Titanium dioxide makers aim for a steady course

By William Clarke
Published: Monday, 12 October 2020

Price stabilization and inventory control are bearing fruit for titanium dioxide and mineral sand producers, even as Covid-19 rocks pigment markets.

Producers of titanium dioxide and its feedstocks had much to fear from the Covid-19 pandemic. Demand for pigment has long been particularly sensitive to fluctuations in the global economy, so a worldwide pandemic threatened to weigh heavily on prices. But the sector has proved resilient so far, aided by factors including the prolonged stock drawdown of previous years, an increased industry focus on tailoring production to demand and steady demand from China and other markets. 

Titanium dioxide pigment

Global economic growth has traditionally been used as a proxy for titanium dioxide demand. Construction, renovation and manufacturing all drive demand for pigment, and these activities all accelerate during times of rapid economic growth and slow when the economy is stagnant or shrinking. 

This means the global effects of the Covid-19 pandemic should be very bearish. But paintmakers, one of the major buyers of titanium dioxide, have drawn a more sanguine picture of 2020 demand. 

Paintmaker PPG in August upgraded its revenues forecast while reporting better-than-expected July sales, and upgraded its expectations for the third quarter. "Led by improving demand trends in our Chinese and European businesses across a variety of coatings end-use markets, and in global industrial production, our July sales increased sequentially from the month of June and were down by 7% compared with the prior year," PPG chief executive officer Michael McGarry said.

Producers also saw demand remaining more stable than had been initially feared. Major titanium dioxide producer Chemours in August reported that the sharpest drop seen in demand was from Europe and Asia, with North American demand sustained by a strong do-it-yourself home improvement sector. But another producer, Venator, struck a cautious note for demand in the near term, expecting a "gradual and uneven recovery in demand."

One reason that the market has been resilient is that stocks of the material were fairly low at the start of 2020, meaning buyers are still forced to make hand-to-mouth purchases. Titanium dioxide has long been a highly cyclical market. When prices are on the rise, buyers rush to fill up their inventories, and as demand eases they trim purchases even faster, allowing their reserves to run down in anticipation of lower prices. Producers are increasingly keen to disrupt that trend by varying their output to reflect changes in demand.

Chemours markets its material at stable prices in long-term supply agreements. Customers who want to obtain material outside these long-term agreements can make spot purchases through an online portal which offers current product prices based on supply and demand. Chemours reduced production in 2019, effectively supporting the market by reducing supply.

The global titanium dioxide market is split into two main production methods. Sulfate titanium dioxide can be produced from a wide range of feedstocks for a lower price, but the process has a greater potential for pollution and the end-product is of lower quality. Chloride-route titanium dioxide is more technologically challenging, and requires higher-grade feedstock such as rutile, titanium slag, or high-quality ilmenite, but the product is brighter. Chemours produces high-quality titanium dioxide products through the chloride route with the use of proprietary technology.

Titanium dioxide pigment, chloride grade, DDP Europe, € per tonne

Bruce Griffin, founder of consultancy Farview Resources and commercial director at mineral sand junior Sheffield Resources (see box panel), noted that the market support provided by supply constraint was most acute in the United States. He said that an open question for him is whether supply discipline in the US would have been as effective without the tariff barrier there.

Titanium dioxide has been one of the materials caught up in the trade war between the US and China. A series of tit-for-tat tariffs means that exports of Chinese titanium dioxide to the US now attracts an extra 25% tax. This has supported a decoupling of the US market from the global market.

"The market has split into three," Griffin said. "China is a price-driven market. All the quality producers export as much as they can, and Europe, Asia and Latin America is where those exports end up as the US market is closed to China because of tariffs."
Fastmarkets assessed the price of titanium dioxide pigment, chloride grade, ddp Europe at €2,900-3,000 ($3,394-3,512) per tonne on September 24, compared with $3,000-3,300 a tonne for titanium dioxide pigment, chloride grade, ddp North America. 

Griffin also ascribed the relative strength of US prices compared with European as a correction to an earlier trend following the fire at Venator’s 130,000-tonne-per-year plant in Pori, Finland and their subsequent decision to close the plant in 2018. "Pori buyers overbought [in response to the fire]," he said. But when concerns over that supply shock eased, "Europe moved from a premium to discount." 

