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Global titanium dioxide pigment industry improved profitability in 2011

Global titanium dioxide pigment industry improved profitability in 2011

The US$17 bln global titanium dioxide pigment industry improved profitability in 2011, with figures that TZ Minerals International Pty Ltd (TZMI) believes are the strongest in two decades. As per TZMI�s annual independent in-depth analysis of the global TiO2 sector, manufacturing cost is expected to increase dramatically in the next two to three years as legacy ore contracts roll off and are replaced by contracts that strongly favour feedstock producers. Growth during the last five years has been led by major emerging economies � most notably China, the emerging economies of Asia-Pacific (Indonesia, Thailand, Vietnam, Philippines, etc.), Brazil, Turkey, Russia, and India; whilst the mature economies of Western Europe and North America have remained flat or declined slightly in consumption.

In 2008, the TiO2 pigment industry operated in an environment of depressed profitability with record high raw material and energy costs resulting in an oversupply of TiO2 in western markets. With the onset of the Global Financial Crisis (GFC), inventories were drawn down and capacity idled, making it difficult to re-start the supply chain when the market recovered. The tight supply situation started in 2010 and continued through 2011, with price increases announced regularly during the two-year period. As a result, global pricing increased by 8% in 2010 and almost 40% in 2011. The EBITDA margin for the industry increased from a level of 11% entering 2010 to 32% exiting 2011 (based on reporting companies). In 2011, production (pro forma basis) increased 3.5% after demand increased out of the global recession, consumers re-stocked their supply chains, and some producers � due to lack of available product � bought ahead of needs to de-risk availability in future months. Chinese producers led the production growth with a very bullish 14.5% year-on-year increase in output. In 2011, profitability gains are as a result of improved sales pricing resulting from strong demand, limited supply, and low inventories. In 2011, all chloride plants were profitable according to the analysis. E. I. du Pont de Nemours and Co (DuPont) held the lowest cost position with its 340,000 tpa plant in DeLisle, Mississippi. Plants operated by all five of the major global producers (DuPont, Cristal Global, Huntsman Corporation, Kronos Worldwide and Tronox Inc) were in among the 20 lowest cost facilities. Half of the 20 lowest cost plants were located in China. The global TiO2 pigment industry is extremely opaque, with cost and production information tightly controlled by most producers, at a time when the industry is encountering significant cost pressures.

At large, the global titanium dioxide industry has enjoyed a period of steady growth over the past ten years, as per Merchant Research & Consulting Ltd. Affected by the financial crisis, the capacity of titanium dioxide shrank around the world in 2008. However, driven by the recovery of paint, papermaking, plastic and other downstream applications, titanium dioxide industry has seen robust growth since 2009. In terms of the supply, the titanium dioxide capacity of China surpassed America and hit over 2 mln tons, making the country the world�s largest titanium dioxide producer with product output surging by more than 23% Y-o-Y in 2011. In terms of the global consumption of titanium dioxide, the Asia-Pacific accounts for 30% of the total demand, followed by North America, Europe, the Middle East and Africa, and Latin America.

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