OUTLOOK ’18: Europe TiO2 players cautious about supply in 2018, market changes likely

LONDON (ICIS)–The market sentiment is cautious about European titanium dioxide (TiO2) availability for 2018 following the market tightness during 2017, with players keeping a close eye on the status of operations at Venator’s Pori plant in Finland and import availability from China into Europe.

Supply in Europe has been tight during most of 2017 due to plant closures both in the region and globally, as well as producers’ strict inventory controls. Other factors which affected supply in 2017 were Venator’s extended output disruption at its Pori plant in Finland, following a fire in early 2017, and along with healthy demand.

However, there is some expectation that there may be some improvement in availability in Europe during the course of 2018, provided there are no unforeseen production issues in the meantime.

“Next year [2018], supply will be better than this year [2017]… as we have secured more supply for next year than this year. I don’t think we will have as much as trouble as this year,” said one buyer.

The anticipated ramp-up of operations at Venator’s Pori plant during 2018 is expected to provide some supply relief, at least for certain grades.

Venator executives have said its focus at Pori is the ramp-up of its higher value specialty grades as quickly as possible in 2018, with the re-introduction of the commodity grade capacity at the Pori site likely to take place at a slower, incremental pace.

While there is some uncertainty about the import situation from China to Europe next year, because of the Chinese government’s environmental output cuts, some European players remained optimistic that imports from China are still likely to feature in Europe in 2018.

They suggested that this will be particularly the case if the exchange rate remains favourable.

The quieter low-winter season period from the paints and plastics sectors could enable TiO2 players to rebuild their stocks, which could help provide some supply support in 2018.

The expected ongoing ramp-up at Chemours’ recently expanded capacity at Altamira in Mexico next year, is also likely to mean more material in the global market.

However, an expected improvement in supply in 2018 was not a view held by all.

Tronox CEO Peter Johnston said in its third-quarter earnings call that he expected continued tightness in the global TiO2 market going into 2018.

He attributed this to industry pigment levels at or below normal levels, despite high utilisation of pigment producers, driven by favourable market conditions.

Johnston also recently talked of tightness in the feedstock markets as well.

Chemours’ CEO Mark Vergnano said in an interview with ICIS in December that “there is not a lot of capacity coming on stream” and growth was projected in line with GDP at around 3%-3.5%.

While European TiO2 players will keep a close eye on supply in 2018, they are also keen to monitor any changes in the seller landscape with Tronox’s planned acquisition of Cristal, which is still awaiting the necessary regulatory approvals.

An objection from a US regulatory authority to Tronox’s acquisition of Cristal came to light in December, Tronox’s CEO remained confident at the time on the Cristal TiO2 deal.

Following the US’ Federal Trade Commission (FTC)’s objections, Tronox said it was prepared to consider “appropriate and reasonable remedial action” to address regulatory concerns – both in the US and in Europe – to obtain approvals.

In terms of demand, players are generally optimistic about 2018, with the healthy performance in 2017 expected to continue into 2018, provided economic conditions in Europe remain favourable.

While there is a general positive demand expectation for TiO2 in Europe next year, the European Commission’s decision is still pending on the possible classification of TiO2 as a possible category 2 carcinogen, when inhaled, as per the European Chemical Agency (ECHA)’s recent proposal.

Looking to the first quarter of 2018, initial indications are that the upward price momentum is likely to continue, because of underlying supply constraints, although low seasonal factors, imports from Asia and recent price spikes could temper any possible rises.

The firm sentiment for the first quarter follows the spate of sizeable and successive price hikes registered since the the second quarter of 2016 and throughout 2017.

Looking to 2018, some buyers talked of possible longer-term contracts – linked to formula pricing – or fixed prices being discussed in certain cases.

2018 is likely to be an eventful year for various reasons, with players expected to keep a close eye on supply in Europe and China, and with any changes in terms of classification, contract conditions and seller landscape also likely to keep players ‘ on their toes.

TiO2 is used as a white powder pigment in products such as paints, coatings, plastics, paper, inks, fibres, food and cosmetics.