Asian Titanium Dioxide Market to Trigger a Wave of Markups

Xinxin Plastic Website:   Time: 10:10:21, July 10, 2007

Europe: According to titanium dioxide buyers, it has become next to impossible for market prices to go up in the third quarter as proposed by manufacturers. They also noted that the fierce competition for market shares between sellers will make it more difficult to attain a markup of 80 euros/ton as put forward earlier. Most buyers, for their part,  see a possible further price drop in the third quarter of 30-50 euros/ton. The improvement in the US market has increased the confidence of sellers in the markup posture. Production remains normal this week, with buyers smoothly stocking goods.

North America: The news that Basel, whose parent company produces polyolefin in its industry, will pay 9.6 billion US dollars (7.1 billion euros), including the price of the debts involved, to acquire Huntsman, the major titanium dioxide manufacturer in the US, has astonished the chemical industry. The acquisition was announced on June 26 and will be completed in the fourth quarter of 2007. Huntsman’s CEO has said that the acquisition will not affect the continuity of the company's business and its management will not changegreatly. Little reflection of this acquisition has emerged in the titanium dioxide market, with buyers and sellers taking a wait-and-see attitude toward the recently announced policy on the markup of 5 cents/lb. According to sellers, owing to contractual restrictions, no material markup will occur before October 1. Some buyers think that a rise in costs and man-made exports will result in a relative shortage in the domestic market, and in a consequent markup of 3 cents/lb.

Asia: After China completely abolished the 13% export tax rebate, almost all Asian manufacturers announced that the price of titanium dioxide would be raised by 100 US dollars/ton in the third quarter, starting from July. With market prices having gained momentum, the markup may amount to 50 -100 US dollars/ton. According to sources in the industry in the Chinese market, China's imports of titanium dioxide will not be influenced by the said abolition in the short run owing to different quality levels, but the long-term situation is not secure. Sulfuric acid-treated titanium dioxide will shortly exit the market, forcing manufacturers to produce rutile titanium dioxide with higher added value. The elimination of preferential policies has led to sales at higher prices or to production reductions or suspensions by some Chinese manufacturers; thus, export prices are set to rise by about 260 US dollars/ton. To make up the loss from the saidrebate abolition, CFR Asia may offer 1,800 US dollars/ton, which will narrow profit margins between Chinese and foreign products and decrease the advantages that have been enjoyed by China's exporters. The annual growth rate in China's domestic market is 10%; the yearly growth in demand will 70,000 tons, based on the projected 700,000–ton output. Moreover, reducing the rate of production capacity expansion will allow the domestic market to  digest the local products, another adjustment objective of China’s national policy. Prices in China's domestic market are stable, with the price of homemade R930 rutile titanium dioxide of 18,900 yuan/ton running equal to that of last week. Recent environmental protection and energy saving efforts by the Chinese government have exerted greater cost pressure on titanium dioxide producers who employ methods involving the wide application of highly polluted sulfuric acid.

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