Europe TiO2 industry braces for further change in 2021

LONDON (ICIS)-The European TiO2 industry is braced for further change in 2021 as several challenges loom large, together with the pandemic-induced downturn: a potential no-deal Brexit and tighter EU regulations are also on the cards.

Following expected sharp GDP falls of 10.2% for 2020, the eurozone is projected to improve to 6.0% in 2021, according to the IMF in mid-2020.

This estimate indicates some cautious optimism for TiO2 – a product strongly tied to GDP.

Concerns remain that a second wave of the coronavirus pandemic could affect the recovery if full lockdowns were to be implemented again, although this is considered unlikely, with localised measures favoured.

Whether a coronavirus vaccine is approved for use in 2021 will also have a bearing on market sentiment and activity.

The substantial €750bn EU recovery package from the coronavirus fallout is expected to support demand for certain segments such as “green” construction projects and electric vehicles.

While the construction sector showed some recovery during 2020 following the lockdown lows, concerns remain about investments in construction projects, especially in commercial builds because of more home-working due to the pandemic.

“Construction activity in Europe is not expected to return to pre-pandemic levels until Q3 2021. In the western world the lingering effects of the pandemic will be felt even when restrictions are lifted,” said ICIS senior analyst Rhian O’Connor and ICIS demand analyst Jincy Varghese .

“This includes transport and logistic bottlenecks, staffing issues and weaker demand.”

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The do-it-yourself (DIY) sector was one of the few industries to benefit from the coronavirus-induced circumstances in the spring/summer, as prolonged stay-at-home measures encouraged consumers to carry out more home renovation projects.

DIY activity surged, recording higher-than-expected activity in some cases during the typical peak paints season.

DIY demand originally intended for 2021 was brought forward into 2020, which could dampen DIY activity in 2021.

By contrast, demand from the paints trade sector could return to relatively normal levels in 2021, following the lockdowns in 2020.

EU: FUNDS, REGULATION, BREXIT 
The EU recovery packages and various government incentives are expected to prop up demand in the auto sector, after the crippling coronavirus impact in 2020.

Although unemployment concerns and uncertainty are likely to limit consumer spending in the professional paints sector and for big ticket items.

The upcoming implementation of EU Commission’s carcinogen classification of TiO2 in powder form and health warning labelling requirements for other TiO2 forms is also another change for the industry to face.

Although any impact is expected to be mitigated in key end sectors such as paints/coatings as there are no viable alternatives and handling requirements are already well-known.

As of mid-September, dwindling hopes of a trade agreement being reached between the UK and EU is unsettling industry players, especially as there are two TiO2 production sites  in the UK.

If a no-Brexit deal were to occur, a tariff rate of 6% would apply, according to the UK government’s global tariff tool.

While the UK is net exporter of TiO2, there are specific grades that mainland Europe consumers can only source in the UK – which will make the decision on who carries the cost even more difficult, especially in the current climate.

SUPPLY
Sourcing alternative grades from elsewhere is also an option.

The permanent closure of Venator’s TIO2 Pori plant in Finland is due in 2021, but players have already discounted the closure after a fire in 2017 severely damaged in 2017 the facility, reducing run rates sharply.

Mitigating factors include alternative supply options having been secured some time ago and Venator shifting around 45,000 tonnes of its previous Pori specialty TiO2 production sites within its network.

The European TiO2 industry is likely to charter some uncertain waters in 2021, with some changes likely to be more challenging than others.

Economic and fiscal stimulus may support a U-shaped recovery in certain segments, but others may still see a backlash from the pandemic-induced downturn well into next year.

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

Front page picture: Paints at a DIY shop
Source: Manfred Bail/imageBROKER/Shutterstock

Focus article by Heidi Finch

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