The slowdown in China and its effects on the
titanium dioxide (TiO2) industry isn’t
the disaster that some industry commentators have indicated,
delegates at the TZMI 2014 Congress heard in November.
China’s slowing economy has been
well documented with regards to the TiO2 industry,
with reports of oversupply, pricing slumps and ghost towns
However, Hugh Peyman, president of Research
Works, opened the TZMI conference with a more optimistic
point of view, saying that what some consider negatives in
China, may actually push the industry forward.
"The stories you have heard are largely true, but
it’s all about putting them in context," he told
One problem China has been facing is a shrinking
workforce - there is no longer a young rural surplus workforce
to be utilised as before. "But this is good news, because for
China to move onto the next stage of development, it needs to
focus on productivity," explained Peyman.
The new normal requires companies to boost
consumption return ratios, and make better use of resources.
"Since 2008, Chinese companies have had to adjust and learn
some hard lessons. Out of all this destruction, so to speak,
those that have survived have emerged much stronger and are
exceeding expectations," said Peyman.
New leaders are also emerging from the private
sector that have been subjected to the intensity of competition
- these people, Peyton explained are financially smarter, and
better equipped to deal with market challenges.
Another positive which has arisen from the
situation in China is the focus on research and development
(R&D), which is now no longer an option but a necessity.
"Quantity has given way to quality, and people in China are
very concerned about quality," Peyman said.
Figures calculated by Research Works
suggest that China’s R&D investment as a
percentage of GDP has quadrupled since 2000, and this figure is
likely to reach around 3% in the near future - on the same
level as world leaders.
A hard lesson that China has had to learn is that
customers matter. "The sharp slowdown has had one upside: it
has given companies a time to focus. Firms have become more
flexible, understanding that it is all about clients and
markets," Peyman said.
The emergence of new industrial leaders is also
complicating the TiO2 landscape, as expansion is
becoming less risky - new leaders are becoming increasingly
Demanding quality, Asian consumers are driving
growth in the world’s largest economic region,
which saw its collective GDP surpass that of the
EU’s in 2001. Peyman described China as "the heart
of Asia, pumping even harder than Japan".
The tighter labour market in China means that
consumers now have the income to demand quality and value.
"Consumers are also more knowledgeable about the market thanks
to the internet and social media, so they are likely to consume
more, and quality is only going to become more important,"
Table 1: September 2014 TiO2
China export data
Quantity y-o-y compare %
Value y-o-y compare %
Top export countries
Brazil, India, US, South Korea, Indonesia
Table 2: January - September 2014
TiO2 China export data
Quantity y-o-y compare
y-o-y compare %
(9.96%), Brazil (9.53%), India (9.26%), South Korea
(6.72%), Indonesia (4.79%),
(4.29%), Malaysia (3.68%), UAE (3.59%), Iran (3.55%),
The existence of "ghost cities" in China has been
widely reported and is a growing cause for concern. Peyman,
however, questioned whether these were actual ghost cities or
just 'ghost areas’.
"This is China’s way of handling an
acute housing shortage. However many of these buildings have
already been purchased and households - for whatever reasons -
are delaying moving," Peyman said.
"Yes there are no lights on, and there is nothing
inside right now, but 70% of a project will be occupied within
two years - this has always been the case," he added. Peyman
said that affordability of housing is now greater than it was
China’s credit is also out of
control, he explained. The country has experienced
unsustainable credit growth and now has the highest corporate
debt in the world.
"But, this is because China has an underdeveloped
capitals market and all of its borrowing comes from banks," he
"Bonds, equities and derivatives are very
underdeveloped," Peyman added, concluding: "Overall, China has
the lowest debt globally, with the world’s lowest
debt levels of households, public sector and financial
China will emerge to compete
TZMI managing consultant David McCoy also said at
the conference that the main factors affecting the
TiO2 sector are industry rationalisation and
consolidation, regional supply demand balance, and
China’s increasing role on the world stage.
"Chinese producers are going to make chloride
pigment in the next decade and it’s going to be
just as good as the rest of the world. There will be chloride
pigment in China. The question is just how it’s
going to fare," McCoy told delegates.
According to TZMI figures, China has so far
accounted for around 32% of global TiO2 supply in
2014 while Chinese exports have increased by 50% in the last
"This to me signals an acceptance of Chinese
product which could also spell a better quality and more
reliable product," McCoy said.
One example of a Chinese producer gaining
increasing prominence is Chengdu-headquartered Sichuan Lomon
Titanium Industry Co., which in 2013 had a TiO2
capacity of only 20,000 tpa.
