Global economic recovery spurs TiO2 market growth

By William Clarke
Published: Thursday, 12 August 2021

Growing demand for the multiple products that depend on titanium dioxide for their manufacture is driving rising output and revenue for its producers, but that is also raising questions about the future supplies of the feedstock materials they need, as William Clarke reports.

Titanium dioxide markets are entering an upswing while the global economy gets back into action with the effects of the Covid-19 pandemic beginning to fade. Markets which have been stagnant for years are starting to see growth, with depleted inventories and growing global demand fueling new interest.

But producers face an uncertain future because the long-standing structural shortfall in titanium dioxide feedstock has only grown wider in recent years, with new pigment capacity outpacing ore production.

 

titanium dioxide - Getty Images  

Chinese demand boosted

Titanium dioxide is by far the most widely used white pigment. No substitute can match the whiteness, opacity and low toxicity of titanium dioxide. For this reason, it finds its way into almost all commercially produced paint, as well as a huge range of manufactured goods.

Demand for titanium dioxide is very closely linked to global gross domestic product growth. The key drivers of titanium dioxide demand are manufacturing, particularly consumer goods and automobile manufacturing, construction and renovation. These are all closely linked to spending patterns. When the economy is growing, optional spending on consumer goods and housing increases.

Titanium dioxide has long been held to be one of the most classically cyclical commodities. When times are good, demand is high, and users rush to build up stocks. And when growth slows, and demand ebbs, the market turns rapidly bearish, with users surviving on stocks and hand-to-mouth purchases until demand recovers.

For this reason, the economic upheavals of 2020 could have been expected to badly disrupt the titanium dioxide market. But the effects on prices were relatively muted. For titanium dioxide pigment, sulfite grade, fob China, prices fell to $2,250-2,450 per tonne at the start of 2021, from $2,200-2,550 per tonne a year earlier, having only gone as low as $2,100-2,300 per tonne during the intervening period.

And now, with economic activity in China recovering, prices have hit a sustained upward trend for the first time in years. Fastmarkets assessed the price of titanium dioxide pigment, sulfite grade, fob China at $2,600-2,800 per tonne on July 29. The reason for this rapid recovery is that stocks, both in China and among users of high-grade chloride titanium dioxide in Europe, are low.

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.

United States-based Chemours produces high-quality titanium dioxide products through the chloride route with the use of proprietary technology. Sulfate-route titanium dioxide production is the primary means of production in China, but chloride production is also rising rapidly.

Chinese economic growth slowed sharply in 2020, while the country absorbed the first wave of the Covid-19 pandemic. There are signs that titanium dioxide exports from China are starting to slow.

Titanium dioxide exports in the first six months of 2021 were 640,538 tonnes. This is an increase from 563,153 tonnes in the first six months of 2020, but a drop from the 651,011 tonnes exported in the second half of 2020.

Indian demand for Chinese exports was hit by the 2021 Covid outbreak and subsequent lockdown. But Chinese exports are also being hit by increased local demand. "Chinese TiO2 demand is at an all-time high. There is less available for export," a trader told Fastmarkets.

This is driving a long-term decoupling, in which the US and European markets are increasingly becoming self-sufficient in titanium dioxide. Although it remains the largest exporter, China is no longer setting the pace of global markets. "This trend has been emerging for a long time. Sulfite-grade TiO2 does not meet western consumers’ environmental requirements," the trader said.

This decoupling is being accelerated by the lingering effects of the US-China trade war, after former US President Donald Trump imposed tariffs on imports of Chinese titanium dioxide.

Benefits of supply discipline

Prices are also rising, albeit more slowly, in Europe and North America. The stage for these price rises was set by a sustained effort by western chloride titanium dioxide producers to disrupt cyclicality, varying their output to reflect changes in demand.

This policy has been pursued by Chemours, which has been operating well below capacity since 2019 while it implements a price stabilization strategy designed to reduce price fluctuations. With demand now recovering, Chemours has been ramping up production in response. In quarterly results for the January-March period, released in May, Chemours reported sales were up by 16% year-on-year, while currency-adjusted prices were down by 1%.

"We believe that renovation and remodeling trends are strong, with stimulus and infrastructure potentially providing longer-term tailwinds," Mark Newman, then chief financial officer at Chemours, said when the results were released. Newman has since taken over as chief executive officer.

