There has been a lot of activity
throughout the mineral sands industry and titanium value chain
in the past few months and certainly in the first half of 2013.
Indeed, it seems as though the last five years have brought
more changes to the industry than the preceding 20.
In contrast to a bumper 2011 and
positive first half in 2012, it was the opposite story for the
second half of 2012 and the first half of 2013. However despite
the gloomy start to 2013, it looks as if there are some signs
of a modest recovery as the year advances.
The high demand and price
environment of 2011 and early 2012 began to unwind when the
Chinese government implemented several policies to head off a
looming property bubble and slow the countrys residential
sector. This resulted in falling titanium dioxide
(TiO2) pigment and feedstock demand.
The zircon, TiO2 pigment
and feedstock sectors began to retreat, hitting the bottom of
the cycle in mid-March and remaining flat for the remainder of
Adding to the strain was higher
economic volatility in Europe where many EU countries were
drawn further into the spiral of increased debt, higher
unemployment and tighter credit.
Slower economies resulted in a drop
in consumer spending, which, when combined with the pigment
producers stockpiling phase, led to many pigment
manufacturers holding higher inventory levels by mid-2012. In
response to falling demand, pigment producers scaled back
production and drew down on inventories.
Overall, TiO2 pigment
demand plummeted 15% in 2012 compared to 2011. Because pigment
accounts for about 90% of feedstock demand, the feedstock
portion of the sector was yanked into the slump in H2 2012 and
Despite somewhat subdued results
for the first two quarters of 2013, pigment producers have
expressed upbeat sentiments about the second half of the year,
noting that prices have stabilised and inventory levels
dropped. DuPont, the worlds largest TiO2
pigment producer, announced price increases effective 1 October
Continued strong growth in the US
construction sector, especially the housing market, may signal
improved demand during the second half of 2013, despite the
economic slowdown in China and cooling of its domestic property
The zircon value chain revealed
weakness significantly earlier than the titanium chain. Cracks
in the zircon sector could be seen as early as Q4 2011. The
Chinese governments policies to head off the property
bubble and the subsequent slowdown also resulted in falling
demand for ceramic tiles and subsequently zircon. In addition,
the high price of zircon forced end consumers to look for
alternatives or substitutes, further weakening demand.
A brighter road ahead?
Despite the drop in demand and
prices across the titanium value chain, there have been early
signs the market has seen the worst of its current slump.
Because the zircon and titanium
value chains are closely linked to the global economy, it is
useful to look at the global macroeconomic outlook for 2013.
Taking into account IHS Global Insights data, TZMIs
view for the remainder of 2013 is cautious optimism after real
GDP growth slowed to 2.6% in 2012, from 3% in 2011.
During Q2 2013, the US economy has
seen early indications of improvements in the residential
investment, consumer expenditure, exports and private inventory
Although China underwent a seasonal
slowdown during Q1 2013, speculation remains regarding the
possibility of Chinas economy losing momentum.
Overall, the macroeconomic
situation poses some challenges for an industry revival.
Despite the challenges and risks global economies are facing,
growth is still occurring, with the Asia-Pacific region
expected to lead a recovery as its middle class begins to
Even with the mineral sands
sectors rocky start to 2013, its underlying fundamentals
remain solid and TZMI believes the market has experienced the
worst of its current slump.
There has been a pick-up in demand
for both TiO2 pigment and feedstock.
In addition, at the recent DbAccess
Global Industrials and Basic Materials Conference in Chicago,
US, major pigment producer Huntsman Corp. CFO Kimo Esplin, said
it had managed to reduce its inventory to 45 day sales of
inventory (DSI) by the end of Q1 2013.
The mineral sectors revival
in H2 2013 and 2014 is dependent on sustained recovery within
the North American and Asia-Pacific construction sectors. China
also remains a large contributor to global demand even with a
reduced growth forecast to a little less than 8% for 2013.
TZMI expects the feedstock market
to improve in the latter half of 2013 and early 2014, provided
there are no unexpected shocks to the macroeconomic
Despite easing off the heights it
reached in H1 2012, feedstock prices are expected to stabilise
during the latter part of 2013 as demand picks up.
To meet the increased demand, most
feedstock producers are capable of resuming capacity that has
been curtailed in the current downturn.
The US was the largest importer of
titanium feedstocks during H1 2013, followed by China.
