mirror the trend seen in 2008, which ranges from $2,150-2,575/tonne CFR Asia according to ICIS data.

Buyers in the paint and coating sector felt that TiO2 prices should be cheaper considering the cheaper energy cost and other co-feedstock such as solvent and coating additives. 

Consequently, buying discussion surfacing in the week ended 12 December were mostly lower, with expected price reduction ranging from $50-300/tonne from their earlier discussions.

The TiO2 market outlook in Asia is expected to be soft from December until January, given the year-end holiday period.

Thereafter, the Chinese would be preoccupied with the Lunar New Year celebration, which would result in slower business from end-January to February.

Typically, demand will ramp up by late-March or early April, according to industry insiders. Therefore, the market’s outlook in 2015 will likely hinge on the market reaction before the expected-seasonal high in late March.

Global TiO2 demand is expected to rise by 3.6 to 5.74m tonnes in 2014, with paint industries remaining the dominant end-use sector, said Reg Adams, managing director of consultant company Artikol during a presentation at the 3rd ICIS Chemical and Coatings Conference, in Armsterdam.

He added that China’s consumption is expected to rise by around 6.5% per annum from 2010-2020, driving global growth at 4% per annum.

TiO2 consumption in Europe, on the other hand, is expected to remain flat from 2010-2020.

The Asia Pacific is a net importer of TiO2, a major pigment used in paint or coating (50-60%), with plastic (20-25%), rubber, ink, textiles and papers forming the rest of the demand for TiO2 pigment.

“China itself accounts for around one third of world consumption at more than 30 %, followed by Europe at around 20%, according to industry experts.

China is also gaining foothold as a major exporter for sulphate-based TiO2, with consumers mostly in the US, Latin America, Europe, India and to a lesser extent within Asia Pacific.