TiO2 prices hold steady; market reaches equilibrium

But a looming feedstock shortage has sustained fears of further supply constraints to come in 2018.

Producers, consumers, and traders of titanium dioxide (TiO2) report that markets are reaching a balance after two years of strong demand and constrained supply. But some fear this new-found stability could be disrupted if feedstock markets continue to tighten.

TiO2 buyers in Europe and China have reported slightly easier markets since July 2018, concurrent with inventories recovering from a prolonged period of very tight supply.

Prices have been on a long-term uptrend since early 2017, driven by two chief factors: reduced output in China and increased global demand.

Environmental inspections in China hit production and forced the closure of a large number of smaller local producers that were using outdated and highly polluting technology, while global demand rose due to increased consumer spending in key markets.

The market is once again finding a balance, buyers said, with new production capacity in China replacing the older and outdated facilities that were closed, while the growth in spending slows.

A large number of pricing contacts have confirmed these expectations to Industrial Minerals, which have also been expressed publicly by a number of the largest TiO2 producers.

Long-term TiO2 demand is closely linked to economic activity, which drives consumption in the manufacturing and construction sectors.

So far in 2018, economic activity has been accelerating in the US, but the pace of GDP growth has been lower year on year in China and the EU.

Inventory levels are rising in China due to slow local demand, despite rising exports to Europe, a buyer of Chinese material reported to Industrial Minerals.

Industrial Minerals assessed prices for titanium dioxide pigment, high quality, bulk volume, cfr Asia, at $2,600-3,000 per tonne on August 9, compared to a yearly high of $2,800-3,100 per tonne last assessed on June 7.

“[Chinese producers] are aggressively marketing [their material] to European buyers,” one trader told Industrial Minerals in July.

Multiple participants in the European markets have reported heavy stocks all along the supply chain, swollen by the rising imports.

“Nobody is desperate, nobody is fighting to buy,” a seller said.

Industrial Minerals assessed the price of titanium dioxide pigment, bulk volume, cif Northern Europe, at €2,650-3,100 ($3,031-3,540) per tonne on August 9, down from €2,800-3,200 per tonne in June 2018.

Feedstock threat looms

Yet, buyers and sellers of titanium-dioxide feedstock mantain that the mineral end of the market is still experiencing significant supply-side constraints.

Integrated producer Tronox’s shift away from external sales and a series of shutdowns and industrial problems at Richards Bay minerals in South Africa have lowered the global availability of rutile, chloride and sulphite slag.

This problem is likely accelerate due to miner Iluka’s easing output and a shortage of new projects coming online to replace old and retiring capacity.

Industrial Minerals assessed prices for rutile concentrate min 95% TiO2 bulk cif China at $950-1,100 per tonne on August 9, compared to $800-840 per tonne a year ago.

“I can see a scenario where feedstock prices will escalate due to a looming supply crunch,” one player in the feedstock market told Industrial Minerals. “Feedstock and pigment prices might even end up having to increase regardless of pigment demand due to feedstock pricing.”

Speaking about the US TiO2 market, one trader said that Tronox, Rio Tinto and Illuka’s production of high-end feedstock would be key world supply for the rest of the year.