Chinese production grows
While there have been no precipitous demand shocks triggered by the Covid-19 epidemic in 2020, there has also been no sharp drop off in supply. A key feature of the 2020 titanium dioxide market has been the ability of Chinese titanium dioxide production to grow uninterrupted, despite the disruption of the Covid-19 epidemic to logistics and workforces. 

China is world’s largest titanium dioxide producer and dominates the production of commodity-grade sulfate pigment. China exported 117,122 tonnes of titanium dioxide in August, compared with 87,349 tonnes a year earlier, according to China customs data. In the year to August, Chinese exports totaled 777,792 tonnes, compared with 656,425 tonnes a year earlier. 

And the largest export volumes were in the first three months of the year, despite the effects of the Covid-19 epidemic on logistics and production in China being heaviest in that period. First-quarter exports in 2020 were 331,276 tonnes, compared with 231,815 tonnes in the first quarter of 2019.

Market sources report strong demand from many developing markets, including India, Southeast Asia and South America, with coatings demand growing strongly despite the effects of Covid-19 lockdowns on downstream consumption. 

Fastmarkets assessed the price of titanium dioxide pigment, sulfate grade, fob China at $2,200-2,400 per tonne on September 24, up from $2,100-2,200 at the end of the first half of 2020, but down from $2,200-2,550 in September 2019. 

Mineral sands
The relative stability of titanium dioxide end markets has also benefited mineral sand miners. Ilmenite and rutile, the most important feedstocks for titanium dioxide production, have been in steady demand. But the market has shifted in one significant way. For a long time, the fastest growth in demand and the greatest supply tightness has been in the higher-grade feedstocks, but this trend has reversed over the past year. 

Fastmarkets assessed the price of ilmenite concentrate, 47-49% TiO2, cif China at $230-250 per tonne on September 24 compared with $190-210 a tonne a year earlier. By comparison, the price of rutile concentrate 95% TiO2 min, bulk, cif China was $1,200-1,250 per tonne on September 24, compared with $1,150-1,250 a year earlier. 

Natural rutile is a mineral with a very high titanium content, and supply of this feedstock is low. The growth in chloride route titanium dioxide demand, as well as demand from other sectors, including the welding material industry, has kept prices high. But with Chinese titanium dioxide proving the most resilient sector, increasingly the most acute demand is focused on lower grade ilmenite, particularly as domestic Chinese supply of this ore has been hard to come by. 

Ilmenite concentrate, 47-49% TiO2, cif China, $/tonne

Zircon, premium grade, 66.5% ZrO2min, bulk, cif China, $/tonne

At the same time, the higher-grade feedstock market has been supplied via the resilient output of titanium slag from Rio Tinto. Titanium slag, produced from ilmenite, can be used as a high-grade feedstock in chloride production. Rio Tinto was forced to temporarily shut capacity at both its South African and Canadian facilities due to Covid-19 restrictions, with output in South Africa also affected by community unrest in late 2019. But in July 2020, Rio Tinto reported that output at both sites had resumed. 

Meanwhile, major titanium dioxide producer Tronox is increasing its vertical integration by acquiring a major European titanium slag producer. Tronox said in May 2020 it would pay "approximately $300 million" for Eramet’s TiZir business.

TiZir’s Titanium & Iron Ilmenite (TTI) facility in Norway produces around 230,000 tonnes per year of titanium slag, as well as 90,000 tpy of high-purity pig iron. Tronox’s existing facilities produced 410,000 tonnes of titanium slag in 2019 and this rate of production could rapidly increase if the company reaches full capacity at the massive Jizan facility in Saudi Arabia. Rio Tinto, by comparison, produced around 1.2 million tonnes of titanium slag in 2019.

Demand for zircon, meanwhile, has been slow as a result of a crunch in the construction industry that hit a market already in a down cycle. Zircon is not a titanium ore, but is mined alongside rutile and ilmenite in heavy mineral sand deposits. Fastmarkets assessed the price of zircon, premium grade, 66.5% ZrO2 min, bulk, cif China at $1,400-1,500 per tonne on September 23. This compares with a price of $1,500-1,600 per tonne a year earlier. 

