Ukraine could lose a chunk of its titanium oxide
(TiO2) production capacity, as some of the
country’s largest manufacturers teeter on the
verge of bankruptcy.
According to industry sources, some Ukrainian pigment
producers may halt operations within months. Crimea Titan PJSC
(now trading as Ukrainian Chemical Products),
Ukraine’s largest TiO2 manufacturer,
has found itself trapped by the fallout from the ongoing
conflict following Russia’s annexation of
Ukraine’s Crimean peninsula in March last year.
Due to the sanctions imposed by the European Union (EU) and US
against Russian companies, Crimea Titan has found it
practically impossible to conclude deals or receive
Ukrainian group Velta, which produces ilmenite as a
TiO2 feedstock, is facing pressure from low prices
for the pigment chemical and feedstock minerals, meanwhile, but
believes that the situation will improve with time.
State-owned Sumykhimprom, another major industry player,
concluded a number of important agreements for the supply of
ilmenite to the European market during 2015 but has likewise
suffered from lower ilmenite prices.
Ukraine is the largest producer of TiO2 in the
former-Soviet Union block. According to official statistics,
the country holds around 20% of total world reserves of
ilmenite and rutile, equating to an estimated 180m tonnes
TiO2. At current production rates of 800,000 tpa
ilmenite and rutile concentrates, Ukraine’s
reserves are enough to last for the next 400 years.
The country exports about 40% of its ilmenite and
rutile. During the period January-June 2015, Ukraine shipped
145,000 tonnes, with a total value of $44m, to foreign markets.
The biggest purchaser of Ukrainian ilmenite and rutile is
Russia, which primarily uses the minerals to make titanium
The second largest buyer of Ukrainian ilmenite and rutile
concentrate is China, which imports 60,000-70,000 tpa. The top
purchasers inside China are textile manufacturers China
National Chemical Fiber Corp. and JOC International,
pharmaceutical company Sinopharm and the Chinese arm of
Sweden-headquartered LKAB Minerals.
China’s ilmenite and rutile purchases from
Ukraine this year have dropped by nearly 20%. According to
market observers, Chinese companies have switched to deliveries
from Vietnam, India and Indonesia, which are cheaper due to
lower transportation costs. As a result, during the first six
months of 2015, supplies of Ukrainian TiO2 minerals
to China amounted to just 13,500 tonnes.
According to Group DF, which owns Crimea Titan, Europe is
presently a more promising growth market than Asia. Since the
beginning of this year, Ukrainian TiO2 shipments to
the EU rose by almost a third to nearly 27,000 tonnes,
primarily due to demand from the Czech Republic. The primary
Czech consumers of TiO2 minerals are inorganic
pigment producers, such as Precheza and Esab Vamberk.
Sumykhimprom has reported an upturn in demand from Germany,
which today accounts for nearly a fifth of all its export
sales. Crimea Titan, meanwhile, has not made any deliveries to
the EU since the middle of 2014, due to sanctions.
Crimea Titan has been Ukraine’s largest
producer of TiO2 from Soviet Union times. Since
Ukraine gained independence from Russia in 1991, the company
has accounted for 74% of the country’s ilmenite
and rutile exports. Now, it is fighting for its survival. After
the annexation of Crimea, the company found itself in a
situation where its resources are effectively based in one
country (Ukraine) while its main manufacturing facilities are
located in another (Russia).
Based on the Crimean peninsula, Crimea Titan, had been
receiving all of its ilmenite from the Volnogorsky and
Irshansky mining sites, located in central Ukraine to the north
of Crimea. After the annexation of the peninsula, Ukraine
implemented sanctions against Crimean companies, which
effectively cut off Crimea Titan’s raw materials
At the beginning of 2015, the regional court of Kiev Oblast
cancelled Crimea Titan’s leases over both its
mining sites and returned them to state ownership. Adding to
the company’s problems, Group DF’s
chairman, Dmitry Firtash, was detained in March 2014 at the
request of the US government over bribery charges relating to
an Indian titanium venture, but avoided extradition to the US
following a court ruling in Austria in April this year.
Group DF has so far refused to be beaten, however, and in
April 2015, announced a new TiO2 project in Ukraine.
