INTERVIEW: Chemours sees TiO2 ore supply constraints easing through 2022 – exec

NEW YORK (ICIS)–Titanium dioxide (TiO2) producer Chemours sees raw material ore supply constraints easing through 2022, allowing it to better meet strong demand, the head of its TiO2 business said on Wednesday.

“Ore availability is something we’re working very hard to address… We’ve got confidence that the situation eases in 2022. It’s going to remain tight for this quarter for sure,” said Ed Sparks, president of the Titanium Technologies segment of Chemours, in an interview with ICIS.

“We’re staying very close to our suppliers to understand what they’re doing from an operational standpoint, and our procurement team has done a great job of going around the world and finding supplies,” he added.

Titanium rutile and ilmenite ore supply has been challenged by production halts related to security risks in South Africa, along with the planned closure of a mine in Sierra Leone for economic reasons, as well as project delays during the pandemic.

The company’s flexibility to use a wide range of ore feedstocks in its system provides it with an advantage in such times, he noted.

Chemours expects Q4 TiO2 volumes to be down in the high single-digit percentage range from a strong Q3, constrained by limited ore supply along with some seasonal weakness. Volumes in Q3 were flat versus Q2 while pricing climbed 6% sequentially.

Chemours has been prioritising supply to its contracted customers, making less volumes available for its online Flex portal and distribution channels.

Chlorine feedstock has been less of an issue for Chemours despite its tightness.

“There have been so many operational issues in the chlor-alkali space but… we have a great network of suppliers and stay very close to them to make sure we’re diversified in terms of where were getting our chlorine,” said Sparks.

“It’s been a bit of an issue for us around the edges of margin, but chlorine availability hasn’t held back our ability to make pigment this year,” he added.

CONTRACTS PRIORITISED AMID ROBUST DEMAND
Meanwhile, demand remains robust from all major customer segments, the executive noted.

“We’re seeing more customers coming to us, that would like to get product from us, than we can serve. And that’s both a good problem to have, and a frustration because we’d love to serve all the customer demand that’s coming at us. Unfortunately in Q4 that’s not going to be possible,” said Sparks.

Chemours has “doubled down” on serving customers with contracted business under its TiPure Value Stabilization (TVS) program.

“This has really been a payoff in terms of the commitments we’ve made to our contracted customers around supply reliability, supply assurance, and also a predictability around price. I think the TVS proposition has really paid off for our customers in 2021, and for our investors,” said Sparks.

TiO2 volumes under contract are in the high end of Chemours’ targeted 60-70% range, he said, with the rest being available through its online Flex portal and distribution channels.

“We’ve got more customers coming to us seeking contracted volumes beyond that… but we’re also balancing that with making sure we have enough volume to put into play through Flex and distribution… Both those parts of the business are really important to us, but central to how we’ve executed this year is serving our contracted customers really, really well,” Sparks pointed out.

The company has also committed volumes to some of its longer-term Flex customers, making it difficult to meet spot demand surges, he noted.

DISRUPTIONS CLOUD TRUE DEMAND
While demand is strong for the moment, supply chain disruptions to customers stemming from shortages of other raw materials is clouding the true demand picture and making for an uncertain outlook.

“What’s really tough right now is sorting out the difference between end-customer demand and supply chain replenishment because there’s been so much disruption in the value chains we serve this year,” said Sparks.

Customers that wanted to build their own product inventories going into year end, haven’t been able to because of other non-TiO2 raw material issues.

“That gives a little bit of a mixed picture going into 2022. How much of what we’re seeing is real demand, and how much of it is supply chain replenishment? And how much does the shortage that our customers have experienced with other raws… carry into 2022? That’s something we’re trying to sort out,” said Sparks.

EUROPE LOGISTICS STILL ‘A MESS’
Meanwhile, Chemours is wrangling with logistics issues in its own supply chain, prompting it to carry additional inventories.

“We’re still seeing pretty strong demand out of Europe, and in our experience, logistics issues are not abating. We put a lot of product through Antwerp and it’s still a long and difficult supply line with more shipping delays than we would like,” said Sparks.

“So we had to make sure we adjust inventory levels within our network to take account of the fact that global shipping is a mess right now – a mess in terms of reliability, and costs are going up,” he added.

“I hope that global shipping gets better in 2022 but that’s one of the things where I’ll love it when it happens, and I’ll believe it when I see it. It’s definitely still an issue,” said Sparks.

IMPACT FROM CHINA DISRUPTIONS
Exports from China are being disrupted by logistics issues along with its dual control policy to curb greenhouse gas (GHG) emissions which is limiting production of TiO2 along with other chemicals.

“We’re having vigorous debates internally around what [the impact will be from] China’s energy policy and enforcement actions. I would have lost a lot of money over time predicting what China’s regulatory landscape is going to look like… but we’re watching it closely,” said Sparks.

Supply remains tight in Europe, driven by output constraints, lack of Asian import competitiveness and ongoing deep sea logistic challenges, especially from Asia.

Sulphate TiO2 is particularly tight in some cases, because of the lack of competitive Asian imports. Certain buyers from the paints sector are being encouraged to switch to more chloride over sulphate TiO2, where flexibility allows, in order to try to manage the situation.

Chemours produces only chloride-based TiO2.

“A number of customers have come to us looking for product this year because they were seeing disruptions in their China-based supply chain,” said Sparks.

“We’re not looking to bail out a customer who’s had a bad experience in the short term with a Chinese supplier and wants a near-term insurance policy. We’re trying to find those customers that will get value from TiPure… and that want a different kind of relationship with us,” he added.

This year, there has been a greater focus on supply reliability and supply growth than at any time during the past decade, the executive pointed out.

Additional reporting by Heidi Finch

Interview article by Joseph Chang