OUTLOOK ’19: Europe TiO2 bearish for Q1, mixed views for rest of 2019

LONDON (ICIS)–The low season could continue to weigh on sentiment in the European titanium dioxide (TiO2) market in the first quarter of 2019, although views diverge about the rest of the year.

Price falls similar to those in the fourth quarter of 2018 could continue in the first quarter of 2019 if demand remains muted for seasonal and economic reasons, while material remains abundant.

Other players, however, said that price falls like those posted in 2018 are unlikely during the first quarter, even suggesting that they could remain stable.

They attributed this to some possible TiO2 production adjustment to mitigate any supply length and some longer-term contract agreements such as Chemours’ so-called value stabilisation program (VSP), in contrast to the traditional quarterly contract model.

Aside from this, any downside in European TiO2 prices is likely to be capped by the economics behind attracting Chinese imports to Europe, according to financial analysts.

Imports ex China into Europe were higher in the first half of 2018 compared to the second half of 2018 (see Eurostat graph below), possibly because of price falls in Europe in the third and fourth quarters of 2018, among other factors.

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Despite this, there are some signs that Chinese imports are still likely to be prevalent in Europe in 2019, taking into account Lomon Billions’ expected additional capacity and the precarious China-US trade relationship.

Views are more mixed about possible market direction beyond the first quarter of 2019.

HIGHER PRICES
In the second or third quarters of 2019, some players expect TiO2 prices in Europe to stabilise, if not move up due to capacity and supply conditions, as well as feedstock- and season-related reasons.

The delayed start-up of the new titanium slag smelter in the Middle East to the second half of 2019, among other feedstock considerations, could affect the TiO2 market in 2019.

“The feedstocks could change everything in Q2. There are a lot of problems with feedstock,” said one trader.

“It could be a problem when demand picks up [in the second quarter].”

Some selling and financial analyst sources also suggested that the lack of new significant capacity additions in the short- to mid-term could mean that supply is unlikely to keep pace with what they view as growing TiO2 demand.

The expected high season pick-up during the spring could also pull on supply, and lead to some price pressure in the second quarter of 2019.

However, this view was not shared by all.

Some buying and trading sources said that existing supply is likely to be sufficient to meet demand in 2019, particularly if demand remains moderate amid a more cautious economic climate.

If demand is adversely impacted by these factors in 2019, then this could pressure prices down in 2019, according to some players.

“2019 will be challenging, in my opinion. I don’t see a bullish market, I don’t see things picking up,” said one main TiO2 buyer in Europe.

The European Commission’s pending decision on whether TiO2 is classified as a category 2 carcinogen when inhaled also remains a consideration, potentially affecting demand.

Whether Tronox’s proposed acquisition of Cristal’s TiO2 business goes ahead or not remained unclear at the time of writing.

However, was the transaction to go ahead, it would mean some changes in the seller landscape and ownership of certain assets.

2019 is likely to be an interesting year for the TiO2 industry in Europe as global factors at play, amid increased price volatility, present a very different picture to that seen in over previous years.

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Focus article by Heidi Finch