Titanium Dioxide Sector Faces with Reshuffling

Supply deficit of titanium resources

The titanium dioxide sector in China has developed rapidly in
recent years and the output reached around 730 thousand tons in
2005. The output increase has promoted a consumption growth of
raw material titanic iron ore and the deficit of titanium
resources has become all the more prominent. The proven reserves
of titanium resources in China amount to 965 million tons,
accounting for 38.85% of the world total. Nevertheless,
high-grade titanium resources that can be effectively used are
not high. Titanic iron ore producers have small scale and
outdated technology. Neither the quality nor the output can meet
the needs in the development of the titanium dioxide industry.
Titanium resources (high titanium residues in particular) in
China have a heavy dependence on import. It is expected that 4.4
million tons of titanic iron ore or 2.8 million tons of high
titanium residues will have to be imported during the Eleventh
Five-year Program period (2006-2010) to make up for the deficit
of titanium resources in China.

Output increased rapidly

    (1) Production scale and technical level have upgraded
drastically

According to the Statistics made by China Titanium Dioxide
Industry Association, the total output of titanium dioxide in
China was around 730 thousand tons in 2005, an increase of 21.7%
over 2004. The output of rutile varieties was 226 thousand tons,
an increase of 58.2% and the output of anatase varieties was
around 410 thousand tons, an increase of 13.89%. Due to the
impact from environmental protection, the output growth of
anatase varieties was relatively small. The units that were
forced to make production restriction or suspension were
basically producing anatase varieties. The output of
non-pigment titanium dioxide was around 92 thousand tons,
basically equal to the output in 2004.
   Compared with 2004, titanium dioxide producers of large scale
in China increased rapidly in 2005. The number of producers with
an annual output of over 30 thousand tons reached 5 in 2005, while
there were only 2 in 2004 including Shandong Dongjia Group and
Zhenjiang Titanium Dioxide Co., Ltd. There were 28 producers
with an annual output of over 10 thousand tons (inclusive) in
2005, being 5 more than the year 2004.
   The titanium dioxide sector in China has made outstanding
achievements in the development of rutile varieties in recent
years. The production of the titanium dioxide sector has also
improved further.

    (2) Macro control policies have slowed down production
expansion

With the impact from industrial control and environmental
protection policies in recent years, the production expansion
in the titanium dioxide sector is slower than has been expected.
Since the second half of 2003 around 10 titanium dioxide projects
with a total capacity of around 200 thousand t/a have been under
construction, design and planning. Except 4 of them that are
already completed and put on stream, other projects have been
delayed or suspended. According to the projection made by China
Titanium Dioxide Industry Association, the total capacity of
titanium dioxide in China in 2006 will be lower than the expected
900 thousand t/a.
   Besides, due to the increase of environmental protection
expenses and the price rise of raw materials, the production cost
of titanium dioxide increased in 2005.

Export increased considerably

China mainly imports titanic iron ore and high titanium residues
from Australia and Canada and small amounts are also imported
from Vietnam, India and Korea. Judging from the import and export
trend in recent years, the import amount increased gradually
before 2004. The import amount in 2005 was however only 227 735.9
tons, a drop of 9.2% from 2004. By contrast, the export amount
in 2005 reached 157 424.6 tons, an increase of 67%.
   Although the export amount of titanium dioxide in China has
increased considerably, the export price is relatively low. Most
of titanium dioxide exported from China is used as semi-finished
product for in-depth processing. The domestic titanium dioxide
sector should therefore conduct technical innovation to improve
the quality and application property of titanium dioxide so as
to increase the export price of the product and promote the
further development of the sector.

Accelerated pace of merging

The production expansion of titanium dioxide using the sulfuric
acid process has been slowed down in China in recent years, but
the capacity is still making a constant increase. The capacity
of titanium dioxide using the sulfuric acid process in Sichuan
Longmang Group Titanium Industry Co., Ltd. reached 40 thousand
t/a at the end of 2005. The company plans to expand the capacity
further to 80 thousand t/a in the second half of 2006. The 10
thousand t/a fiber-grade titanium dioxide project in Shandong
Sansheng Titanium Industrial Co., Ltd. started production in
2005. (CCR2005, No. 17) The construction of titanium dioxide
projects using the chlorination process has also been speeded
up. For example, Du Point has established a wholly-owned
titanium dioxide production base in Shandong province. It is
reported that after the completion of the first phase, the output
can reach 200 thousand tons a year. (CCR2005, No. 20) Hunan
Zhuzhou Chemical Group intends to launch a 30 thousand t/a
titanium dioxide unit.
   While making capacity expansion, the pace of merging between
companies has also been accelerated. China Nuclear Huayuan
Titanium Dioxide Co., Ltd. purchased a titanic ore plant and a
titanium dioxide producer in Kunming, Yunnan province in 2003
and the total capacity of titanium dioxide in the company has
reached 50 thousand t/a today.

Table 1  Major Titanium Dioxide Producers in China in 2005
Producer    Total     Rutile    Anatase     Non-pigment

Shandong Dongjia Group    44 862    20 566    24 296    -
China Nuclear Huayuan Titanium Dioxide Co.    38 884    36 124
    2 760    -
Zhenjiang Titanium Dioxide Co.     35 001    31 411    3 590    -
Sichuan Longmang Group Titanium Industry Co.    35 200    35
200    -    -
PanSteel Chongqing Titanium Industry Co.    33 820    33 820
    -    -
Jinan Yuxing Chemical Plant    26 555    17 579    8 976    -
Tongling Anada Titanium Dioxide Co.    23 016    -    23 016    -
Yunnan Dahutong Industry & Trade Co.    21 402    -    21 402
    -
Cangwu Shunfeng Titanium Dioxide Co.    20 580    -    20 580
    -
Nanjing Titanium Dioxide Chemical Co.     18 756    10 14