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October 21, 2002
Volume 80, Number 42
CENEAR 80 42 p. 35
ISSN 0009-2347


DARK CLOUDS OVER WHITE PIGMENT
Last year was brutal for TiO2 despite massive consolidation in the industry

ALEXANDER H. TULLO, C&EN NORTHEAST NEWS BUREAU

The poor economy pushed the titanium dioxide industry into a trough last year. Plants were closed, expansion plans were on hold, and the consolidation of the past five years had little impact. Producers now hope that the modest recovery they have seen this year will sustain itself.

TiO2 is the white pigment used in practically every can of paint that isn't black. It comes in two crystalline forms: rutile and anatase. Papermakers and makers of paints and plastics usually prefer rutile, which is made using a chloride process. Anatase--made with a sulfate process--is preferred for polyester fibers.

Because TiO2 applications are so broad, a declining economy brings the TiO2 industry down with it. Such was the case last year, according to Doug Coombs, president of Huntsman Tioxide. "Last year was a disappointing one where global demand declined pretty much all through the year," he recalls. Globally, TiO2 demand declined by 4%, he says. According to the Census Bureau, apparent U.S. consumption of TiO2 decreased by 4.6% last year, down to 1.1 million metric tons.

Production was throttled back. Kerr-McGee had shut down its Antwerp, Belgium, unit by the end of the year. Millennium Chemicals idled an anatase line in Hawkins Point, Md. "We will keep that capacity turned off until we see a recovery in the market that would suggest that capacity is needed," says Gary L. Cianfichi, Millennium Chemicals' TiO2 sales director. "It could be down forever."

Ian Edwards, global business director at DuPont Titanium Technologies, says TiO2 hit its cyclical trough in 2001 and 2002. "It was pretty clear that in 2001, capacity utilization was lower than at any point in the 1990s," he says.

The poor demand, utilization, and operating rates pushed prices down by about 15%, Cianfichi says. Prices are now about 90 cents per lb for rutile grades, which are usually more expensive than anatase. "Producers were just flat on their backs," he says. "They weren't making any money, and those that were making money weren't making much."

But the industry turned the corner at the beginning of 2002. Producers built up stocks, and consumers bought more paint at the same time. "Outside of Latin America, all the regions of the world are strong, even though the economies in those regions aren't on fire yet," Cianfichi says.

Global demand, Coombs says, increased by about 8% in the first half of this year.

Jim Fisher, president and chief executive officer of Hilton Head Island, S.C.-based pigment consultancy International Business Management Associates (IBMA), says producers were able to increase prices by about 5% this year, but he doubts they will be able to increase them any further unless demand sustains the upswing. With the economic uncertainty, that prospect is dim.

The current trough follows two recent bottoms in the TiO2 industry in 1993 and in 1996 to 1997, DuPont's Edwards says. The last trough, and its aftermath, led to considerable consolidation. Kerr-McGee bought most of Bayer's business, and, after the market improved, Kemira's Savannah, Ga., and Botlek, the Netherlands, plants. Millennium purchased Rhône-Poulenc's operations and Bayer's plant in Salvador, Brazil. DuPont would have purchased Tioxide's business outside North America if the Federal Trade Commission hadn't stopped it. NL Industries would have bought the rest if the deal had not fallen through.

But the woes of 2001 demonstrate that all this consolidation did not have a stabilizing effect on the industry. Edwards thinks nothing has really changed. "There were probably 10 companies seriously committed to TiO2 in the beginning of the 1990s, and at the end of the 1990s, only six, but the rivalry between those was intense," he says.

With FTC stopping the DuPont purchase, no expert believes regulators will allow another major acquisition. However, consolidations in Asia, which have been predicted previously but never transpired, remain a possibility from a regulatory perspective. From a business perspective, they are less likely. Most of the plants in Asia use sulfate technology that is in the public domain, not exactly the kind of base the global players want to build on.

EXPANSIONS aren't probable either. The only major capacity currently coming onstream is Huntsman's in Greatham, England. The company is adding a line using Icon, its chloride-based process that the company says allows for efficiency at a relatively low capital cost. The new line at Greatham will produce 50,000 metric tons per year. The company is scrapping an older, chloride-based unit at Greatham that has a capacity of about 30,000 metric tons.

But Huntsman is backing off from other expansion plans--notably the Caojing, China, project it announced two years ago. "In the current environment, we can't justify it. We can't justify any brownfield or greenfield expansion," Coombs says.

Huntsman is also putting on hold its 15,000-metric-ton expansion of a plant in Huelva, Spain. But, Coombs notes, some of the basic engineering work on the plant has been done and the plant can be finished in a year if needed. "When the economics support it, we would look at completing the expansion in Huelva and look at another Icon line, be it in the U.S., Europe, or China," he says.

IBMA's Fisher thinks it's wise not to build in Asia, where prices are usually low. "I think there is a pretty strong case to be made against spending any money in Asia," he says. "I don't see the pigment industry spending any money--period--over the next several years."

DuPont's Edwards agrees, but he's seen worse happen. "The willingness of people in the chemical industry to throw money at unprofitable ventures never ceases to amaze me," he says.

Go to:

AUTOMOTIVE COATINGS
Paint companies offer new technologies and new products for both the bold and the cautious of the automotive industry

GRADUAL EVOLUTION
Architectural paints are changing slowly but steadily, and more is on the way

DARK CLOUDS OVER WHITE PIGMENT
Last year was brutal for TiO2 despite massive consolidation in the industry



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Chemical & Engineering News
Copyright © 2002 American Chemical Society



 
Cover Story
AUTOMOTIVE COATINGS
Paint companies offer new technologies and new products for both the bold and the cautious of the automotive industry

GRADUAL EVOLUTION
Architectural paints are changing slowly but steadily, and more is on the way

DARK CLOUDS OVER WHITE PIGMENT
Last year was brutal for TiO2 despite massive consolidation in the industry

Related Stories
Paint Show Ends On Upbeat Note
[C&EN, Nov. 12, 2001]

Paints & Coatings
[C&EN, Nov. 5, 2001]


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