In addition to idled capacity there
are some new feedstock projects that are expected to come
online on the African continent within the next 12 months. TZMI
believes the new supply will go some way to offset naturally
declining production rates and the expected demand recovery in
There will be a segment at this
years Congress which will focus on new supply for
titanium feedstocks and zircon, with presentations from
developers such as Image Resources, Mineral Commodities, Murray
Zircon, Rio Grande Mineracao, Sheffield Resources and Zirco
Mines and acquisitions
This year there have been a number
of strategic moves and acquisitions. Of note was
Huntsmans announcement of its intended acquisition of
Rockwoods TiO2 and performance additives
businesses. Under the agreement, Huntsman will pay
approximately $1.1bn and assume unfunded pension liabilities
worth close to $225m. The move will cement Huntsman as the
worlds second largest pigment producer, second only to
DuPont. It will also boost the companys position in
Earlier this year, Rockwood
acquired Kemira Oyjs 39% stake in Sachtleben in February
for 97.5m ($127.6m.) With the sale of Sachtleben, Kemira
was no longer exposed to the TiO2 pigment
After acquiring Sachtleben,
Rockwood unsuccessfully tried to sell the business.
Another piece of news which made
headlines was the intended joint venture between World Titanium
Resources (WTR) and Sichuan Lomon.
In March, WTR and Sichuan Lomon
announced plans to jointly develop WTRs Ranobe mine, part
of WTRs Toliara project in Madagascar. Under the
agreement, Lomon would put up the capital required for
developing an 800,000 tpa operation and earn itself a 50% stake
in Toliara and about 12% of WTR. Lomon would also purchase 80%
of the ilmenite produced from the mine. However, after a 90 day
due diligence period and an amended deal, Lomon withdrew from
the proposed agreement citing WTRs recent A$3.25m
($3.11m) capital raising and senior management change as its
reasons. Despite withdrawing from the previous proposed
arrangements, Lomon stated it remained interested in the
In terms of the potential moves
ahead, DuPont reported in August it was reviewing
strategic alternatives for its performance
chemicals segment which includes its TiO2 business.
Elsewhere, Tronox has secured $1.5bn in debt to pursue what it
has also termed as strategic alternatives.
The consolidation and integration
theme within the industry appears likely to continue into 2014,
which means some significant restructuring in the coming
Pigment producers remained subject
to pricing pressure although all five major pigment producers -
Kronos, Cristal Global, Tronox, DuPont and Huntsman - announced
price increases during the first half of 2013. Japanese TiO2
producer Ishihara Sangyo Kaisha Ltd also announced price
increases for products sold in the Asia-Pacific region, however
the company announced it will be closing its plant in Singapore
due to high costs of operation.
The mineral sectors revival
in H2 2013 and 2014 is dependent on sustained recovery within
North America and Asia-Pacifics construction sectors. In
2012, more than 400 industry leaders and representatives
attended the TZMI Congress for an in-depth review across
titanium feedstocks and zircon, TiO2 pigments and
end-use markets. The 2013 Congress will provide the opportunity
for all participants to ensure they have access to the most up
to date industry information.
Hong Kong lights up
In November, industry leaders from around the world across
the titanium, zircon and finance sectors will be attending
TZMIs 7th Congress in Hong Kong to hear about the latest
developments in titanium feedstocks and zircon, TiO2
pigments, end use markets and more.
Delegates at this congress will
meet and hear from established and emerging mineral sands and
TiO2 pigment producers as well as new projects, end
users and new industry developments.
The keynote speaker is Ben
Simpfendorfer, managing director of Silk Road Associates, a
strategy consultancy based in Hong Kong with offices in Beijing
and Melbourne. Ben was the former chief China Economist for RBS
and senior China Economist for JPMorgan where he advised some
of the worlds largest financial institutions and
multinationals. He is also the author of The New Silk
Road, published by Palgrave Macmillan in 2009, and a
leading specialist on commercial relations between Asia and the
Middle East. His forthcoming book, The Rise of the New
East, looks at managing growth and complexities in the
Other speakers will include senior executives from Alkane
Resources, Base Resources, Braemar Seascope, Chilches
Materials, CMI Group, Cristal, DCW Limited, GPM Asia, Hainan
Wensheng High-Tech Materials, Henan Billions Chemicals, IRC
Ltd, Jotun A/S, Panzhihua ZTi Science & Technology, Rio
Tinto, Ruby Ceramics, Sierra Rutile Ltd, Specialty Metals,
Southern Ionics, Toho Titanium, Tronox and TZ Minerals
*Converted October 2013