White out? Challenges mount for the global TiO2 industry

By William Clarke
Published: Friday, 01 November 2019

Faced with stagnating prices, feedstock shortages and health warnings, William Clarke considers the challenges faced by the world’s titanium dioxide producers.

The global titanium dioxide (TiO2) market has had a turbulent year so far in 2019, albeit one that has resulted in price stagnation becoming a preferable alternative to the recent steady decline in the chemical’s export value.

The industry, already reeling from the implementation of tight environmental controls in China, is now facing a number of new and unexpected disruptions - including international trade tariffs, an economic slowdown, a shortage of feedstocks and stricter public health legislation.

Perhaps the most dramatic of these has been the impact of TiO2 being added to the list of products subject to tariff hikes in the trade war between the United States and China.

A series of escalating tariffs on Chinese TiO2 imports to the US, which as of mid-October stood at 25%, have effectively cut off the US from the world’s top exporter.

Perhaps more significantly, this block on a key export market has weighed heavily on China’s domestic TiO2 demand and has resulted in rising exports to other parts of the world. 

"Exports from China are up recently. But, year-to-date, they are [only] up marginally compared with previous years," Gerry Colamarino, managing director at Pennsylvania, US-based TiPMC consulting said.

"It is very clear that exports to north America have gone down and we’ve seen [the Chinese TiO2 that would have come here] placed in other areas, particularly Latin America and the Middle East," he said.

Colamarino said, though, that Chinese producers would struggle to grow exports further without improving the grades of TiO2 they make.

"China exports multi-purpose grades of TiO2. They have not been able to get into the more differentiated markets and have almost saturated their markets outside China for their current product quality," he said, adding that Chinese TiO2 prices have probably reached a floor.

"For many marginal producers, they can’t lower prices any more, as costs have increased and margins are thin," Colamarino said.

TiO2 manufacturer margins in China have been helped by the weaker yuan, which increases the value local currency-denominated receipts. 

But producers there are also facing rising labor costs and continued scrutiny from environmental inspectors, presenting the risk of temporary or permanent closures, or orders to retrofit their factories with expensive modern equipment.

In mid-October, Fastmarkets assessed the price of titanium dioxide pigment, high quality, bulk volume, cfr Asia, at $2,200-2,550 per tonne, down from $2,300-2,600 per tonne at the start of the year and illustrating the market torpor caused by plentiful supplies and restricted markets for this grade.

Destocking

The comparatively small world of Western TiO2 producers was shaken up in 2019, when Connecticut, US-headquartered pigment producer Tronox finally managed to complete the purchase of its larger rival, Jeddah, Saudi Arabia-based Cristal. 

The deal, which faced stiff opposition from antitrust regulators, was eventually finalized after Cristal agreed to divest its US assets to UK-based chemical producer, Ineos.

Two other major titanium producers appeared on the scene in recent years, when The Chemours Company and Venator, both located in the US, were spun out of their respective parent companies, DuPont and Huntsman, in 2015 and 2017.

The spin-offs followed major restructurings and shareholder pressure to separate out the TiO2 businesses, due in part to the price volatility of the chemical.

Ineos, the biggest chemicals company in the world in terms of sales revenues, is the first completely new entrant into the Western TiO2 market in decades and its debut came at a difficult time for the sector.

Producers in Europe and the US have been struggling with a heavy overhang of TiO2 stocks, built up in the first half of 2018, which has weighed heavily on prices, particularly in Europe.

"[Western TiO2 producers] went into this year with a need to destock, and Chemours did the destocking singlehanded, reducing nearly 200,000 tonnes of sales in the first half of 2019 vs. 2018," Colamarino said.

"Kronos increased its sales [and] Venator tried to manage its volume and price relationship, but still gave up some price for volumes," he said. 

"In the past, Tronox would generally sell everything it could produce, but is currently aligning its regional pricing at a level somewhere between what Cristal and [pre-merger] Tronox would have offered. Price is being managed very carefully.

"Ineos is by far the smallest TiO2 producer, almost a regional [player]. Its focus is on getting as many tonnes out as it can," Colamarino added.

As a result of this destocking, Colamarino is positive about the prospects for TiO2, despite persistently sluggish demand and the possibility of another global economic recession in the foreseeable future.

"I don’t think I’ve ever seen an industry better adjusted for global recession," he said. "The TiO2 industry saw the overstock and responded quickly. Although export prices from China have reduced considerably [in the past two years], Chemours really led the effort to minimize [price erosion] from the [Western] multinational producers."

Ilmenite shortage

Another concern facing the TiO2 industry is the developing structural shortage of feedstock. 

This is largely down to the depletion of a number of large heavy mineral sands resources in Australia and Africa.

Mineral sands miners concentrate first on areas of deposits richest in valuable minerals, including rutile and ilmenite, meaning that recovery rates fall over time.

But there are other reasons for the drop-off in mineral sands availability. 

In China, mineral sands mining in Hainan, an island province off the coast of southern China has stalled, as the region converts into a special economic zone with a focus on trade, finance, and high-tech manufacturing.

And, while Ilmenite production in the central Chinese province of Sichuan and elsewhere continues, it faces environmental restrictions. In addition, the ilmenite rock mined in these areas is less suitable as a chloride feedstock than that derived from sand deposits.

Indian ilmenite exports, meanwhile, have slumped over the past year, after the government decided in August 2018 to 'canalize’ exports of mineral sands. This means that mineral sands can only be exported through state-run entity, Indian Rare Earths Ltd (IREL).

