Supplies tight, tags higher

By Staff -- Purchasing, 1/15/1998

Buyers can expect to see higher titanium dioxide prices through the first three quarters of 1998, because supplies will remain tight through the first half of the year. For the past year, rutile-grade titanium dioxide prices hovered between 87cents/lb and 89cents/lb, according to Purchasing's monthly chemical transaction price survey. In October, spot prices jumped to 91cents/lb. In November, spot tags increased to an average of 92cents/lb.

Industry experts predict this upward momentum will continue with another increase coming as soon as the first quarter. Buyers forecast spot tags will move up another 2cents/lb by the beginning of the second quarter.

Contract prices for titanium dioxide are beginning to follow spot market tags upward. In the third quarter, the average domestic contract for this pigment was 87cents/lb. This price moved up to 88cents/lb in October, before rising another penny to 89cents/lb in November. Buyers of titanium dioxide predict they'll be paying an average of 92cents/lb in April.

SUPPLY: Tight

There are five large-volume titanium dioxide producers in the U.S. Two major mergers are in the works. Millennium Inorganic Chemicals is buying Rhone-Poulenc's titanium dioxide business, and DuPont is acquiring Tioxide's titanium dioxide business from ICI.

What will be the impact of these mergers on the domestic market? "In the near term, there will be no effects," says Jim Fisher, president and CEO of International Business Management Associates (IBMA), Princeton Junction, N.J. "In Europe, buyers can expect a more moderate, less volatile pricing environment." Pricing will, however, steadily rise to return to more profitable levels. "Longer term, the effects will be more sulfate plants switched to chloride," says Fisher. This trend will occur principally in Europe but will also occur in Asia and the U.S.

Availability is tight. In July, average leadtimes hit 1.5 weeks, up 0.5 weeks from a year earlier. Delivery times reached 1.9 weeks in October, and 2.3 weeks by November.

Buyers can expect availability to remain problematic at least through the first quarter of 1998. "I don't believe buyers will have trouble getting titanium dioxide, but they will have long leadtimes and need to be reasonable about orders," says Fisher.

One producer is adding to capacity. DuPont is undergoing an incremental hike of its North American capacity. The projects will add 200,000 tonnes/yr of capacity. Some of these will likely come on-stream in 1998.

DEMAND: Settling

In 1997, worldwide demand for titanium dioxide was robust, growing at 5.5%. That's a major change from the flat growth in 1996. With inventories rebuilt, demand will continue to grow in 1998 but not at the high rates of 1997. Through the next several years, worldwide demand for titanium dioxide will likely grow at 3%-3.5%/yr.

MARKETS: Varied

Major markets for titanium dioxide are paints and coatings, paper, and plastics. Paints and coatings account for 60% of demand, and look to grow at 2%-3%/yr. Plastics comprise 18% of consumption, and is the fastest growing market for titanium dioxide.