Review of China's Titanium Dioxide Industry

Affected by rocketing international prices and increased domestic demand, China's titanium dioxide output grew steadily in 2011. The structure of product portfolios was further adjusted, and the profitability of manufacturers was enhanced. The situation can be summed up in the following main four characteristics of the titanium dioxide sector: (1) China's total capacity expanded further. The government's industrial control policies have played a significant role in the titanium dioxide industry, one result being that most proposed titanium dioxide projects will employ the chlorination process, the method encouraged by the government, were implemented while the capacity using the sulfuric acid process has continued to increase due to economic inertia. (2)The existing capacity operates at 70% load. Output and capacity of the sector have been increasing together at much the same rate. (3) Enhanced quality. The ratio of upscale products has increased, such as rutile type titanium dioxide. (4) The price of both titanium dioxide and titanium raw materials hit an all-time high in the beginning of 2011, and turned down at the end of the third quarter. The high prices created a big margin and ensured titanium dioxide makers improved profits.

1.  A steady increase in output

China's total output of titanium dioxide was 1.812 million tons in 2011 (up 22.9% y/y), of which rutile type titanium dioxide was 1.32 million tons (up 57.0% y/y), accounting for 73.1% of all titanium dioxide output and increasing 15.9 percentage points compared with the previous year. The output of anatase type titanium dioxide was 423 700 tons (down 24.1% y/y), accounting for 23.5% of the total and down 14.4 percentage points compared with the previous year. The output of non-pigment titanium dioxide was 64 583 tons, (down 8 647 tons or 11.8% y/y).   

China's output of titanium dioxide in 2007-2011
Item    2007    2008    2009    2010    2011
Total output/thousand tons    1 000    787    1 047    1 472    1812
Total output of rutile type/thousand tons    402    359    553    841    1 324
Portion or rutile type/%    40.2    45.6    52.8    57.1    73.1

Geographically, most titanium dioxide manufacturers are located in China's eastern costal area with the twin advantages of capital and technology, and in the Pan Zhihua area of southwest China which is rich in titanium mineral reserves. The titanium dioxide output of these two areas was 66.5% of the nation's total in 2011. In detail, eastern China's output was 643 600 tons, accounting for 35.5% of gross national production. The southwest's output was 562 100 tons, accounting for 31% of the nation's total. Central and southern China contributed 17.9% and 14% respectively of the total. Northeastern China contributed to the remaining 1.5%.
China has 67 titanium dioxide manufacturers in 2011. Three of them produced more than 100 000 tons. They are Sichuan Lomon Titanium Co., Ltd, Shandong Doguide Group Co., Ltd and Henan Billions Chemicals Co., Ltd. The combined titanium dioxide output of these three manufacturers was 431 000 tons, accounting for 23.78% of the nation's total, and their combined output of rutile type titanium dioxide accounted for 32.6% of the nation's total. The sum of the top ten manufacturer's production was 856 400 tons, 43.7% of the nation's total, while that of the top twenty was 1.2314 million tons (58%), and that of top thirty was 1.4763 million tons (81.5%). All the proportions increased compared with them in 2010.

2. Dramatic rise in price to enhance profitability

Spurred by rocketing international prices, rising raw-material prices and increasing needs for the substance in China, the titanium dioxide prices realized by Chinese producers increased sharply in 2011. To take anatase type BA01-01 grade titanium dioxide as an example, the price rose , from RMB13 500 per ton in January to RMB19 800 per ton in October, a nine-month increase of 46.7%. Affected by weakening demand, the price turned down in November. But the yearly average price was RMB16 930 per ton, increased 27.8% compared with the second half of 2010. Due to the rising price, the industry's margin increased rapidly and most manufacturers improved their profit and capital situation.

3. Achieving self-sufficiency and exports growing

Along with the increase of domestic production capacity and the improvement of quality, China basically achieved titanium dioxide self-sufficiency in addition to adding some high-grade products. China first became a net exporter in 2011. The combined amount of import and export was 626 700 tons, with an annual growth rate of 17.3%. In detail, the export volume was 398 100 tons, an increase of 49.6% over one year earlier, while the import volume was 228 600 tons, down 14.7%. Apparent demand volume was 1.643 million tons, an increase of 10.8%.

4. China lacks high-grade titanium ore resources

Among China's titanium reserves, the V-Ti-bearing iron ore accounts for the most and high-grade titanium resources are poor. The development of China's titanium dioxide industry relies heavily on importing raw materials, limited by factors such as technological level of raw materials utilization. In 2011 China imported 2.172 million tons of titanium concentrates ore, accounting for 49.3% of the country's total demand for titanium ore. The supply of high-grade titanium ore resources is essential to the stable development of China's titanium dioxide industry.

5. Capacity expanding too fast

Overcapacity has emerged. The total production capacity of titanium dioxide was 2.6 million tons as of the end of 2011 and the operating rate was 70% in 2011. The manufacturers rushed to expand their capacity, interested by the improved profitability in recent years. It is estimated that China's total production capacity of titanium dioxide will reach 4.4 million tons in 2015 if all proposed projects and expansions are put into operation on schedule. China's apparent consumption of titanium dioxide was 1.643 million tons in 2011, a year on year increase of 11%. The demand in 2015 will be only 2.9 million tons even if annual growth reaches 15% per year between 2011 and 2015.

6. Competition from substitute products

For a coatings producer, titanium dioxide typically accounts for 25% of raw materials cost of coatings production. A persistently high price has brought high pressure on coating producers. To manage such challenges, some international coating giants claimed one by one to take measures to cut their consumption of titanium dioxide, and reduce the cost by seeking for substitutes of titanium dioxide. Some manufacturers aim to use titanium dioxide made via a sulfuric acid process for 5%-10% of the titanium dioxide in coating formulas in coming years. Other coating manufacturers are seeking substitutes for titanium dioxide. All these factors will adversely affect the price and consumption of titanium dioxide.