Tight Supply of Titanium Dioxide Forecast for the Next Few Years   

Prices soar

Titanium dioxide is a major raw material for the production of plastic colorants, paints and coatings. Since the end of 2010, its prices have been soaring. In Asia, Kronos, Tronox and DuPont all announced that since the third quarter of 2011, the contract prices of their titanium dioxide products will be raised by US$300 /t, US$400 /t and US$500 /t, respectively. Currently, the cost and freight of titanium dioxide reach US$3 300 to US$3 500 /t.
   In China, since May, titanium dioxide prices have climbed from RMB21 700 /t to RMB22 100 /t, up 1.84% month on month. During March this year, titanium dioxide prices even grew 27.59%.
   In the United States, DuPont and Cristal recently announced plans to increase their titanium dioxide prices by US$0.10/lb from September 1 onwards, only 60 days away from their last price increases (US$0.15 /lb) starting on July 1 announced in April.
   In Europe, manufacturers raised the contract prices of their titanium oxide products by Euro 250 /t in the third quarter this year. It is expected that in the fourth quarter, they will have a similar price increase. Since the first quarter of 2010, titanium oxide prices have soared by 29%. In Northwest Europe, the delivered prices of titanium oxide now reach Euro 2.50 - 2.75 /kg. It is expected that by the end of 2011, titanium dioxide prices in Europe may reach Euro 3 /kg.
   Experts warn that before 2015, the supply of high-grade titanium dioxide will always be inadequate, and titanium oxide prices in this period will likely continue rising.

Demand continues to grow

Global demand for titanium dioxide is now about 4.90 million to 5 million tons annually, and regional demand is expected to grow 2.7% to 6.4% annually in Asia and 2.7% to 5% in other developing regions like Latin America. Meanwhile, European demand is expected to grow 1.9% annually, according to the forecast of German distributor Brenntag.
   According to this growth forecast, the world's supply of titanium dioxide should be increased by 132 300 - 135 000 tons annually to meet the market demand. Deutsche Bank analysts predict high-grade titanium dioxide giant DuPont's capacity expansion will not be enough, global demand for high-grade titanium dioxide will reach about 4 million tons this year, and its annual growth rate will reach 3% to 4% (120 000 to 160 000 t/a) in coming years. Market participants expect that the overall titanium dioxide market situation in 2012 will remain grim.
   According to a professional report, China consumed 1.24 million tons of titanium dioxide in 2008. As China has a population of 1.33 billion, the average person in the country only consumed 0.93 kg of titanium oxide a year. Because China's current per capita consumption of titanium dioxide is smaller than in wealthy countries, there is a huge space for growth in China's titanium oxide market. In the next 20 years, China's demand for titanium dioxide will grow rapidly.

High-grade products are in short supply, but low-end products are in surplus

There are two titanium dioxide production processes: the sulfuric acid process and the chlorination process. In China, almost all producers use the sulfuric acid process, and the production capacity was 1.5 million t/a in 2009 and 2.3 million t/a in 2010, of which the chlorination process accounted for less than 2%. In 2010, China's titanium oxide output was 1.472 million tons. Out of nearly 70 titanium dioxide producers in China, only one - Jinzhou Titanium Dioxide Industry Co Ltd - uses the chlorination process. But in developed countries, the chlorination process accounts for 60% to 70% of capacity. The sulfuric acid process is outdated. It has a long process flow, high energy consumption, large pollutant emissions and low-quality products and has been included in China's national list of restricted technologies, processes and products.
   Currently, the world's top 7 titanium oxide producers account for 68% of the global total titanium oxide production capacity, which is mainly distributed in North America and Western Europe. In China, today's titanium dioxide producers are generally small. Only a few have a capacity of 80 000 t/a or more, such as Shandong Dongjia Group, Sichuan Lomon Titanium Oxide Co Ltd and Henan Billions Chemicals Co Ltd. Most of them focus on the production of anatase-type titanium dioxide, leading to fierce competition and excess capacity for this product.
   Although some titanium dioxide producers will expand their production capacity in China in the second half of 2011, this is not good news for European and American customers who need high-quality titanium oxide, because most of the producers' products are low-end titanium dioxide.
   In the titanium oxide market, high-grade products are in shortage, while low-end products are oversupplied.

Future capacity expansion will be limited and will develop mainly in China

Over the past 10 years, except for China, the world's titanium dioxide production capacity had almost no increase, and the 2008 global financial crisis made a lot of titanium dioxide plants shut down or idle. Data show that in 2008, the global titanium dioxide output was 4.942 million tons, down 5.34% year on year. It even fell by 15% year on year in 2009.
   So far, only DuPont attempts to make a substantial expansion of its titanium oxide capacity. The company plans to increase its titanium oxide capacity by 350 000 t/a before the end of 2014. It announced plans to build a 200 000 t/a titanium dioxide project in Dongying, China. At the same time, the company said that it will transform its titanium oxide plants in the United States, Mexico and Taiwan to increase their combined capacity by 150 000 t/a.
   For China, the titanium oxide capacity expansion of the next 5 years is shown in Table 1.
   Industry insiders estimate that the current boom cycle of the titanium dioxide industry will extend to 2014, mainly due to the following: (1) the economic recovery in developed countries brings their demand back to normal levels; (2) the construction of new titanium oxide plants abroad generally takes 3 to 5 years, and in the next three years, 70% of the world's new titanium oxide capacity will arise in China; (3) the expansion of the sulfuric acid process-based titanium oxide capacity is limited in China due to environmental and financial pressures, but the construction pace of new capacity based on the chlorination process is too slow due to technological issues; (4) the inadequate supply of titanium ores will drive up the price titanium dioxide; and (5) economic growth in China and other emerging markets, and the real estate recovery in the USA will contribute to a price hike.

Table 1 New titanium dioxide capacity in China in 2010-2015 (thousand t/a)
Producer    New capacity in 2010    New capacity in 2011-2015
Shandong Dongjia Group    50    -
Sichuan Lomon Titanium Oxide Co Ltd    60    60
Henan Billions Chemicals Co Ltd    50    -
Wuhan Fangyuan (Qianjiang) Titanium Oxide Co Ltd    20    -
Jiangxi Tikon Titanium Oxide Co Ltd    50    50
Maanshan Goldstar Chemical Co Ltd    30    -
Jinan Yuxing Chemical Co Ltd    100    100
Jinzhou Titanium Oxide Industry Co Ltd    30    30
Guangdong Huiyun Titanium Ox