Prices slip and level off

By Christopher Reilly -- Purchasing, 4/5/2001

Price: flat

The U.S. market has seen no price increases for TiO ₂ pigment since the third quarter of last year, and there are currently no price increases scheduled. According to pigment market analyst Jim Fisher, president of International Business Management Associates (IBMA) based in Princeton, N.J., pricing has slipped more than 5¢/lb since the third quarter of last year, but the fact that the downward price movement is slowing and prices are beginning to level off may be a sign that better market conditions lie ahead.

In the next few months, pricing should begin to solidify and hold steady. Further out, Fisher is optimistic that depending on the effect of the Federal Reserve's interest rate cuts, pricing in the TiO ₂ market will begin to turn around in the third quarter, and producers will begin to announce price increases.

According to buyers who responded to PURCHASING 's monthly chemical pricing survey, anatase-grade spot market material is hovering at about 94¢/lb. Buyers expect pricing to remain flat for the next several months, with some probable price increases (3¢/lb at most) by the end of the year.

Rutile-grade titanium dioxide spot prices will see a similar trend, from about $1.03/lb now rising to about $1.05/lb during fourth quarter 2001.

Demand: quiet

Domestic market demand for TiO ₂ saw slightly negative annual growth last year. According to data from IBMA , overall demand growth slipped to minus-0.2% last year compared to annual growth rates in 1999. This year, Fisher is forecasting minimal demand growth of about 1%/yr, though he is not ruling out flat demand.

In the near term, consumption of TiO ₂ is off last year's levels. And though January is not the best time of year to measure consumption, due to seasonal conditions and inventory adjustments, Fisher says that consumption will continue to fall through first quarter 2001 and most of the second quarter.

"The TiO ₂ market is in the middle of a recession," Fisher says. He says this was caused by general economic conditions, and that the TiO ₂ market is typically a very good barometer of general economic conditions in the U.S. "Right now the pigment market is pretty quiet," he says.

Fisher says that the wildcard influencing demand is the fact that housing starts are beginning to look up in the U.S. However, demand rates for consumer durable goods are down. Much of the TiO ₂ demand trend will depend upon the impact of the interest rate cut and consumer confidence.

Supply: ample

No capacity expansions have been announced. Producers have been trying to cut back production in an effort to tighten supply to generate higher pricing.

Currently, producer material inventories are running at about 44 days, which, according to Fisher, is a little higher than normal for this time of year. He expects to see some inventory adjustment in the next several weeks.

Regarding the supply situation, Fisher says that TiO ₂ producers and buyers alike may not be as confident right now as they were during the fourth quarter of last year that the downward economic situation would soon reverse itself. "Everyone seems to be looking over their shoulder right now," Fisher says. "Buyers and suppliers will be watching the market closely in the next few months for any signs of change."

Market: slow

The TiO ₂ pigment market is diverse, but much of demand and pricing is determined by the performance of the housing and construction markets, which in turn are driven by the gross domestic product of the U.S. economy. Buyers should watch general economic changes to determine pigment price trends.