Asia TiO2 may fall further on inventory pressure, weak demand

SINGAPORE (ICIS)–Titanium dioxide (TiO2) prices in Asia may continue falling in the coming weeks after hitting a near seven-year low, as sellers are under pressure to cut offers to offload hefty stocks amid weak demand, industry sources said on Wednesday.

Third-quarter contract discussions were $50-150/tonne lower compared with second-quarter prices, they said.

Some sellers were even heard quoting a steeper discount of up to $200/tonne, a major northeast Asian supplier.

In spite of the lower offers, some end-users were hesitant to confirm deals given uncertainty in the price outlook.

A slowdown in China’s economy is another major source of concern for market players.

“We still have substantial volumes of undelivered TiO2 from second-quarter bookings, while TiO2 prices keep going down from the first quarter to the third quarter, and they don’t seem to [be] bottom[ing] out yet,“ said a southeast Asian buyer in the plastics sector.

To some buyers, however, prices may have hit their nadir and they are keen to lock in on longer-term contracts of up to one year.

But Chinese TiO2 cargoes became less attractive to European buyers as the euro weakened on fears that debt-ridden Greece may exit the eurozone, making imports more expensive.

“Buyers [in Europe] are likely to turn to domestic supply as a result,” said a major Chinese supplier.

Overall TiO2 demand outside the Asia-Pacific region could be shrinking, leaving European and North American suppliers with high inventory.

To woo buyers in Asia, these sellers have implemented steep price cuts since May, market sources said.

“The short-lived positive news from Chinese market consolidations and European plant closures, were countered by the overall slower and more deliberate procurement activities,” a major distributor said.

Moreover, new capacities expected to come on stream in the second half of the year will also weigh down on TiO2 market.

These include Henan Billion’s 100,000 tonne/year chloride TiO2 production in China, Chemours’ (a spin-off company of US producer Dupont) 200,000 tonne/year choride plant in Altamira, Mexico.

In China and Europe, most TiO2 plants are not running at full capacity, industry sources said.

“Suppliers are more anxious to offload materials now than ever. Also, the stronger US dollar against local currencies makes our raw material more expensive,” a southeast Asia-based paints and coatings manufacturer said.

“With [the] bad economy here [southeast Asia], it is difficult to accept higher TiO2 prices,” the end-user said.

In the week of 24 July, prices of TiO2 (multipurpose grades) averaged $2,200/tonne CFR Asia, near levels last seen in March 2008, according to ICIS data.

Suppliers were hoping that seasonal restocking activities in August or September from major downstream users in paints, coatings and plastics sectors would help support TiO2 prices.

A number of distributors were less optimistic, as overcapacity issues remained, made worse by poor macroeconomic conditions.

“We didn’t even see significant peak-season demand in late Q1 [first quarter] this year for coatings,” said a major southeast Asian distributor, adding that the outlook for the plastics industry also looks bleak.

TiO2 is a white pigment used mainly in paints & coatings, and has applications in the plastics and printing ink sectors.

Focus article by Alexis Gan

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