TZMI Releases Global Tio2 Pigment Study

According to TZ Minerals International’s (TZMI) “Global TiO2 Pigment Producers Comparative Cost and Profitability Study,” the $10 billion titanium dioxide pigment industry improved profitability in 2009 compared to 2008, as variable costs reduced at a faster rate than selling prices. Leading producers also idled high cost plants during the year, leading to improved asset portfolios. A rebound in demand in the second half of 2009 had plants winding back to full production rates.

TZMI announced that, according to its annual independent in-depth analysis of the global TiO2 sector, the weighted average manufacturing cash cost decreased by 11 percent in 2009, while at the same time sector revenues contracted by only 4.5 percent on a U.S. dollar basis. The net result was a further rebound in the industry revenue to cash cost (R/C) ratio to 1.21, taking the sector back to profitability levels last seen in 2006.

Sulfate plants from China led the manufacturing cash cost tables in 2009. At the number one position was Guangxi Dahua, a 30,000 tpa plant, which benefited from a sharp decrease in sulfuric acid pricing and high capacity utilization throughout the year.

Among the 10 lowest cost plants in 2009 were five more Chinese sulfate plants, two North American chloride operations owned by DuPont, a Ukrainian sulfate plant and Cristal Global’s leading chloride facility located in Saudi Arabia.

However, operating with a low manufacturing cash cost platform was not the only precursor to profitability: product quality and price were key factors requisite for producers to return acceptable margins. DuPont’s 340,000 tpa chloride plant in DeLisle, MI, was the most profitable facility in this year’s study. Sichuan Lomon’s Mianzhu sulfate pigment plant came in as the second most profitable facility in 2009.

On average, industry profitability expanded by $100 per ton in 2009 relative to 2008. Manufacturing cash costs dropped substantially relative to 2008 costs on the back of declines in raw material and energy input costs. Producers managed to hold fixed costs flat, but production rates were down in the first half of 2009, and therefore, fixed cash costs per ton increased.

The cost gap between chloride and sulfate technology shrunk significantly in 2009, primarily as a result of a significant decline in sulfuric acid pricing.

DuPont remains the industry leader with the highest profitability rating, when all five plants in its portfolio are consolidated. According to TZMI, DuPont’s weighted average revenue to cash cost ratio was 1.47, approximately 21 percent higher than the industry wide average for 2009. There was a significant decrease in the number of plants operating in a negative cash-margin position in 2009. Whereas in 2008, TZMI calculated that 27 percent of the output that year was operated with negative cash margins, in 2009 that had decreased back to 11 percent, or 16 plants.

In 2009, global pigment demand was estimated at 4.68 million tons, down 3 percent from 2008. Regionally, the main consuming markets for TiO2 pigment are the major industrialized economies of North America, Europe and the increasing role for China. Per capita consumption is highest in North America and Western Europe. The greatest opportunities for growth lie in the less developed high population economies, led by China and India.

According to the report, higher titanium feedstock prices are expected to be fully rolled out by 2011 to support much needed investment decisions by the suppliers. Pigment manufacturers will have to pass through reasonable price increases over the ensuing period just to tread water. Capacity utilization rates are expected to rise sharply as the global supply chain is restocked. There will still be an extended period of price and profitability recovery until global producers will commit to brownfields expansions. There are not expected to be any new pigment plants built outside China before 2012.

Each year TZMI releases its Global TiO2 Pigment Producers Comparative Cost and Profitability Study. The study covers 60 pigment plants spread across 27 countries and covers almost 91 percent of the 2009 output. The study is an independent analysis built up from individual plant cost structures plus an analysis of global pigment trade during 2009. For more information, contact David McCoy, +61 (0)8 9359 6000, e-mail: [email protected]; or the web: www.tzmigroup.com.