Mineral sand miner Iluka, which is the most zircon-focused of the major mineral sand miners, in August reported a drop in revenues for the first half of 2020, driven primarily by lower zircon sales and pricing.

Iluka reported sales revenues for the first half of 2020 at A$456.6 million ($324.5 million), compared with A$545.6 million for the corresponding period of 2019. The company sold 78,400 tonnes of zircon in the first half of 2020, compared with 133,300 tonnes a year earlier, a fall of 41.2%. Its realized price for zircon in the first half of 2020 was 11% lower than in the first half of 2019, Iluka said.
A key driver of zircon demand is the construction sector, particularly in China, because it is used in ceramic fittings and tile production. "Ceramic industry activity in China recovered in April but remained relatively flat throughout the second quarter. Chinese tile makers’ operating rates were around 50-60% of the operating rates in the same period in 2019," Iluka said.

"[Meanwhile], pressure from property developers for more favorable pricing and payment conditions resulted in margin pressure throughout the entire value chain, and in the closure of some smaller producers," it added. "Chinese tile exports were also affected by reduced demand from key markets, including the US."

"The cycle peaked in mid-2019, it was already declining before Covid-19," Griffin said. "There was weak Chinese demand, particular ceramic demand." He added that in Q2, China bounced back a bit, but also that demand has weakened in Europe."

Finding funding: Thunderbird case study
Mineral sands may be facing short-term demand disruptions, but in the longer term the industry is moving toward deficit. Mineral sand miners focus on the highest value part of the deposit first, meaning that ore quality falls over the life of the mine. These lower quality ores yield less ilmenite, zircon and rutile per tonne mined, meaning the rate of their production declines.

As a number of large projects have been operational for decades, the output of heavy minerals is falling, and there is a shortfall in the number of new projects. For this reason, the struggle of some potential major new sites to find funding has been watched with concern.

One such site is Thunderbird, in Western Australia, owned by Sheffield Resources. The resource has an estimated 3.2 billion tonnes of ore, containing 6.9% heavy minerals including zircon, leucoxene and ilmenite. 

But in early 2020, the project was still struggling to find funding. In February 2020, Sheffield Resources announced it cut back development to reduce capital costs. And in April, the company said it had suspended care and maintenance activities in order to preserve cash, announcing a 25% cut to executive pay and a reduction in staff at the same time.

The fortunes of the project shifted in August 2020, when the company secured an A$130.1 million ($93.3 million) investment from Chinese steel producer Yansteel to develop the Thunderbird mineral sand project to supply ilmenite for titanium dioxide production.
The agreement means Yansteel will acquire 50% of the Thunderbird project via the investment. Yansteel is a wholly-owned subsidiary of Tangshan Yanshan Iron & Steel – a privately owned Chinese steel manufacturer – which recently started constructing a 500,000-tpy titanium dioxide processing facility, including a titanium slag smelter.

The deal also includes a take or pay offtake agreement for the total ilmenite output of stage 1 of the project, which is due to be processed at Tangshan’s Chinese titanium dioxide facility, subject to an Australian government review into foreign investments.
Sheffield has also contracted offtake agreements for all of the zircon production during the first stage of development at Thunderbird, the producer said, with agreements for all ilmenite production also signed.

Sheffield will begin a full-scale trial-mining program by the end of the year to confirm the mining plant design and contract costs, and to collect bulk ore samples. Site investigation and design will take place over the same period. 

Commercial director at Sheffield Resources Bruce Griffin ascribed the rapid development of the deal to Sheffield’s ability to be flexible about offering the ideal product to Yansteel, which is in need of feedstock for its titanium slag and titanium dioxide production plans. "We thought about what the right product was and were able to be responsive to a motivated partner."

"There’s a decent sized market for ilmenite. The challenge is finding someone who wants to work with you," he explained. "This was a case of the right party coming at the right time," he added. "In this case it was people who were looking to build a smelter, and they were looking to manage their feedstock risk."

Griffin also noted that the Australian government has an interest in supporting economic activity in the sparsely populated region of Western Australia where the Thunderbird mine is located.