Buyers tracking the domestic pigments market will notice many of the same trends evident in other CPI markets. Producers are under price pressure from low-cost overseas producers and are trying to add value to their products and service offerings.

"For years, major pigments producers have been losing market share to specialty chemicals and pigments makers located in the Far East, primarily due to pricing and production cost issues," says Scott Stephenson, a consultant with Intertech, an international market research firm based in Portland, Maine. "Each pigment product area has reacted differently to the effects of this competition," he adds.

Other major factors influencing pigment pricing include energy and feedstock pricing as well as demand for paints and coatings, which is the primary end use.

Energy prices have fallen significantly from their highs in first quarter 2001. However, most buyers expect energy costs to average above 2000 levels through year end. And with demand for new houses below year-ago levels and GDP growing very slowly, buyers shouldn't expect to see much of a demand boost for pigments in the next six months.

For a gauge of pigments pricing and demand, both now and in the coming year, consider the current situations and market outlooks for two of the highest volume pigments:

• Titanium dioxide (TiO2). The most common pigment, titanium dioxide, makes up about 70% of all pigment use in the global paints and coatings market. For buyers, rutile grade is usually preferred over anatase-grade material due to its durability, high opacity and other performance attributes, according to Industrial Research Ltd., a consulting and market research firm based in London, England.
  In terms of demand for TiO2, the market has seen typical growth with two exceptions. "We see relatively flat demand and pricing through the rest of the year," says Chuck Hoover, Jr., chief operating officer (COO) and head of purchasing at Hoover Color Corp. in Hiwasse, Va. "I haven't seen any compelling evidence that the TiO2 market will break out of its current trend."
  Hoover says titanium dioxide producers pushed through price increases in late 2000 and early 2001. "Last year, pigment suppliers were able to pass through pricing increases, hiding behind the fact that energy prices were booming." But, since then, he says prices have come down considerably as declining sales volumes have made the market more competitive.
  PURCHASING's monthly survey data agree with Hoover's perspective. Pricing for anatase-grade TiO2 material has fallen a few cents per pound this year from almost 97¢/lb in fourth quarter 2000 to about 94¢now. But while prices eroded steadily in the first part of the year, most buyers anticipate flat prices for at least the next six months.
  Pricing for rutile-grade material has also seen its share of price slippage this year. Buyers say average prices have fallen from about $1.05/lb in fourth quarter 2000, to about $1.03 currently. While some buyers argue that pricing will probably fall another penny or two during the fourth quarter, it's unlikely that this year will see the dramatic price volatility that characterized last year's TiO2 market. Look for prices to hover around $1.02-$1.03/lb for the foreseeable future.
• Carbon black. PURCHASING's price survey data show a steady downward trend for carbon black prices as well. Average prices fell from 41¢/lb in December 2000 to about 38¢/lb in January 2001. The 38¢/lb price average held through first and second quarters, but August data show a price average of 36¢/lb, bringing the quarterly average down a penny.
  "We were hammered with price increases due to natural gas and energy hikes starting at the end of last year and continuing through the beginning of second quarter 2001," says Hoover. He estimates that carbon black prices increased about 10% during that time.
  "But for us, the carbon black market has seen little change since then," he says. "We're not seeing pressure in either direction, right now." However, Hoover he does expect that buyers will begin to aggressively pursue lower carbon black prices in the next couple of months, which should cause prices to slide by a few cents per pound.
  Supply and demand seem well balanced in the carbon black market, and in terms of capacity, the market is quiet with little news to report.
  For an indicator of where prices are headed in the future, most buyers track trends in energy costs. "Energy is the major cost component of carbon black pricing," Hoover says. "If carbon black pricing goes up when energy prices go up, it should come down when energy pricing falls," he says.