Titanium dioxide: Year in Review 2015

2015 began with titanium dioxide (TiO₂) producers pointing to signs of recovery in end markets, however the year was characterised by existing producers shedding their pigment divisions or cutting back manufacturing. Others, particularly in Asia, ramped up production and new sources of supply came online, ultimately keeping demand for feedstocks (ilmenite, rutile and leucoxene) depressed.

SUPPLY SECURITY

A number of major TiO₂ and feedstock producers announced capacity cutbacks and staff reductions during 2015, as weak demand failed to justify maintaining higher output.

Ireland-based miner Kenmare Resources Plc said in February that compulsory redundancies totalling around 15-20% of the workforce would be necessary at the company’s Moma heavy mineral sands (HMS) mine in northern Mozambique. US-headquartered TiO₂ producer Huntsman Corp. meanwhile announced its intention to cut its European TiO₂ capacity by 100,000 tpa, owing to continued pricing weakness.

Producer Cristal Global axed around 70 jobs at its Grimsby plant in the UK as its manufacturing cost position was deemed unsustainable and, in April, Anglo-Australian miner Rio Tinto said it had cut its TiO₂ output by 17% to 322,000 tonnes in the first quarter of 2015 in response to soft market conditions.

After a long-running battle with investors, US chemicals company DuPont finally spun-off its TiO₂ and fluorochemicals business into The Chemours Co. in mid-2015. Chemours proceeded to announce capacity cutbacks and layoffs, stating that it was focusing on its fluorochemicals business.

In October, Huntsman confirmed that it intended to exit the TiO₂ business, either by spinning off the unit to shareholders or by pursuing "a more strategic move".

Despite the ructions in the downstream market, a number of new feedstock businesses came online over the course of the year. Mineral Deposits Ltd continued to ramp up mineral sands output from its Grand Cote project in Senegal and Base Resources Ltd expanded supply from its Kenyan Kwale operations.

In December, ASX-listed Iluka Resources Ltd terminated takeover talks with Kenmare following an indication by the Dublin-headquartered miner that its largest shareholder would not accept Iluka’s most recent non-binding offer.

MARKET DEMAND

Demand for TiO₂ from end users softened inexorably over the year, pulling prices down and creating a tough market for raw material suppliers as inventories in the sector remained high.

By mid-2015, large producers such as Iluka noted indications of recovery in demand for high grade TiO₂ feedstocks and other supply side operators voiced confidence in the recovery of the titanium pigments market, provided large suppliers exerted supply discipline. Demand in the US continued to strengthen, with unemployment levels dropping as construction and industrial activity improved.

However, market commentators expressed concern about the impact additional production might have in an industry where the majority of titanium pigment production in Europe and China was running below capacity.

Although inventories went down throughout the year, consumption did not pick up enough to lift the industry, while lower production from Sierra Leone in the wake of the Ebola crisis also failed to buoy feedstock prices.

Prices reached their highest point in over a decade in 2011 and 2012, but paint, coatings and plastic customers – accounting for 80% of end use demand – have since "learned to do more with less" by reformulating, substituting and downgrading on quality. Chloride-route TiO₂ has been worst hit, with substitution for sulphate-route TiO₂ becoming popular.

PRICE TRENDS

Prices for ilmenite, rutile and TiO₂ started 2015 on a low, having slid unremittingly over the preceeding 12 months. Market participants predicted that a recovery was unlikely to occur before 2016.

In April, IM received reports that Chinese TiO₂ producers were pushing to raise prices for the pigment, however with non-Chinese producers offering heavily discounted cargoes of chlorite-route TiO₂ to buyers in Asia-Pacific, these efforts did not translate into price increases for mineral sand suppliers. 

In China, rutile TiO₂ prices rose by 4.8% between March and the end of May and anatase TiO₂ prices increased 6% over the same period. However, by the middle of the year, it became apparent that these prices were unsustainable in the long term as the slowdown in China’s real estate market continued to hinder the coatings sector. 

In the third quarter of 2015, market reports from Asia suggested that Q3 contract discussions for TiO₂ supply were $50-200/tonne lower than prices offered in Q2.

Globally, oversupply in TiO₂ continued to weaken prices with no signs of bottoming out, while producers reported lower consumption levels.

By November, prices for TiO₂ in China had reportedly fallen by around $400/tonne since their May-to-June 2015 peak, as the industry continued to suffer from overcapacity and shrinking export demand. Slow progress in upgrading manufacturing facilities to more efficient chloride-route production technology, which is less environmentally damaging and produces higher quality TiO₂ than the traditional sulphate-route process more widely used in China, also added pressure to margins.

Towards the end of the year, prices for rutile TiO₂ in China fell further as slower buying activity and growing inventories prompted producers to give in to lower bids. Ilmenite and rutile prices tracked those of TiO₂ in 2015, although the pace of decline was slower than in the previous year.

MARKET OUTLOOK

Locally-based sources said that overcapacity is continuing to rise in China and that none of the manufacturers of the pigment chemical are willing to shut off production as they vie to secure market share.

The newly merged entity of China Henan Billions Chemicals Co. and Sichuan Lomon Titanium Industry Co., has announced plans to expand its output with 100,000 tpa additional chloride route TiO₂ capacity over the coming years.

Chemours also has plans to add 200,000 tpa chloride route TiO₂ to its capacity at Altamira in Mexico by the middle of 2016, which is expected to reduce the company’s capex and add between $20m and $70m to annual adjusted earnings.

These additions and a number of new projects in the pipeline will add further supply side pressure to the TiO₂ market, pushing recovery back.