"We recently launched plans for the development of the
Stremigorodsky apatite-ilmenite deposit, with an intended
capacity of 500,000 tpa ilmenite and the possibility to boost
this figure to 1m tpa within the next 10 years," disclosed Ivan
Bondar, CEO of Valky Ilmenite, which is part of Group DF. He
added that all ilmenite will be supplied to Crimea Titan and
should fully compensate for the loss of Volnogorsky and
Irshansky, which had a combined production capacity of 700,000
"So far, we have not disclosed the financial plan for the
project," Bondar said. "It will be announced after we have
completed all estimates and a technical-economical draft of the
project. Valky iIlmenite has a licence to develop the deposit
until 2032," he added. Ukrainian analytical agency, Delovaya
Stolitsa, has estimated that investment in Stremigorodsky is
likely to be around $500m – a significant sum for
Crimea Titan, which already has large debts. Experts have
suggested that the project is a risky venture for the company,
given what happened with Volnogorsky and Irshansky. It may
therefore be difficult for Group DF to secure foreign
investment in the venture.
According to official information, Stremigorodsky is one of
the largest deposits in Ukraine, with total resources of around
131m tonnes. However, the minerals are deep underground and the
economic viability of extracting them is questionable, given
current low prices for TiO2 and
Additionally, Crimea Titan’s operational status
following Russia’s annexation of Crimea is not
quite clear. At the beginning of 2015, the company increased
the price of its TiO2 by 5% to $2,100/tonne and
Crimea Titan’s management says it has increased
its deliveries to Russia, although no precise figures have been
It is also unclear where the company is sourcing its raw
materials from. It has been suggested that Crimea Titan has
been importing minerals from Asia-Pacific suppliers via another
company in order to avoid international sanctions, while others
have suggested it has secured resources in Ukraine. The
company’s management has so far declined to
comment on this issue.
At the beginning of 2015, Crimea Titan rebranded itself as
Ukraine Chemical Products, although the Crimea Titan name also
remains in use.
Other players under pressure
Velta and Sumykhimprom, which are also facing challenges,
chiefly related to the tough economic situation in Ukraine and
low ilmenite prices. "The situation in the world market has
been changed, primarily by China," said Andrei Brodsky, general
director of Velta. "Two years ago, we shipped our products to
China at the price of $350/tonne, while earlier this year, we
sent it for $110/tonne. So we have decided to stop supplies [to
"Because two years ago, China was the most promising market
globally, many manufacturers went there. But they trampled on
one another and greatly brought down the price of titanium raw
materials," Brodsky explained. "This wave [of low prices]
transferred to the rest of the world. In addition, the
consumption of pigment also dropped around the world, which
further pulled prices down."
Brodsky said that Ukrainian producers are struggling to
compete at current price levels, as they have higher production
costs compared with some of their international
At the end of last year, Sumykhimprom, which has a
production capacity of around 40,000 tpa ilmenite, said it was
on the verge of bankruptcy. The company has cancelled an
expansion programme it announced in 2012, which would have
increased its capacity to 160,000 tpa by 2020. Doubts have been
cast over Sumykhimprom’s insolvency claim,
however, with some suggesting that the move was intended by
Group DF to spur assistance from the Ukrainian government,
which owns a stake in the company.
According to Brodsky, both Velta and Sumykhimprom may face
problems if Group DF develops the Stremigorodsky deposit. "This
is one of the largest deposits in the world," he noted. "If
[Group DF] brings this huge stock of raw materials to market,
it will inevitably lead to the collapse of prices."
Brodsky doubts that the project will be developed, as it is
a greenfield deposit and production costs will be high. For its
part, Velta has said it plans to expand its production capacity
from 100,000 tpa to 250,000-300,000 tpa over the next few
years, by which time Brodsky believes that TiO2
prices will have recovered.
However, Ukraine’s existing TiO2
producers may face increased competition if a government plan
to launch a new state-owned company for the production ilmenite
and rutile is implemented. The scheme was announced in mid-2015
by Adomas Auditskas, senior adviser at Ukraine’s
Ministry of Economic Development and Trade and head of a
national task force for the reform of state-owned
Auditskas said that details of the scheme would soon be
finalised and the planned holding company may involve
Sumykhimprom, if it looks likely that it could go bankrupt.
Potentially, the new company could produce 500,000-1m tpa
ilmenite and rutile, most of which will be exported.
According to Brodsky, Ukrainian domestic demand for
TiO2 feedstocks has collapsed and local
manufacturers will have to fully switch to exports to survive,
particularly since the devaluation of the Ukrainian hrvynia
against hard international currencies makes
Ukraine’s exports more attractive.