A year ago IM ran
an article prior to the 6th Annual TiO2
Conference in Hong Kong stating that TiO2 producers
were convinced that the 2012 market softness was only
We now know that the weakness the
market experienced was not, as stated, temporary, but rather it
stretched into 2013 and continues. There is, as ever, some
indication that demand will return to the market, but not all
producers are convinced.
We know that prices for
TiO2 slipped by between 10 and 15% over 2013 as the
European recession worsened and US growth stalled.
And we also know that Chinas
GDP growth has been slower than expected, and that
manufacturing also slumped through 2013 - but both have since
We know that feedstock producers
have accepted lower average prices for their material and we
have also seen the divestment of TiO2 business -
with Rockwood selling its TiO2 assets to Huntsman
Corp. in September this year . Similarly, DuPont has gone on
the record stating it is ready to sell or spin off its
Performance Chemicals business as part of its transformation to
a higher growth, less cyclical company.
DuPonts Performance Chemical products include
TiO2 technologies, fluorochemicals and
fluoropolymers, and sulphuric acid.
For new producers, this market
softness depends on where developers sit with their projects.
Those with projects coming online now, such as Base Resources,
which has already settled contracts with buyers, may be in a
better position than those that used more aggressive cost of
production models, Base CEO, Tim Carstens, told
If you were trying to bring a
project on now I think you would struggle to get
financing, Carstens said.
The essentials for a project
succeeding, Artikols Reg Adams told IM,
are having a good quality product (ore, slag or
synrutile), good infrastructure, tranquil political conditions,
assured finance and good strategic management.
According to feedstock producers,
2014 does look better than last year. Of course, it is in their
interests to say that the market will improve, but some have
reported an increase in demand for products in the year
Pre-conditions for a recovery
in pigment, and in turn high grade feedstock demand, are
becoming evident, Iluka informed the market in its Q3
2013 production update (see p27), while Sierra Rutile
pointed to increasing pigment plant capacity utilisation
This, it said, in combination
with reports of finished TiO2 pigment inventory
reaching manageable levels throughout the supply chain, means
that any increase in end-user TiO2 consumption will
directly translate into feedstock demand.
Kenmare Resources, meanwhile, told
the market that it had seen an improvement in demand in the
last weeks of September, adding with an improving demand
outlook for pigment and an anticipated gradual ramp up in
pigment plant operating rates as inventories reduce, a more
normal feedstock buying pattern is expected to emerge in 2014,
which is expected to support stronger customer
Others also seem supportive of a
recovery in markets. Jack Blumenfrucht, CEO of Fairmont
International Inc., said in October, that there were
signs the TiO2 market may rebound.
Firstly, Blumenfrucht pointed to
the three successive price increases that have been implemented
by the top TiO2 producers this year, which he said
have finally succeeded in stabilising TiO2
Also, with the US crisis
temporarily resolved, Chinas economy expanding again and
some optimism expressed by European and Asian leaders and
industrialists; it would appear TiO2 and
titanium feedstock prices are ready to move upwards,
However, he adds - this all depends
on the orders for 2014, which will be placed in the next few
DuPont, the world leader in
TiO2, said in its Q3 2013 results that it believes
that its TiO2 sales would improve in Q4 2013, adding
that it expected TiO2 industry fundamentals would
improve. Volumes, it said, would increase. Despite this, it is
moving with a sense of urgency to divest its
TiO2 sector, Ellen Kullen, CEO, said.
As IM went to
press DuPont announced that its board of directors had
authorised management to execute a full separation of its
Performance Chemicals segment, which includes the
TiO2, chemicals andfluoroproducts businesses. DuPont
intends to execute the separation through a tax-free spin-off
to shareholders, subject to customary closing conditions.
Upon completion of the separation
in about 18 months, 100% of the new public entity will be owned
by DuPont shareholders.
According to a presentation by
Adams made this year during a TiO2 conference in
Melbourne, Australia, paint markets consumption of
TiO2 is expected to increase by 3.6% pa to 2020.
Driving growth is the fact there are no technical substitutes
for paint in sectors expected to grow.
Paint demand growth will
continue to be at roughly the same rate as GDP. Or maybe
slightly above, to cater for the fact that per capita paint
usage for building interiors, cars, etc. tends to row slightly
faster than per capita GDP consumption in emerging/developing
economies, Adams said.
In plastics, consumption of
TiO2 is expected to grow by 4.6%, driven by
plastics ability to displace other materials and a
bullish world plastics demand growth picture, he added, while
in paper, a surge in demand for decorative laminate means a
surge in TiO2 consumption in this market. This
market is expected to grow 5% by 2020.
