Environmental inspections hit Chinese TiO2 supply

By Albert Li
Published: Friday, 08 September 2017

Lower production rates following months of governmental inspections is leading to reduced supply in TiO2 and its downstream segments, with coatings manufacturers among the worst affected.

The series of environmental controls across the TiO2 industry in China led to low operation rates for local producers and tightening supply for some products, prompting market participants’ concern over the effect on market prices.

Despite September is normally a peak season for TiO2 products sales in China, the average operation rate for TiO2 companies was only around 50% this summer, due to interruptions related to the environmental inspections.

According to China TiO2 Association, the spate of controls is not only affecting TiO2or a specific province but, rather, it spreads across all provinces and industries including TiO2’s downstream segments the like of coatings, plastics, oil, ink and paper.

Coating companies have been among the worst hit, as they are sandwiched between the pressures from both upstream and downstream. Upstream source material prices increased, while downstream buyers would not accept upwards adjustments in coating prices.

In Panzhihua in Sichuang province (one of the main ilmenite producing hubs in China), the slag area in Jinjiang industrial park was forced to shut down in late July. This was followed by a complete shutdown of all chemical companies inside the park, including several TiO2 factories, which have now resumed production.

However, more environmental controls from the central government may be on the cards later this year. At the end of June, a new director of China Ministry of Environmental Protection was appointed, Jiegan Li, who ordered a renewed set of inspections that may continue until year-end.

The inspection team from the central government is required to cover all provinces in 2017, and no company or sector, whether large or small, would be able to bypass it.
Both ilmenite and TiO2 prices have so far held firm but, with the peak selling coming up and concerns over supply amid ongoing inspections, market participants say the market could be affected.