And on July 28, Tronox, which is now the largest integrated titanium dioxide pigment producer, reported record revenues and volumes sold in the quarter ended June 30, 2021. Titanium dioxide volumes were up by 45% year-on-year, and up by 1% quarter on quarter. Titanium dioxide prices achieved by Tronox were up by 9% year-on-year, and 5% quarter on quarter.

Jean-François Turgeon, Tronox co-chief executive officer, said: "We believe we are still early in the cycle. Regional pricing initiatives are continuing across both TiO2 and zircon. Demand remains very strong, driven by a recovery across all of our end-markets, and we are working very hard to support the demand of our customers."

"For the third quarter," Tronox said, "we are balancing strong customer demand against our ability to deliver based on continued supplier and logistics constraints. Taking these factors into consideration, we expect TiO2 volumes to decline by 5-10% sequentially, which still represents growth compared with third-quarter volumes in 2020, 2019 and 2018."

And signs of demand from major titanium dioxide end-users were also extremely positive. In results for the second quarter of 2021, released on July 19, paint maker PPG reported net sales of $4.4 billion, an increase of 45% year-on-year, showing very strong coating demand despite the continuing logistics disruptions caused by the pandemic.

"Our strong organic sales growth reflects a partial demand recovery from the pandemic, including above-market contributions across many of our businesses," PPG chief executive Michael McGarry said. "However, our volume growth was significantly tempered due to various supply and component disruptions, including those that reduced the overall manufacturing capability of our customers."

AkzoNobel, another paint-making giant, also reported a rapid rise in coatings demand, with January-June 2021 revenues up by 18% year-on-year, due to strong end-market demand.

Looming feedstock shortages

There is a cloud on the horizon for titanium dioxide producers, both in China and particularly in the US, and that is an emerging shortage of feedstock.

Chinese titanium dioxide producers have been dealing with a local shortfall in ilmenite production, forcing higher imports and raising prices. Fastmarkets assessed the price of ilmenite concentrate, 47-49% TiO2, cif China, at $280-300 per tonne on July 22, up from $210-230 per tonne a year earlier and $190-210 per tonne at the start of 2020.

The market for high-grade feedstock used in chloride TiO2 production could be about to get tight as well. Rio Tinto on June 30 declared force majeure on customer contracts for titanium slag production from its Richards Bay Minerals site (RBM) in South Africa. Titanium slag is a form of upgraded ilmenite and is suitable for use in chloride TiO2 pigment production.

RBM halted mineral sand mining earlier this year due to an outbreak of violence that threatened the safety of workers. More recently, on July 21, Rio Tinto announced that the RBM operations will shut one of its four titanium slag furnaces, slowing the depletion of stockpiled feedstock after mining operations at the site were halted. With mineral sand mining stopped, the furnaces at RBM have been relying on stockpiled ilmenite.

"Shutting a furnace has a major effect on the business and broader community, and is not a decision we have taken lightly," Rio Tinto’s chief executive for minerals, Sinead Kaufman, said. "However, we will not put production ahead of the safety of our people, and there are still fundamental criteria that must be met before we can resume operations in a sustainable manner."

RBM is a major seller of rutile and zircon, and one of the largest producers of titanium slag, which is upgraded from ilmenite produced at the mine. A planned $463 million upgrade to RBM has been on hold since 2019 due to security problems at the site. Rio Tinto has suspended its titanium slag production forecasts due to the violence at RBM.

Rio Tinto, which also produces titanium slag at a facility in the Canadian province of Quebec, is the only major non-integrated titanium slag producer supplying titanium dioxide pigment producers. Its titanium dioxide slag production was down by 7% to 1.12 million tonnes in 2020, which was a decline the producer attributed to lower market demand and operational problems at its RBM facility.

Elsewhere, Iluka’s Sierra Rutile mine in Sierra Leone will suspend rutile production in the fourth quarter of 2021, because of business and financial challenges.

Globally, there is a backdrop of a long-standing decline in rutile production because of the shortage of suitable high-grade mineral sand deposits, and the depletion of ore quality at existing sites. Mineral sand deposits contain varying concentrations of different minerals, and miners often focus on the area richest in rutile, compared with the less valuable ilmenite, meaning that the total amount of rutile produced will fall over the life of the mine.

So far, high-grade feedstock prices have been slower to rise than ilmenite, due to the lower ability of European and American producers to ramp up capacity. Fastmarkets assessed the price of rutile concentrate, 95% TiO2 min, large volumes for pigment, fob Australia, at $1,300-1,400 per tonne on July 22, compared with $1,150-1,200 a year earlier.