In the paper industry, the
major end-use sector is dcor paper [the base stock
substrate for decorative laminates], Adams explained to
Prior to the 1990s, much of
the TiO2 demand for papermakers was coming from
North American papermakers using TiO2 in
paper-coating formulations. When alkaline technology took over
from acid technology in papermaking, calcium carbonate (GCC and
PCC) displaced TiO2. This caused a long-term decline
in TiO2 consumption for paper throughout the 1990s
and into the first half of the 2000s. Decorative laminate
(especially with wood-grained or marble-type appearance for
floors, wall panels, worktops, etc.) has become increasingly
popular since the mid-2000s, especially in Asia and
Europe, he added.
Enter the dragon
It is undeniable that any project
will be looking at the Chinese story (see pp12-13) as
an indication of where the market is going. Chinas
TiO2 consumption is forecast to nearly double from
1.48m tonnes in 2010 to 2.8m tonnes in 2020 [and] Chinas
forecast GDP growth is 7.5-8% pa over the same period,
Adams told IM.
This, he added is admittedly
slower than the double-digit percentage rates of the previous
decade, but still faster than most other markets.
Of course TiO2 pigment
markets are linked to both construction and to consumer goods.
So the rising standards of living and construction investment
in China will be major influences pushing up TiO2
Chinas economy expanded 7.8%
year-on-year in Q3 2013, an acceleration of 0.2% compared to Q2
when it grew by 7.5%, data released in October showed.
The figures suggest a revival in
Chinas economic growth from the slowdown observed in H1
2013, with a consequent optimism in foreign investors and
exporters, which raw materials producers hope will extend to
the mining sector.
The Chinese government implemented
several policies to head off a looming property bubble and slow
the countrys residential sector in 2011-12, which led to
a complete slowdown in construction, and therefore
Now, however, growth is returning
to the market. The growth is the result of the
governments recent economic reforms, which include a
looser monetary policy and investments in infrastructure, aimed
at stimulating demand in the domestic market.
For TiO2 markets, this
means that an uptick in demand could well be expected in 2014
Ñ specifically from Chinese markets Ñ and
potentially, China could even look to expand its own
This is, in fact already happening,
Adams told IM.
Yes, Chinas own
production of TiO2 pigment will undoubtedly
rise, he said.
There is already a
substantial capacity surplus within China and it is likely to
increase. Chinas TiO2 pigment capacity was 2m
tpa at the end of 2011 and it is forecast to reach 3.5m tpa [by
the end of] 2015. China became a net exporter of
TiO2 pigment in mid-2010 and its exportable surplus
will grow over the next five to eight years, he
Sulphate or chloride route
In the past, China has been known
as a sulphate-route market. This is because it did not hold
many, if any, chloride-route plants, as this technology was a
closely-guarded western secret. 98% of Chinese TiO2
uses sulphur route technology, which was abandoned in the late
1990s by the US. Out of the total Chinese TiO2
production capacity of 1.8m tonnes, only 30,000 tonnes are
derived from the chloride route, accounting for less than 2%,
while in other parts of the world its 76% more.
In December 2012 US paint producer
PPG Industries and Chinas Henan Billions Chemicals Joint
Stock Co. Ltd signed a technology licensing agreement, which
enabled Henan Billions to use PPGs technology to
manufacture chloride-grade TiO2 on a worldwide
Prior to this, the buying and
selling of chloride-route secrets was well documented in the
courtrooms of the US, where DuPont was bringing espionage
lawsuits forward against Chinese former workers (see
IM April 2012 Former DuPont worker admits to
providing DuPont trade secrets).
So far, all the growth in
Chinese pigment capacity has been from sulphate-route
plants, Adams told IM.
Most of the additional 1.5m
tpa (2011 to 2015) will be sulphate-route. But there are at
least six Chinese chloride-route TiO2 projects
underway that will come to fruition between now and
end-2015, Adams added.
By 2020, I think Chinas
total pigment capacity could be around 4-4.5m tpa, of which
15-20% might be chloride-route, Adams said.
Projects in the pipeline
One of the most interesting stories
of the year has to be that of Argex Titanium Inc., which has
been working towards its NI 43-101 definitive feasibility
study, which was completed in October this year.
The feasibility study, for its
planned TiO2 production facility in
Salaberry-de-Valleyfield, Quebec, outlined the technical
viability of opening a new TiO2 production
Based on a 25-year project life and
50,000 tpa production in 2015, Genivar assumes an approximate
pigment price of $3,500/tonne for the project duration, along
with a $454 of by-product credit per tonne of TiO2
Study results also estimate that
the project could garner a pre-tax investment rate of return of
more than 40% and a pre-tax net present value of $954.4m.
The pre-tax payback period is
expected to be 4.2 years, including an initial ramp up period,
with production building to 50,000 tpa TiO2 in 2015
before ramping up further to 100,000 tpa in 2017.
This, Bonnell argues, makes a
compelling case for the economic viability of the
project, a sentiment that has been echoed by investment
analysts Byron Capital Markets.
Argex has already, potentially,
signed agreements for 80% of its TiO2 output.
In October, Canadas Argex
signed a letter of intent (LOI) to distribute up to 25,000 tpa
of its TiO2, with one of the worlds
largest chemical distribution companies.
