Over the last five years manufacturing cash costs have increased by 29%, while pigment prices have only added 14%
Perth, Western Australia (PRWEB) November 18, 2009
TZMI’s latest independent titanium dioxide pigment price forecast (PPF09-H2) suggests for a strong rally in prices over the next 3-5 years. TZMI is forecasting global pigment prices to rise by 11% in nominal terms from present Q3 2009 levels by the end of 2011, with a further increase to around US$2,550 per tonne (delivered basis) by 2014. While demand has been its weakest since the “first oil shock of 1973-75”, pigment producers have been resilient to significant price erosion during the first half of 2009. This is because there is little room to move.
According to TZMI Snr Partner David McCoy, the TiO2 pigment industry “has been in dire straits for a number of years, with industry margins below greenfields reinvestment levels since the mid 1990s and even below the cost of capital for brownfields investment for all but the lowest cost plants since 2001.”
The global TiO2 industry meets at TZMI’s Asia In Focus Congress each year to discuss the state of the sector. This year the event was held in Singapore and over 200 delegates from more than 20 countries attended. “While the global financial crisis was at the front of everyone’s minds” according to Philip Murphy, Managing Director of TZMI, “there appeared to be a strong theme of change emanating from the messages delivered by the chief executive officers through the industry.”
The TiO2 industry has tens of billions of dollars of capital invested in it, but returns throughout the sector have been diminishing as price increases have failed to keep ahead of cost inflation. According to Murphy, “titanium dioxide is one of the few industries the commodities boom forgot.”
Since 2004, TZMI has produced an annual manufacturing cash cost analysis covering over 90% of the global TiO2 industry. Over the last five years manufacturing cash costs have increased by 29%, while pigment prices have only added 14%. Capacity utilisation dropped to approximately 60% in early parts of 2009 as producers battled to maintain inventory levels at a time when cash management was essential. Global capacity utilisation has rebounded strong by Q3 2009 on the back of several facilities being idled or closed: Baltimore & Savannah in the US; Huelva in Spain; Grimsby in the UK; and a number of smaller Chinese producers. The outlook is for a very tight supply/ demand balance through the early parts of 2010 all the way through to 2012.
TZMI’s Pigment Price Forecast is the only independently researched and published price forecast data on the titanium dioxide industry. Within the report regional supply/ demand is analysed in detail and price forecasts by region and by product quality are presented. With the pending Section 363 sale of the number three producer, US-based Tronox Inc in early December, TZMI’s pigment price forecast provides invaluable independent information for the wider investment community.
“While there is no real global differentiation between chloride or sulfate-route product pricing trends, regionally pigment prices can vary widely depending on product quality and local market conditions” reiterated McCoy. “Within China and other parts of Asia there is certainly two tier pricing” he continued to say. According to the report, supply from the Asia-Pacific region is expected to grow at a compound average growth rate (CAGR) of 8.8% in the period to 2014. China is expected to add nearly 600,000 tonnes per year of incremental supply over the next five years. TZMI forecasts a shift in the domestic market towards higher quality TiO2, but the prevailing demand will be for a lower quality product that domestic producers can supply.
TZMI closely follows the global trade of TiO2 as well as keeping abreast of regional and country specific dynamics through its active involvement in the industry, particularly in China.
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