Titanium dioxide (TiO2) supply and demand fundamentals will
balance in mid or late 2017, independent research firm TZ
Minerals International (TZMI) consultancy said at its annual
congress in Hong Kong at the start of November.
Followed by some de-stocking in the seasonally slow period
of 2017, the balance of supply/demand fundamentals will
continue through 2018, TZMI’s principal
consultant, David McCoy, said.
Latin America is showing signs of a return to growth after
extensive demand disruption in parts of the region in the
past 12 to 18 months.
Stronger European demand has been a positive surprise
despite negative expectations due to the UK’s
referendum to leave the EU and low consumer confidence earlier
in 2016. However, demand in Q3 has been driven more by supply
concerns and tight overall global supply/demand balance than by
Brexit concerns, McCoy said.
Inventory levels remain tight as a result of some minor
production outages in Europe and, with the exception of an
unforeseen recession or other supply/demand disruption, TZMI
believes the current cycle of higher consumption amid reduced
supply will continue through to the end of 2016.
Emerging Asia appears to be the most vulnerable region near
term as it is most likely to experience a stronger downturn
due to higher than expected demand during the peak of the
cycle, said McCoy.
"The key to managing the cycle near term for producers is to
maintain inventory discipline through early 2017 when demand
is at its seasonal low point," said McCoy.
If producers maintain discipline and avoid market share
battles, balanced supply/demand can be maintained. Critical
in this fight are the actions of China’s supply
base, which is improving its product quality and global
competitiveness, he added.
China continues to export increasing volumes of TiO2, with
current estimates at 550,000 tonnes net exports annually, but
this number could rise if demand weakens in the country or
Chinese production increases.
Furthermore, following Beijing’s push to
encourage more TiO2 chloride-route production in the country,
China’s Henan Billions has continued to push
chloride products into the market, according to TZMI.
"While the full transition to consistent, stable production
and quality will continue to take time, Billions’
chloride plant continues to hold up to expectations of the
firm, leading the way in the 'chloride race’ in
China," McCoy said. "The rise of China chloride is starting
Recovery led by construction and housing
Stephane Leblanc, managing director for Anglo-Australian
miner Rio Tinto Iron & Titanium (RTIT) energy &
minerals, also noted at the event that a recovery in TiO2 was
underway, led by the construction sector.
"Fixed asset investment and government stimulus have driven a
recovery in the Chinese property market, strength in the US
housing market has also been a positive influence," he told
delegates during a talk.
Due to an anti-pollution clamp-down in China, many facilities
or mines that do not meet environmental standards have been
shut down. As a result, Chinese ilmenite supply has declined
leading to higher local prices and rising imports, Leblanc
said. In addition, global excess feedstock inventories also
continue to wind down.
Despite the decline in the past four years, sulphate ilmenite
prices have increased steadily this year and reached levels
as high as 900RMB/tonne ($132.70) on a FOB China basis in
July, according to RTIT data.
In contrast, zircon has not experienced a similar recovery
TiO2, Leblanc said.
Meanwhile, Marcus Schutz from construction consultancy B+L
GlobalBuildingMonitor predicts that China and India will be
the main drivers in the growing housing demand in Asia.
Construction activity is a key demand indicator for TiO2
pigments as the mineral is a key raw material in paint, in
addition to its use in decorative paper, which is a growing
market for the pigment mineral.
Permits for residential buildings in Asia are expected to
increase to 27.5m units in 2020, up 12% compared with 24.5m
units in 2016, according to B+L’s forecast.
"The most important drivers in many regions are urbanisation
and immigration. The main drivers are in China and India,"
Schutz said during his presentation. "China is driving the
Asian construction activity (…) most of this is still
happening in China, it is going to continue to happen until
2020 if the factors stay the same."
In China, building permits for residential buildings are
forecast to rise to 16m units by 2020, up nearly 10% compared
with 14.6m units in 2016.
Although there has been widespread concern of a real estate
collapse in China due to an overheating economy, Schutz
believes real demand still exists.
"Despite the risks of a housing bubble, in the end the demand
is still there in China," Schutz said.
Following China, India has the second highest construction
activity in Asia, according to B+L data, which forecasts that
the underlying demand in India is 6.8m units of houses in
2016 and construction growth in the country is likely to
Elsewhere in Europe, construction activity will fall slightly
until 2020, when there will be some slight recovery, Schutz
Consolidation in China
Meanwhile consolidation and changes to Chinese TiO2 supply
are likely to continue.
