TiO2 prices to improve after Q1 – Tronox co-CEO

HOUSTON (ICIS)–Tronox expects titanium dioxide (TiO2) prices to reverse their downward trend and begin improving after the first quarter, John Romano, co-CEO of the US-based producer said in an update on Friday.

In Q4 2023, TiO2 prices were down 6% year on year and down 1% sequentially from Q3.

While prices in the 2024 first quarter would still be relatively flat, compared with Q4 2023, “I would suspect as we start to migrate out of the first quarter, we will start to look at pricing opportunities across all regions”, Romano told analysts during Tronox’s Q4 2023 earnings call.

“We are hopeful to see some sort of [price] movement as we move into Q2,” he added.

Tronox’s TiO2 business is at the “forefront of a recovery” and “we have already begun to see a pick-up in demand for TiO2 that is more positive than we would see normally at this time of the year”, Romano said.

January sales were strong and Tronox is seeing continued strengthening in the market for February and March orders books, he said.

The improvement is across all end markets – coatings, paper, plastics and specialties, he said.

“We are confident that destocking has largely run its course, and we are seeing customers restocking and moving into more normal buying patterns”, he said.

Tronox’s price expectations do not include potential upside from the EU anti-dumping investigation of Chinese TiO2 imports into Europe, Romano noted.

A final recommendation from the EU investigation is not expected until Q4, although provisional anti-dumping duties (ADD) could be put in place as early as Q2, he said.

OPERATING RATES
Meanwhile, the company is ramping up operating rates from historical lows as it moves through the current first quarter, Romano said.

Through 2023, Tronox incurred significant costs from running assets at low utilization rates because of the soft market demand, and over the past two years its TiO2 volumes were down “roughly” 27%, Romano noted.

However, with demand improving now, Tronox expects its TiO2 volumes to increase by 12-16% in the first quarter, sequentially from Q4 2023, he said.

The higher rates will boost the earnings margin, which in the second half of 2024 could return to the “normal” low-to-mid-20% range – “and that’s without a lot of movement on prices”, Romano said.

“Price is an opportunity” while running its plants at more normalized levels will be “a big driver” in Tronox’s profitability going forward, he added.

Also helping margins are lower chlorine prices in North America, he noted.

In North America, Tronox is a buyer of chlorine, which is a feedstock for chloride-based TiO2 production. Elsewhere, it has own chlorine production.

Tronox’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin was 13.7% in Q4 2023 – down from 17.4% in Q4 2022 and 17.5% in Q3 2023.

In Q4 2023, Tronox’s TiO2 sales volumes fell about 4% sequentially from Q3, partly due to higher than expected seasonality in North America, as well as the Red Sea logistics issues that delayed some stock transfer shipments to cover an outage at a Tronox plant at Botlek, Netherlands.

RED SEA
As for the Red Sea shipping congestions, Romano said that Europe-based TiO2 production could get “a little bit of benefit” from this.

The Red Sea issues were a “a bit of a short-term anomaly” in terms of spot freight rates, which were higher than Tronox put into its forecasts, he said.

However, overall, Tronox is seeing positive moves on freight, he said.

After freight rates have risen of the past two years, they were starting to abate, which would be a tailwind for Tronox in 2024, although currently some rates have been negatively impacted by the Middle East tensions, he said.

BOTLEK
During the Botlek outage, which was due to a delayed restart by steam supplier, Tronox was able to meet customer demand by shipping in inventory from its other sites, Romano said.

The company expects insurance proceeds of at least $15 million in 2024 that will cover the costs it incurred in working around the outage and meet customer demand, he said.

RARE EARTHS
Romano also said that Tronox is exploring opportunities to extract rare earths from the mineral sands it mines at its operations in South Africa and Australia.

In 2024, Tronox expects to invest $130 million in two mining projects in South Africa to replace existing mines that are reaching the end of their lives. The investment will maintain the feedstock pricing advantage the company has over non-integrated competitors.

The integrated TiO2 producer has nine pigment plants, six mines and five upgrading facilities worldwide.

Thumbnail photo of Tronox co-CEO John Romano, who is due to take over as CEO with the retirement of co-CEO Jean-Francois Turgeon on 1 April; photo source: Tronox