The tightening of regulations on the Indian mineral sands sector - which is centered on beach sand deposits in southern India - has sharply reduced the availability of ilmenite, rutile and zircon from the country.

S Vaikundarajan, chief executive of Indian miner VV Minerals, hit out against the policy in an interview with Fastmarkets in January 2019, saying that, as a competitor to private firms, IREL has little incentive to encourage exports.

"The new policy... is a blow to private companies like us," Vaikundarajan said. "We have made huge capital investments by way of technology and production facilities, and we have established significant share in global markets.

"Private producers like us have spent millions of dollars and more than 20 years developing foreign clients," he said. "But the recent move by the government will nullify our efforts if the export of beach minerals continues to be through IREL."

Exports from Vietnam have also been restricted, due to delays in issuing new ilmenite export licenses.

Colamarino said the industry was struggling from a lack of access to high-grade Indian ilmenite in particular. 

"It has always been the most sought after [TiO2 feedstock]," he said. "It’s the easiest to digest and gives the best yields,"he added.

Colamarino said that political factors, which turn partly on controversies around the detrimental impact of beach sand mining and partly on the Indian government’s desire to ring fence export revenues for the state, are likely to impair the future development of the Indian ilmenite Industry. 

"I have heard people speculate that those other [non-government operated] mines may never be able to operate," he said. 

"That’s what it’s starting to look like. In the past, India has exported nearly 600,000 tonnes [per year] of ilmenite. Current imports are around half that, at nearly 300,000 tonnes of TiO2."

According to Colamarino, restricted feedstock supply is also hindering the growth of India’s TiO2 production capacity. 

"[India] a natural place to see TiO2 production growth, but the political issues have been, and continue to be, a major barrier," he added.

Cancer classification

A fresh threat to the TiO2 sector has come from the news that TiO2 products in the EU are likely to face new consumer health warnings within the next two years.

On October 4, 2019, the European Commission (EC) announced it would classify TiO2 in its powder form, as a Category 2 carcinogen under the EU 'Reach’ regulations (the Registration, Evaluation, Authorisation and Restriction of Chemicals) regulations, because when inhaled it is suspected of causing cancer in humans.

The decision follows a recommendation from the European Chemical Agency (ECHA) about the safety of TiO2, and marks the end of years of legislative wrangling over the chemical’s classification.

Many in the industry fear that classifying TiO2 as a carcinogen will reduce demand for the pigment.

If no objections are raised by the European Parliament or the Council of Ministers, the classification will be adopted by December 2019 and new restrictions on the material will then be implemented over an 18-month transition period.

Speaking at the TiO2 World Summit in Berlin, Germany in September 2019, before the EC’s classification decision was announced, David Lockley, toxicology manager at Venator, and chair of the Titanium Dioxide Manufacturers Association’s scientific committee, warned of the detrimental effects of the reclassification on the industry.

The proposed change in EU rules will mean that any powder product containing more than 1% TiO2, with particles under 10 microns, will face a number of restrictions.

Most worryingly for consumer sales, products meeting these criteria will need to carry a label warning of potential organ damage, including a representative graphic that Lockley described as resembling "exploding lungs".

Pigment in liquid form, such as architectural paint, will not be subject to the same rules, although it will still be obliged to carry text warnings.

Lockley expressed the widely held industry viewpoint, that the perceived threat posed by TiO2 is based on inadequate data, adding that his association "vehemently disagrees with the classification."

He said the study cited in the original push for reclassification was based on a single study in rats. 

"The relevance of rat lung-overload data for humans in questionable," Lockley said, adding that no epidemiological studies have shown an increase in cancer for workers exposed to TiO2 over decades.

There are very few substitutes for TiO2. The only material which offers a comparable opacity and refractive qualities is lead oxide, which has been vilified for its proven toxic effects on human tissue.

Other, less-effective pigments could also face similar classifications in the future, further shrinking the pool of TiO2 alternatives.

"[The risk of inhalation and the consequent carcinogenic effect] is not an inherent property of TiO2, it’s a property of dust," Lockley said, adding that any other poorly soluble material would be a candidate for the same categorization.

Lockley also pointed out the effect the classification could have on recycling waste, including demolished buildings and plastics waste, given the widespread use of TiO2 in construction and manufacturing.

The classification will also bring in automatic restrictions on its use in cosmetics and certain toys and the chemical will no longer be usable in eco-labeled products.

One pigment producer told Fastmarkets that reformulating TiO2 production to increase particle size was a possibility, but that the process would be complicated and the resulting pigment could only be used in matt paints. High-gloss paints require a finer mesh product.

"We’ve been trying to reduce the size of the particles for 10 years," the producer said.

Producers could try to develop pigment with a larger particle size, formulated to dissolve and disperse into particles of under 10 microns.

And another option discussed by producers at this year’s TiO2 World Summit was the increased use of TiO2 in slurry form. 

This product is more expensive to ship, due to the liquid content, but would not need the same level of labeling as TiO2 powder.

How the ECHA took the shine off TiO2

France first put forward the proposal to categorize TiO2 as a carcinogen by inhalation to the ECHA in 2016.

In September 2017, the ECHA’s Risk Assessment Committee (RAC) proposed that the pigment should be classified under category ii, as a suspected carcinogen by inhalation.

This proposal was repeatedly been rejected by European Union member states, but in 2019, after an evolution of EU rules, the European Commission was able to push the proposed classification forward, and it is now being put to the European Parliament.

Europe accounts for 20% of global TiO2 demand, and consumes 70% of the chemical produced within the continent.