What a difference a year makes. The
entire makeup and trends of the titanium dioxide
(TiO2) pigment market have changed since its 2011
boom to give a radically changed landscape during 2012.
2012 has been a time of austerity,
characterised by end-user destocking and high feedstock prices
squeezing the mineral from both sides and forcing the industry
into a significant dip.
The year started positively with US
chemicals group DuPont - the worlds largest producer of
TiO2 - reporting a 33% increase in fourth- quarter
profit for its Performance Chemicals segment on higher
Tronox Inc. also reported a
positive 2011 with its EBITDA (earnings before interest, taxes,
depreciation, and amortisation) more than doubling in 2011 on
the back of TiO2 prices and higher sales volumes, it
said in its financial year results.
Demand begins to
Things got rough as the year
progressed and end-user destocking, which began in the last
quarter of 2011, started to bite into demand.
AkzoNobel, one of the worlds
leading paint companies, saw its Capex increase
The absolute impact of
increased raw material prices for the year was approximately
1bn ($1.32bn*), Hans Wijers, CEO, said in
Paint producers Sherwin-Williams
and PPG Industries were the next to report changing market
conditions, with PPG taking action by aiming to reduce its
TiO2 consumption on a per-gallon basis by 4-6% for
However, the round of first-quarter
results from the large producers showed an increase in
profitability despite this end-market concern, which was due
mainly to increased prices compensating for either steady
volumes or a slight decline.
Tronox completed financing for its
previously announced purchase of the mineral sand assets of
Exxaro, which it completed later in the year, making Q3 2012
its first quarter as a fully integrated titanium dioxide
Rockwood, one of the largest
sulphate-route TiO2 producers outside of China, also
made headlines declaring that it was going to sell its pigment
production operations, its largest in terms of revenue, to
focus on lithium.
Its European subsidiary,
Sachtleben, then purchased the former Tronox asset, crenox.
Crenox consists of a single, 100,000 tpa sulphate route plant
near Essen, Germany, where Sachtleben also have a facility.
The market weakness that had been
hinted at throughout 2012 truly came to a head in July when
Jefferies Equity Research analysts cut the rating for DuPont
from buy to hold.
The ratings agency also reduced the
earnings estimates for Huntsman Corp., the only other major
TiO2 producer it covers, but maintained its hold
This was shortly followed by Iluka
Resources, one of the biggest producers of TiO2
feedstocks, slashing its sales forecasts because of apparent
weakness in the pigment market.
DuPont and Tronox were quick to hit
Recent comments regarding
market demand for TiO2 in the second half of 2012
are not consistent with DuPonts view and overstate the
softness in the pigment industry, BC Chong, DuPont
Titanium Technologies president, said.
This statement differed
considerably from DuPonts Q3 results in October where
sales revenues dropped 19% and volumes fell 18% year-on-year
We are in the midst of a
changing market condition, Ellen Kullman, DuPont CEO,
said, highlighting a fall in economic activity throughout Asia
Pacific, and particularly the fall in infrastructure investment
in China, as the reason for the large decrease in volumes
Tronox highlighted its upcoming (at
the time) Exarro purchase as insulating it from the feedstock
squeeze, but agreeing in part with Iluka.
We think that pigment
producers (...) are seeing somewhat lower demand, and may be
switching more of their feedstock requirements from the
higher-priced synthetic rutile to lower-priced slag because the
input cost savings outweigh the reduced production efficiencies
in a soft demand market, Tom Casey Tronox CEO, said at
Huntsman Corp. also predicted
Out of the frying
The third quarter of 2012 was by
far the weakest quarter of the year for all TiO2
pigment producers. Sales were poor across the board and prices
DuPont reported an almost 20%-drop
in sales revenues and volumes along with a raft of cost-cutting
measures, while Huntsman Corp. was also hit by the industry dip
as revenues from its pigment segment declined by 30%
Kronos Worldwide Inc. also reported
weak third quarter results as higher average TiO2
selling prices and lower sales and production volumes hampered
profitability. The US companys net income totalled $35.2m
in Q3 2012, compared with $85.9m for the third quarter of 2011,
while net sales for the quarter fell 14% y-o-y to $75.1m
Sulphate producers were also hit as
Rockwood Holdings Inc.s sales volumes dropped by 25%
y-o-y, while accompanying price rises meant that overall
revenues dropped by around 9%.
The US company also made the
decision to operate its production facilities at 75% capacity
for 2012, Ghasemi said.
Tronoxs results were weak as
well as sales volumes declined 32% y-o-y and 13% q-o-q.
TiO2 sales prices were also hit, declining by 6%
q-o-q, but rose by 4% y-o-y.
The overall feeling from major
TiO2 producers is that this decline will come to an
end. The general consensus is that as the global economy and
GDP pick up, then TiO2 demand will begin to rise and
that this is likely to happen midway through 2013.
Recent positive indicators have
been the Chinese leadership change and new infrastructure
programme and the recent news that the US housing market has
been showing signs of life.
Also, major end users have
indicated that they will continue to destock and so will
gradually begin to build up their inventories again now that
titanium dioxide prices have fallen.
So, while Q1 2013 will show similar
weakness, Q2 2013 will hopefully show signs of strength and
industry profitability will begin to pick up again.
*all calculations made in