There are 42 sizeable TiO2 producers still operating in China
but, in contrast to elsewhere in the world, Chinese
production is scattered.
In order to promote industrial consolidation and develop
economies of scale, China must eliminate outdated production,
which includes small and polluting plants, and upgrade its
processing technology, the deputy chairman of Henna Billions,
Ruiqing Tan, told delegates at the TZMI Congress.
TiO2 output in China was 2.32m tonnes in 2015, and
sulphate-route accounted for 98% of the total production,
according to Henan Billions. Some sulphate-route production
facilities have recently been forced to halt production due
to stricter anti-pollution checks.
As a result of intensifying environmental efforts and the
Chinese government’s promotion of industrial
upgrade, chloride-route capacity is expected to grow.
As most TiO2 producers have not been profitable in the past
eight years and there is a high debt ratio within the Chinese
industry, the debt ratio has to be cut in order to achieve
sustainable development, Tan said.
"Multinational companies are facing heavy debt. This mean
this industry is unhealthy. It’s a signal of
crisis," he added.
Henan Billions and fellow TiO2 producer Sichuan Lomon Co.
have secured financial backing to assist in their proposed
merger deal, and the newly-formed company Lomon Billions aims
to become the largest TiO2 producer in Asia.
As part of the expansion plan, Lomon Billions plans to build
a new 200,000 tpa TiO2 chloride-route production facility and
the plant is expected to be in production by 2019, Tan
Henan Billions believes that the global TiO2 demand in the
coating industry will increase at an annual rate of 5% and
the new facility will serve to meet this growing consumption.
Investment in mineral sands
More financial funds could invest in mineral sands mining
projects as the sector has outperformed other commodities,
financial advisor Hannam & Partner LLP told delegates at
the TZMI congress in November.
"Everyone else is struggling to make profit in the last
quarter, [but] the mineral sand producers outperform the rest
of the sectors," said partner at the firm, Ingo Hofmaier.
Total shareholder return from the top five mineral sands
producers Iluka, Tronox, Kenmare Resources, Sierra Rutile Ltd
between January 2012 to December 2015 have increased by 54%,
higher than the 38% return in copper, said Hofmaier, citing
data from financial data provider S&P Capital IQ.
Furthermore, "the upswing in prices is happening and is
expected to run for a couple of years," he added.
The downtrend in Ilmenite, rutile and zircon prices started
in 2012 but prices started to recover in early 2016. The
higher prices are expected to support the financial
performance of mineral sand producers.
Brokers such as Deutsche Bank, Macquarie, Credit Suisse, UBS,
J.P Morgan, Canaccord and Mirabaud have all forecast market
recovery and price increase in rutile, ilmenite and TiO2,
"From 2012 to 2015, it was impossible for junior companies to
raise any equity," Hofmaier said.
"Mining speciality fund still have $6-7bn, this implies that
there is a silver lining for mining companies," he added.
Hannam & Partner LLP has worked with Kenmare for the past
two years in its debt restructure, reducing the mineral sand
producer’s net debt from $378m to $25m.
Sibelco to keep Stradbroke open for three
Improving demand has led Sibelco Australia to reverse its
decision to halt mineral sands mining at its Stradbroke Island
site in Queensland for the next three months, the company told
IM on the sidelines of the TZMI conference.
"Due to improving demand, the production pause will not
happen," said Gerry Daly, mineral sands sales manager,
Sibelco was initially planning to restructure its Stradbroke
Island mineral sand mining operations ahead of the Queensland
Government’s mining phase-out planned for 2019.
Due to low mineral sand commodity prices, the company
announced in September that it may shut down operations
between December 2016 and February 2017 depending on market
However, the plan has now been scrapped as demand for
ilmenite and rutile improved due to re-stocking from TiO2
producers. Mined output in Stradbroke Island includes
ilmenite, rutile and zircon.
The Queensland government has committed to ending mining
activities in the North Stradbroke Island region by 2019 and
the repealing of 2013 amendments to return to the original
intent of the North Stradbroke Island Protection and
Sustainability Act 2011.
The 2011 Act did not allow renewal of leases beyond 2019.
"There are only three years left. They are going to get
everything out of the ground while they can," a second source