Titanium Dioxide Market Recovers and the Industry Becomes Rational

By Ren Min, China Chemical Industry Productivity Center

I. Domestic titanium dioxide market has achieved steady recovery

1. Export volume increased significantly
Since 2013, the real estate market of the United States has gradually recovered, driving up the demand for titanium dioxide in the international market, and promoting the trade flow and price changes of titanium dioxide in the world. In the first half, the export volume of titanium dioxide from China reached 275 kt, a drastic year-on-year growth of 56.7%. However, the import volume to China was 94 kt, up 218 tons from the previous year and the year-on-year growth was only 2.4%.
In 2013, China’s total capacity to make titanium dioxide reached 2.9 million t/a, the output was 2.155 million tons, the export volume reached 403 kt, the import volume was 193.7 kt, and the apparent consumption reached around 1.946 million tons. It is expected that in 2014, China’s import volume of titanium dioxide will remain at around 200 kt, being basically the same as that in 2013, and the export volume will climb drastically to 600 kt. See Figure 1 for foreign trade data in the first half of 2014.

2. Price was pushed up by increasing exports
In the first quarter of 2014, the titanium dioxide sector remained sluggish. The international market improved after the second quarter. For example, the total amount of foreign trade in Sichuan Lomon Group Corporation exceeded 10 kt per month during April-June, having greatly facilitated the company’s destocking campaign. Driven by booming exports, major enterprises have announced to lift their prices in succession. After the adjustment of RMB300/t for two consecutive times in April, the price of rutile titanium dioxide was made two upward adjustments of RMB300/t respectively on June 4 and July 3. However, it is worthwhile to note that it is difficult for only relying on foreign trade to pull up the domestic market. In fact, domestic rutile titanium dioxide producers that use the sulfuric acid process with considerable exports mainly include Sichuan Lomon Group Corporation, Shandong Dongjia Group, Henan Billions Chemicals Co., Ltd., China Nuclear Huayuan Titanium Dioxide Co., Ltd., Shandong Dawn Titanium Industry Co., Ltd., Jinan Yuxing Chemical Co., Ltd., Ningbo Xinfu Titanium Dioxide Co., Ltd., Jiangxi Tikon Titanium Oxide Co., Ltd. and Anhui Annada Titanium Industry Co., Ltd., etc. Of which, the individual large-scale producers with the export ratio of being more than 50% still have intention of raising price, and most other producers that are trapped in the soft domestic market do not blindly raise price, and they often adjust price according to their own production and inventory conditions.
Compared with rutile titanium dioxide with a constant price rise, anatase titanium dioxide was much more rational. In regions like Guangxi and Sichuan provinces, the price of anatase titanium dioxide was relatively low and mostly lower than RMB10 000/t (including tax). The price of anatase titanium dioxide was relatively higher in the regions such as Central China and East China, being around RMB10 300/t. At present, the typical price difference between anatase titanium dioxide and rutile titanium dioxide is close to RMB3 000/t. The main reasons for this are the relatively less exports of anatase titanium dioxide using sulfuric acid process and the fierce competition among producers.
3. Recovery in the international market
According to the financial results for the second quarter of 2014, compared with the same period of 2013, Tronox turned loss into profit and gained a net profit of US$2.0 million. Kronos turned loss into huge profit and achieved a net profit of US$33.1 million, compared with the same period of 2013. The operating rate of Kronos hit a new high. After experiencing four consecutive quarters of decrease in 2013, the operating rate of Kronos has rebounded drastically since 2014, and rose from 90% in the first quarter of 2014 to 97% in the second quarter. Benefiting from the strong recovery of coatings as well as construction markets in North American, in the second quarter, the sales volume of titanium dioxide in Tronox rose 11% year-on-year and 13% compared with the value in the first quarter. The inventory of Tronox fell constantly, its operating rate maintained at a high level of over 80%, and the company presented a good situation of sales volume being greater than output for three consecutive quarters.
From the view of performances of global titanium dioxide giants, the demand for titanium dioxide in the international market has rebounded and the profit of the sector has recovered. The improvement of global titanium dioxide sector will hopefully further promote the profitability improvement of domestic titanium dioxide enterprises.

II. Titanium concentrate ore market remained weak

In the first half of 2014, China imported 1.007 million tons of titanium concentrate ore, down 17.8% year-on-year.
Since mid-April, with several upward adjustments of price in Sichuan Lomon Group Corporation, the market price of rutile titanium dioxide using sulfuric acid process has climbed. However, three months afterwards, the price trend of raw material titanium concentrate ore in Panzhihua was not affected by this positive factor. There are three main reasons for this.
First, the titanium concentrate ore in western Panzhihua is mainly sold to domestic titanium dioxide producers. While at present, the domestic trading market is weak and far inferior to foreign trade market. Due to the brand effect, not many producers have good sales in the global market. Most producers are trapped in the weak market, so they take a more cautious attitude towards purchasing raw material titanium concentrate ore and also exert a greater pressure on the prices.
Second, according to the foreign trade data provided by the customs in the first half of 2014, Australia, Mozambique, Vietnam, India and South Korea were China’s major import sources of titanium concentrate ore, and the import volume totaled 1.0067 million tons. In the regions like East China, the price of titanium concentrate ore from Panzhihua was not significantly cheaper than imported ore, and considering the quality advantage of imported ore, some producers preferred to choose imported ore.
Third, most producers in Shandong province purchased titanium concentrate ore from Yishui of Shandong province and the ore has not much difference in grade compared with that from Panzhihua. At present, the market price of titanium concentrate ore from Yishui is around RMB1 050/t (including tax), being not much different from the delivered price of titanium concentrate ore from Panzhihua. Therefore, some producers from the regions such as Shandong, Henan, Anhui and Jiangsu provinces prefer to choose ore from the neighboring region. In view of the market price, the profit margin of titanium concentrate ore producers in Yishui is slightly higher than those in Panzhihua.

