OUTLOOK ’18: Tight TiO2 supply, strong demand driving North American Q1 price hike efforts

HOUSTON (ICIS)–Amid chronically short supply, North American titanium dioxide (TiO2) prices will see stronger-than-usual  upward pressure in the first half of 2018, including peak paint and coatings demand next spring.

Separate price-increase efforts timed to take effect early next year seek gains of 6-11 cents/lb ($132-243/tonne). Allowing for 90-day price protection, increases would be implemented on or after 1 January or 1 February.

Adding to pressure from tight supply will be pent-up demand for paint and coatings after catastrophic hurricanes in the US Gulf and wildfires in California late in 2017. Those ordeals helped keep the domestic TiO2 market tight and demand unseasonably strong late in the typically weak fourth quarter.

That prolonged Q4 demand is partly attributable to the short-term needs of businesses and homeowners flooded during and after Hurricane Harvey struck the US Gulf coast in late August.

Additionally, storm damage in Florida and other southeastern states from Hurricane Irma, as well as wildfires in California will foster heightened construction demand early next year.

While many renovations have begun, repainting is likely to see a strong surge early next year. Some Houston, Texas homes flooded by Harvey have only recently completed mould remediation and had wallboard re-installed.

“Next year will be interesting,” a TiO2 buyer said. “I have to imagine that the paint, siding, pipe and coating guys will be going through a lot of white due to the hurricanes that hit us this year.

“Construction will be up, new-car [production] will be up … and I think that if Asian TIO2 imports into the US go down due to environmental restrictions there, US customers will have fewer options, and supply [limits] will allow vendors to push through increases.”

Additional TiO2 price pressure is also expected if upstream ilmenite ore producers implement higher prices in 2018.

Also expected within the first quarter of 2018 was the closing of Tronox’s acquisition of Cristal.

But those plans stumbled over a federal action that seeks to prevent the corporate marriage.

Tronox asserts that the US Federal Trade Commission’s (FTC) administrative complaint filed on 5 December is unmerited.

Tronox vowed to “vigorously” fight the FTC’s effort to thwart the deal, which the company had announced on 3 December would be proceeding toward completion.

The FTC complaint charged, in part, that the deal would violate antitrust laws by reducing chloride-route TiO2 competition in North America. Tronox countered that its purchase of Cristal will expand production at a lower per-ton cost.

Buyers have not expressed much concern over the proposed deal.

“I think it is too early to say what the ramifications will be.  It will depend on how they justify their individual product lines, perhaps discontinuing grades from one part of the new company, and combining them with the other’s similar grades,” a buyer said. “Regardless, it will very likely take at least a year for customers to properly trial the alternative material offerings.”

Another buyer suggested a Tronox/Cristal consolidation might help reduce the historical price and supply “peaks and valleys” of the TiO2 industry, benefitting buyers and sellers.

North American fourth-quarter TiO2 prices are in a range of $1.48-1.55/lb FD (free delivered), as assessed by ICIS.

TiO2 is used in products such as paints and coatings – including glazes and enamels – plastics, paper, inks, fibres, foods, pharmaceuticals and cosmetics.

Major US TiO2 suppliers include Chemours, Cristal, Kronos, Tronox and Venator.