Just prior to ChinaCoat, I attended the 11th Annual TZMI Congress in Hong Kong. The event, produced by Australia-based consulting company TZ Minerals International (TZMI), hosted 260 delegates from 32 countries, and is designed to provide high-caliber presentations covering all aspects of the titanium and zirconium industries across supply, demand, industry influences and new innovations. TZMI’s Eric Bender, General Manager, Markets, Strategic Services and Publications, presented a very informative market review and forecast of the titanium dioxide (TiO2) market.
Bender stated that economic sentiment remains strong globally, and is expected to remain so through 2018. Demand for TiO2 is robust, with both a strong housing market and healthy automobile sales. TiO2 demand growth for 2017 is forecast at around 2%, with 6.1 million tonnes in demand for 2017-2018. TiO2 suppliers are seeing strong earnings, with an approximately 20% gain in EBITDA margins from Q1 in 2016 to Q3 in 2017.
According to Bender, the global story line for 2017 is lack of supply. TZMI forecasts that this will continue into next year as well. There are a variety of reasons for this shortage. First, the Chinese government’s focus on more environmentally friendly manufacturing is impacting TiO2 supply heavily during 2017. Regular inspections have affected many producers, resulting in 250,000-300,000 tonnes of annualized TiO2 supply being taken offline in China during Q3 2017. Additionally, this past January, a devastating fire at Venator’s Pori, Finland, manufacturing site completely stopped production, putting a squeeze on supply throughout Europe and impacting the supply/demand balance globally. The company expects to be back on line and at full capacity by the end of the year. Bender noted that other market disruptions, such as maintenance issues, are possible as well in the future, as all TiO2 manufacturers have been running their equipment hard for the past two years. In the medium- and long-term, supply constraints remain a possibility as no significant expansions outside of China have been announced. Without the additional supply, the next cyclical peak could be significantly higher.
TZMI is forecasting 2019 to be a trough year, as the supply/demand balance shows some signs of tilting in late 2018. Trends point to slight declines in demand growth, as well as a loosening of supply in the second half of next year due to recovery in both China and Pori. However, Bender noted that there will be some differences during the next downturn compared to previous cycles. First, there is a better understanding of the market, its cycles and supply chain. There is greater discussion with customers about inventory. And there is a more disciplined supply focus at the producer level. Additionally, more measured price increases will allow the supply chain to adjust. This new understanding and communication will hopefully result in a less damaging outcome for the market than previous trough years.
In looking to the future, TZMI predicts we will continue to see consolidation in China over the next five to 10 years. Quality differences will drive small, low-quality producers out of the market, and continued government inspections will cause more companies to close up shop. TZMI also expects at least one TiO2 producer to announce a capacity expansion soon based on historical norms for the industry and the recently improved profitability of the market. Bender noted that expansion announcements need to happen now in order to have capacity ready for the next cycle. A third prediction is that chloride expansion is likely to outpace sulfate in the next 10 years. There is a definite push in China for innovation and investment, and TZMI believes the direction in China will be to develop chloride technology. TZMI forecasts that global producer expansions are also likely to be chloride.
Thanks to TZMI for a very enjoyable and educational event. If you are interested in obtaining more market information from TZMI, e-mail marketing@tzmi.com.
