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
The industry structure itself was defined by new trends, both
in end-market behaviour, supply structure and feedstock
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
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
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
There have been no staff layoffs as yet, which the company
indicates is a sign of confidence in an imminent uptick in the
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
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,
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 TiO2s 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
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
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
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
companys 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,
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 TiO2s 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
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.