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Titanium dioxide: Firm trend

A. Srikanth

PICK up in demand and consolidation in the industry have been the two driving forces behind the recent increase in the global prices of titanium dioxide). Global demand declined or posted marginal growth rates (depending on the region) during the first half of 1999. However, the second half of 1999 and subsequent periods witnessed significant improvement in demand, especially from the paper industry, which consumes 13 per cent of the total production of titanium dioxide.

During April, while Millennium Chemicals (the second largest manufacturer of titanium dioxide in the world) increased its European prices by 10 per cent, DuPont (the largest manufacturer) increased its prices in the US markets by five per cent. The price increases were mainly for titanium dioxide sold to the paper manufacturers. As DuPont announced further price hikes for the paper industry during May, other manufacturers have followed suite.

Recently, Millennium Chemicals announced fresh price hikes of nine per cent in the European markets effective June 1. Though titanium dioxide prices for coatings and plastics (which account for 58 per cent and 21 per cent of the total consumption, respec tively) have remained subdued, reports suggest that it is only a question of time before prices are hiked for these sectors too. The domestic scenario has been slightly different with the prices of both anatase and rutile grade remaining subdued, though they have shown signs of some revival.

Consequent to the consolidation in the global industry, production cutbacks to reduce the inventory levels have become easier. Both Millennium Chemicals and Kerr-McGee have acquired the titanium dioxide businesses of Bayer and Rhone Poulenc, respectively . Recently, while Kerr-McGee acquired Kemira's US and Dutch assets, Huntsman's has acquired the titanium dioxide from ICI. Consolidation in the paints industry world wide (which increases its bargaining power) has been the key driving force behind the ri sing M&A in the titanium dioxide industry.

According to a report in the Chemical Weekly, the global titanium dioxide demand during 2000 is expected to be around 2-3 per cent compared to 1-2 per cent during 1999. The annual growth rate in demand till 2005 is expected to be around 2.60 per cent. By 2005, while the global demand is expected to be around 4.50 million tonnes, the total capacity is expected to be around 4.90 million tonnes. The ongoing consolidation in the global titanium dioxide industry is expected to bring about rationalisation in the demand-supply balance.

The increase in the global is a cause for concern for the domestic end-users (mainly the paints sector) as most of the requirements are imported. With titanium dioxide accounting for the majority of the total raw material cost for paints, firming up of global titanium dioxide could affect its bottomline, especially when the demand for paints is subdued.