III. Development of titanium dioxide sector faces both opportunities and challenges

1. Capacity expansion significantly slows down
In the past two or three years, the number of new and expanded titanium dioxide projects reached 28 to 30, and the combined capacity of these projects reached 1.6-1.8 million t/a. If all these projects are put into production on schedule, China’s total capacity to make titanium dioxide will drastically increase to 4.2 -4.4 million t/a by 2015. However, in fact, except for several projects using the chlorination process and a few projects using the sulfuric acid process, the vast majority of projects have been delayed or even shelved, and some projects have been cancelled. The blind expansion of the sector has been restricted by the dramatically changed market conditions. A few years ago, because of a favorable situation of titanium dioxide market, numerous titanium dioxide projects were constructed or planned for construction. However, many projects have been suspended or cancelled because of the capacity expansion and weak market in the past two years. Since 2013, only a few new projects whose construction has been launched are in Ningbo Xinfu Titanium Dioxide Co., Ltd., Panzhihua Dongfang Titanium Industry Co., Ltd., Guangxi Dahua Chemical Plant, Henan Billions Chemicals Co., Ltd., China Nuclear Huayuan Titanium Dioxide Co., Ltd. and Xuzhou Titanium Dioxide Chemical Co., Ltd. of Nanjing Titanium Dioxide Chemical Co., Ltd., etc.
2. Denitration field has been highly acclaimed
Because a large amount of nitrogen oxides (NOx) emissions from coal-fired power plants and various industrial boilers has caused serious environmental pollution, China has promulgated the corresponding mandatory denitration policy, and each power generation group as well as steel plant has also formulated the corresponding schedule to construct denitration system in the next few years. The denitration market will soon enter a period of rapid growth. The selective catalytic reduction (SCR) is a denitration technology which is most frequently used and most efficient. The technology uses a large amount of denitration catalyst, which then has a huge market potential. Nanosized titanium dioxide is the main component of denitration catalyst, accounting for 80%-90% of the weight of denitration catalyst. With the rapid growth of demand for denitration catalyst, the demand for nanosized titanium dioxide will also increase rapidly.
According to the projection made by the Ministry of Environmental Protection, by 2015, the capacity of coal-fired power plants which need denitration system will reach 817 million kW. During the 12th Five-Year Plan period (2011-2015), the total demand for SCR catalyst in thermal power plants will be 800 000 cubic meters. During 2016-2020, the installed capacity of thermal power plants will also increase, and denitration catalyst has a service life of around 3 years and need to be replaced regularly. Therefore, the SCR catalyst needed for new power plants, and the replaced SCR denitration catalyst will total over 1.0 million cubic meters (200 000 cubic meters annually). Producing one cubic meter of catalyst consumes around 0.5 tons of nanosized titanium dioxide, so the average annual demand for nanosized titanium dioxide will be 80 kt during the 12th Five-Year Plan period (2011-2015), and the figure is expected to reach 100 kt during the 13th Five-Year Plan period (2016-2020).
With the rapid development of SCR denitration catalyst production, China has made progresses in its main raw material, the specialty titanium dioxide, although domestic products still lag behind imported products in the aspects of certain application performance and stability. Because the pigment type titanium dioxide market has remained in the doldrums for a long time, the denitration field with good prospects has attracted attention from large enterprises. Many enterprises have been ready to or already engaged in the production of titanium dioxide for denitration. For example, on March 6, Jilin Gpro Titanium Industry Co., Ltd. signed a technology license contract with Sakai Chemical Industry Co., Ltd. China Nuclear Huayuan Titanium Dioxide Co., Ltd. signed a technical cooperation framework agreement with Institute of Process Engineering Chinese Academy of Sciences, and the cooperation scope will include the industrial production technologies of titanium dioxide for denitration, titanium tungsten powder, titanium tungsten silicon powder, honeycomb denitration catalyst, as well as recovery and reuse technologies of waste denitration catalyst.
3. Environmental pressures promote the industrial upgrading
With the gradual implementation of new national economic policies and environmental regulations, the development of titanium dioxide sector has faced multiple challenges. Behind all the challenges, opportunities are transient. To cope with the environmental pressures, the majority of downstream coatings and papermaking enterprises will also have to conduct industrial upgrading. Their industrial upgrading will be bound to put forward new requirements to the titanium dioxide sector, and promote enterprises to improve product quality, realize the transformation and upgrading, and develop toward energy conservation, environmentally production and high technology. At the same time, the increasing strictness of environmental protection policy will accelerate the phase out of production units with backward technologies.
With the tightening of environmental requirements and increasing public awareness on environmental protection, the environmental conditions of titanium dioxide enterprises have improved significantly, and the vast majority of enterprises have installed qualified waste disposal facilities and their final effluent quality can meet discharge standard. The enterprises have suited their measures to local conditions, and created the clean production and circular economy industrial chains (including sulfur-titanium, sulfur-phosphorus-titanium, sulfur-iron-titanium and sulfur-ammonium-titanium, etc.) with distinct characteristics of the enterprises or regions.