In 2004, the company began to roll out its
expansion plan, aiming for a production capacity of 360,000 tpa
TiO2 and a forecast of 300,000 tonnes in
TiO2 sales by the end of 2014.
Speaking at the Congress, the
company’s senior vice president, Gan Wang, told
delegates that R&D was the core value of the business - a
common theme at the conference as attendees agreed that
innovation would be the deciding factor in which companies
survived current market challenges.
With environmental regulations pushing smaller
producers out of business, Wang also stressed the importance of
"Our idea is to recycle, reuse and reduce.
Sustainability is very important in the sulphate route of
TiO2 production because you need to find a way to
deal with the waste," Wang said.
"That is why our plant is inland, because if you
are not sustainable you can’t build a large scale
operation. With our operation we fully recycle all of the
sulphuric acid," he added.
Wang conceded that growth in China had slowed,
but would continue at a lower rate as urbanisation is still
occurring and income continues to rise.
He added that Chinese chloride production would
occur, but that that it would be "a long march" and many
questions would need to be answered in terms of the quality,
cost, reliability and feedstocks for the product.
Although figures vary between sources, it is
estimated that there are between 45 and 60 small scale TiO
2 producers in operation in China, a situation which
Congress attendees agreed will inevitably give way to further
According to Wang, environmental issues, heavy
reliance on borrowing, unplanned rush projects and increasing
labour costs are all issues that will force some factories to
Jack Blumenfrucht, CEO of Fairmont International
Inc., told delegates that China currently has an unsustainable
number of producers, which average production of around 51,000
tpa TiO2, compared with an average production rate
of 500,000 tpa for the other global top producers.
"A 51,000 tpa producer cannot survive in a
competitive market," he said. "At least half of these are using
antiquated polluting equipment and they don’t have
the money to address this, so these producers are going to die
With many Congress participants focused on the
importance of quantity and consistency of product exports from
China, Blumenfrucht added that Chinese producers would need to
also improve their product mix - emphasising the need for
innovation - in order to compete on the world stage.
"Exporting is not something that can be done on a
whim. If you want to be successful in a highly competitive
market you have to espouse the terms and conditions that the
West offers," he said.
Survival in a changing
According to Blumenfrucht, the last two years of
price declines have hit Chinese producers hard, with some
smaller manufacturers barely breaking even or operating below
"These laggers will shut down which will
accelerate the consolidation process," he said.
Although Blumenfrucht forecast that market may
potentially turn around in 2015, he noted that the
transformation of the Chinese TiO2 industry in
recent years has been amazing.
"Three new chloride plants are in final
completion - that’s 220,000 tonnes of chloride by
2015. This represents 50% of chloride imports that China needs
for its industry," he said. "This might be exaggerated optimism
though. It might take years before they come online properly
and the prices will have to meet competitor prices."
Iluka to open China technical
Iluka also announced at the event that it would
be opening a new technical centre in China in 2015 as a
response to the need for innovation in the TiO2
Speaking to IM on the sidelines
of the congress, Matthew Blackwell, head of marketing for
Iluka, confirmed that the centre, funded by capital investment
internally, will be located on the outskirts of Shanghai and
that the building had already been constructed.
"The technical centre will be focused on
servicing our customers and will be able to test zircon and
TiO2 as well as feedstocks and forward products," he
Despite a well-documented slowdown in
China’s economy and - crucially for
TiO2 markets - construction, Blackwell told
IM that Iluka still had faith in
"I think that when you consider China you have to
look at it in the longer term. It still has a growth rate of
around 7% a year and that it’s now the third
largest economy in the world - that is very encouraging and it
is one of the right places to focus our attention," he told
In terms of the new projects currently under
development, Iluka also appears unfazed by a possible
oversupply over the next few years.
"Someone else said - not Iluka but I am quoting
here - that mineral sands projects take longer to bring online
than you think, they cost more than you think, and then they
cost a little bit more," Blackwell told IM.
"But, I think it’s good to see people giving it a
Blackwell told delegates that as a result
of industry challenges, it is no longer good enough to rely on
experience alone in the TiO2 and zircon
"I think we can all agree there is a need for
innovation - there has been a hiatus in this area and this is
something Iluka is trying to reinvigorate," Blackwell
Included as part of the operation will be a state
of the art laboratory, access to leading academics and
scientists and access to testing facilities.
"Iluka’s investment in the technical
centre acknowledges the role that innovation needs to play,"
Blackwell said. "It also recognises the importance of China in
the growth of the TiO2 industry."