This is half of Argexs
initial industrial module.
Without naming the partner, Argex
told the market that the agreement is to act as a guideline for
the negotiation of a definitive marketing and offtake agreement
between the parties.
This follows on from the signing of
an offtake agreement with PPG industries for 15,000-17,000 of
the 50,000 tpa capacity, in June.
Assuming the newly announced LOI
moves forward, at least 80% of the material produced from
Argexs first operating line (40,000-42,000 tpa) is now
earmarked for offtake.
The successful completion of
a definitive marketing and off take agreement of this scale
means that now a significant majority of all available
TiO2 product from our initial industrial module will
already be spoken for well in advance of actual production for
many years to come, Philippe Guillemaille, Argexs
head of sales and marketing, said.
Argex added that it could ramp up
its capacity with more investment. The news prompted Byron
Capital Markets head of global research, Jon Hykawy, to
send a note to potential investors maintaining its
ÊArgex continues to
progress in a positive and systematic fashion. It is building a
solid and diversified customer base through off-take agreements
while continuing to clarify the economics of its process
modules, as in the recently announced third-party feasibility
study, he added.
Base Resources, an Australian
junior with a project in Kwale, Kenya, was the first
TiO2 producer to come online in 2013, with its
project being ready for commissioning in November, slightly
later than first planned.
The delays, CEO Tim Carsens told
IM, were attributed to the
slower-than-expected construction build.
The $300m project is expected to
have an output of 340,000 tpa ilmenite, which is about 10% of
the worlds total supply, 80,000 tpa rutile or 14% of
total global output, and 25,000 tpa zircon.
It is linked by road to a major
highway that leads to the port of Mombassa, where Base has its
own port facility and 60,000 tonne capacity warehousing
A major offtake agreement was
signed in November 2011 with the worlds largest producer
of TiO2 pigment, DuPont, for 72% of its rutile
production over a six-year period. In the last four years of
the agreement DuPont has the right to reduce offtake volumes in
line with its overall high-grade feedstock requirements.
The Kwale project is one that has
been around for years and has somewhat of a chequered past
under previous owners Tiomin.
New company, new mining law
However Base has had a different
experience with the Kenyan government lawmakers. It has an
open and frank relationship with the Kenyan
government, Carstens said, which is yet to pass a new mining
bill that it has been amending this year.
At the time of going to press the
Bill still had not been passed, but discussions were taking
place on 24 October to see whether it would pass.
Controversy centres around Clause
53: Government participation in mining license. , which states:
Where a mineral right is for mining or exploitation, the
National Government shall acquire ten percent free carried
interest in the rights and obligations of a mining operations
in respect of which financial contribution shall not be paid by
the National Government. A subsection to this says this
does not preclude the National Government from any other
or further participation in mineral operations that may be
agreed upon with the holder.
If passed in the current form, the
Ministry would still have the power to revise the afore
mentioned stake, under clause 53(2) and clause 54, quoted
The Cabinet Secretary may
from time to time gazette different minimum levels of local
equity participation for certain minerals.
Expansions at Sierra Rutile?
Sierra Rutile defined an additional
39,300 tonnes rutile (at 3.49% grade) and 17,300 tonnes zircon
(at 1.54% grade) in several tailings areas surrounding the
mineral separation plant in its H1 results (see
IM October 2013 issue).
This provides Sierra Rutile
with the opportunity to blend this product directly into the
mineral separation plant, or via an existing 50 tph tailings
upgrading facility, the company said.
In Q2, Sierra Rutile overhauled its
existing Lanti Dredge and brought its Lanti dry mining up to
It is also considering further
expansion into a second area, Gangama.
feedstock explorer Image Resources, meanwhile, is further off
than the aforementioned projects, but holds potential because
of its strong economics and low-risk project, Peter Davies,
managing director, told IM.
The project, located in North
Perth, is expected to be online in 2015. Offtake and financing
discussions are ongoing, Davies said.
NL has confirmed a JORC indicated
and inferred resource of 2.1m tonnes grading 15.4% heavy
mineral content (HMC) for Block A of the Boonanarring deposit
in Western Australia.
The zircon content for Block A was
25.9% of the 323,000 tonnes heavy minerals contained, at a
cut-off grade of 2.5% HMC, much higher than the 11% that was
The grade of the JORC
resources in Block A is far higher than we predicted and this
adds further to our confidence in the potential of the
Boonanarring project, said Davies.
While there are many feedstock
producers vying to get into the TiO2 space, there
are also those who are looking to get out.
Huntsman has gone on the record
with its intention to list the business in a couple of years
Ñ but could a major list before them?
As IM was going to
press news broke that DuPont was to separate its
TiO2 business, so that the Performance Chemicals
sector would operate as an independent, publicly traded company
after the separation.
Tronox too has said that it is
looking to acquire more TiO2 properties.
All bets are off then as to what the next twelve months will
bring in the TiO2 market, but one thing is for
certain - this is a space to watch.