New trends define TiO2

By John Ollett
Published: Monday, 19 November 2012

Feedstock problems, end market weakness and substitution

 
Source: Iluka
The titanium dioxide (TiO2) pigment industry slowed during 2012, and both chloride and sulphate producers have seen profits fall, particularly in the second half of the year.

The industry structure itself was defined by new trends, both in end-market behaviour, supply structure and feedstock consumption.

Demand has been heaviest hit in Asia Pacific, but Europe and the US have also shown weakness as key end markets have succumbed to the global economic crisis. As the markets have slowed, so have the pigment producers, but many remain positive in their outlook, with an overall consensus that the situation will have changed by the middle of 2013, due mainly to end markets rebounding.

Feedstock problems

The fortunes of the TiO2 pigment industry has always hinged on the state of its feedstock industry.

As feedstock supply is limited to a few key feedstocks, the pigment industry has no alternatives it can turn to in the event of rising prices.

These feedstocks are controlled by a few large producers – Iluka Resources, Rio Tinto, and Tronox – based in South Africa and Australia, which further restricts the supply options available to a pigment producer. Coupled with this is the depletion of feedstock ore bodies, which has happened during the past five years.

This has led to a short supply of feedstock, which came to a head during 2011 when prices rocketed and put pigment producers under severe pressure. There are a large number of junior feedstock suppliers waiting in the wings, but with few scheduled to come online before 2015, their influence on the current industry situation is minimal.

Of these juniors, four important ones are in an advanced stage and hoping to come online during 2013 or in early 2014. These are: Base Resources, Gunson Resources, Mineral Deposits, and MZI Resources (Matilda Zircon Ltd).

This, coupled with existing producers Iluka Resources, Kenmare Resources, Rio Tinto and Sierra Rutile expanding production, will help to ease supply somewhat but it will still remain tight.

However, an emerging trend has been seen where pigment producers alter their feedstock mixes to accommodate lower-grade feedstocks into their processes.

Iluka, which focuses on the two highest-grade feedstocks, rutile and synthetic rutile, has noted this trend and seen demand for these products fall.

To combat this, it has moved into hibernation mode – switching to lower-grade sections of some of its ore bodies and slowing output at its separation plants. It is also shutting several of its synthetic rutile kilns during the Christmas period, with one not scheduled to come back online until April.

There have been no staff layoffs as yet, which the company indicates is a sign of confidence in an imminent uptick in the feedstock market.

As lower-grade feedstocks have seen a slight rise in demand, titanium slag demand has risen, but a general feeling at recent TZMI conference in Hong Kong is that this mineral is now slightly over priced and a drop is likely during 2013.

Ilmenite, too, has been more in demand, but prices for the mineral have begun to decline.

One of the chief reasons for the instability of the market is that many pigment production plants cannot simply switch one feedstock for another. As such, there will certainly be a sustained demand floor, but there is no indication yet of how low this could be.

Producers with multiple plants have been addressing this issue by reducing output at plants that use higher-grade feedstocks, such as rutile, and compensating by raising capacity at plants which focus on the lower-grade, and therefore cheaper, feedstocks.

End market weakness

As pigment producers were squeezed from one side by their feedstock suppliers during 2012, they were also squeezed by their end-market users. Some of TiO2’s biggest end markets – both paints and plastics, housing and automotive – showed serious decline throughout 2012, and this filtered back to the pigment producers.

Weakness in housing and automotive was particularly pronounced in Asia Pacific, but many believe that the change in leadership of the Chinese Communist Party will herald a rebirth in the housing boom and a pickup in economic activity that will consequently spur demand for TiO2.

Any new housing and infrastructure construction policies may stimulate demand for TiO2, but this could be taken up by Chinese supply, rather than western chloride supply.

The housing market has also been weak in the US, but there have been recent signs of growth as the general economy recovers.

A recent column in the Financial Times predicted that a housing surge is beginning, which will be driven by a combination of improving house prices, a lower inventory of homes for sale, rising rates of household formation and population growth, and improving access to mortgage credit.

Together, this should push residential investment, which includes both new construction and remodellings, to annual growth of 15-20% during the next five years. This alone may contribute 1-2% to annual growth in GDP and up to 4m jobs during that period.

The European housing and automotive markets will likely remain suppressed, but some relief will come from renovations, which Gilles Michel, Imerys CEO, recently told IM tend to grow during a recession.

  Substitution – a new end-market trend

End users have traditionally been independent of pigment producers, but 2012 saw a new trend emerge in a series of initiatives to secure pigment supply from a variety of new areas.

Leading this was was PPG Industries. This year, the US paint producer aims to reduce its TiO2 consumption on a per-gallon basis by 4-6% for the year.

“Through the first three quarters of this year, we were tracking at a little over 3% [...]. We feel that for the full year, we will be into certainly the 4% to 6% range [...] on the low end of that range or a little over 4%, but certainly within our target,” Charles Bunch, CEO, told analysts during the company’s Q3 results statement.

PPG holds an advantage over the other paint producers because it previously produced chloride-route TiO2 itself from its Natrium plant in West Virginia, US. This technology may not be as modern or efficient as that of DuPont, but it gives the company an advantage.

The company is also looking to chloride supply and earlier this year entered into an agreement with Henan Billions to work on a new chloride plant in China. Henan Billions also entered into a new agreement of its own recently with Ti-Cons, Germany.

“The [...] agreement between Henan Billions and Ti-Cons is for the delivering of the complete know-how for the erection and operation of a plant for the production of 100,000 tpa of TiO2 using the chloride route,” Christian J Weiland, from Ti-Cons, told IM.

Other companies are also looking into substitution, but none as advanced as PPG.

The threat of this substitution needs to be put in context. PPG has managed a 3%-reduction, but there is still no example of mass substitution. Some companies use materials such as calcined kaolin (see Strandlines, IM September 2012) as an extender, but no strong substitute exists.

“I don't see much of a direct threat of TiO2 pigment substitution. But it's already been the case this year that some plastic products manufacturers have been cutting down on white products, making them clear/transparent or coloured instead,” Reg Adams, of independent consultancy firm Artikol, told IM.

This trend has also been seen in TiO2’s sister industry, zircon, which has seen similar price rises, where instead of substituting for zircon in tiles, end users are simply finding substitutes for the tiles, such as glass tops or polished tiles, which do not contain zircon, but still have the same brightness.

The most popular automotive colour remains white, with silver, black, grey, and red following, PPG said. However, use of colour is on the rise, which could eventually have an effect on TiO2, which is used in the white paint exterior and any white plastics inside.

 



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  • Mathew Kanattu | 02 Aug 2014, 10:02 AM

    For Business technocrats dealing with TiO2 manufacture and its threats and strengths, this report is very useful. As a TiO2 consultant with more than 30 years experience in the TiO2 rulile grade manufacture, I find the report somewhat authentic.