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After 20 years of steady decline, the TiO2 pigment sector has turned the corner – and accelerated away. Rising prices are coming as a shock to the customer base, which has enjoyed nearly two decades of sourcing power, according to the second edition of the TiO2 Pigment Annual Review, just released by independent industry expert TZMI.
TZMI estimates that the global weighted average price for all TiO2 pigment sold during 2010 increased by 8% y-on-y, increasing the value of the sector by 21%, from US$10bn to US$12bn. Growth value will be more substantial in 2011, as widespread changes to pigment manufacturing costs, particularly titanium feedstocks, will be tempered by contractual conditions.
TZMI expects global demand for the pigment to grow by 4.4% CAGR in the period 2010 – 2013, with demand in North America growing by 2.2% and 6.7% in Asia Pacific. Total global demand is expected to grow from 5.31Mt in 2010 to 6.05Mt in 2013. Capacity growth during the next 10 years is expected to be driven by above global average demand in Asia Pacific. TZMI expects global capacity to grow by 4.7% in 2010 – 2013 with 65% of new capacity being installed in Asia Pacific.
"Manufacturing cost is expected to increase by around 30% over 2010 levels by 2015,” TZMI managing consultant David McCoy said. "Although rising costs are substantial, it is likely that margins will expand further in the coming years as a result of a global TiO2 pigment supply shortage.” On the cost side, TiO2 pigment producers are being production constrained because of being unable to secure supply of feedstocks. Feedstock producers have reacted with a spate of price increases. In some cases, TZMI believes pigment producers will be unable to source adequate feedstock supplies and be forced to temporarily idle or reduce output.
Similarly, TiO2 producers are likely to be unable to meet the demands of all their customers as the lingering effects of 2009 capacity shutdowns and the shortage of feedstocks limit their ability to meet market demand; furthermore, there is no available inventory from which to supply short-term customer needs as has been the case in previous years.
"The tight market conditions throughout the supply chain will cause rapid price escalation through 2012 and possibly 2013,” TZMI senior consultant Eric Bender said. "TiO2 producers and feedstock suppliers will increase margins in 2011, with the timing of future capacity expansions in both sectors largely controlling the balance of pricing power in the value chain over the next several years. TiO2 producers’ ability to add necessary capacity hinges on feedstock producers’ ability to increase output from existing and new mines and beneficiation plants.”