Henan Billions-Lomon merger will transform China’s TiO2 market

The merger of Henan Billions Chemicals Co., Ltd. (Henan Billions) and Sichuan Lomon Titanium Co., Ltd. (Lomon) will send shockwaves through China’s titanium dioxide market, with domestic price rises and a wave of further M&A activity highly likely, according to market intelligence firm CCM.

The deal, announced on the Shenzhen Stock Exchange on May 5, will make Henan Billions by far the largest TiO₂ manufacturer in China with an estimated production capacity of 520,000t/yr – more than double its nearest rival – and the fourth largest producer worldwide after DuPont, Cristal Global and Kronos Worldwide. CCM’s TiO₂ market analyst, Dean Wu, predicts that the deal will precipitate a flood of M&A activity in China’s TiO₂ industry:

"Joining with Lomon will help Henan Billions improve its product quality and R&D and also lower its production costs, so its domestic rivals will be under pressure to counter this merger with their own acquisitions. It’s the only way for them to remain competitive,” commented Wu.

"CCM has been predicting an increase in M&A activity among China’s TiO₂ producers for several months due to the structural overcapacity, low profit margins and low concentration in the industry. We believe that this merger could open the floodgates for more deals over the coming months.”

TiO₂ prices in China are also likely to be boosted in the short term as manufacturers use the merger as an excuse to raise prices. Rutile TiO₂ prices have been rising slowly in line with seasonal demand since January and reached US$2143/t in April. CCM predicts that prices will rise further to US$2270/t by October before dropping off as demand slows during the winter.

Wu also predicts that we will begin to see more Chinese-manufactured TiO₂ on the international market in the coming years as a result of the Henan Billions-Lomon deal: "The foundation of Henan Billions’ success during the last year and a half has been its focus on increasing exports. Its rutile TiO₂ exports rose over 50% in 2014, which allowed it to record a 20% increase in revenue and a 170% leap in net profits, while most of its domestic competitors struggled.

"Now, Henan Billions will benefit from increased brand recognition and will gain access to Lomon’s marketing channels and its product quality should also improve thanks to Lomon’s superior sulphate process technology and R&D resources so it is well placed to continue driving up exports further,” Wu concluded.

See the June issue of APCJ for more on this story.