Titanium dioxide market under pressure
----Interview with Liangqiang Du
Deputy General Manager
Shandong Lubei Chemical Co., Ltd.
- Established in 1996, Shandong Lubei Chemical Co., Ltd has more than 1,000 employees, 4.1 billion yuan of assets, and an annual production capacity of more than 260,000 tons of titanium dioxide by its subsidiary. Main products are rutile titanium dioxide, chloride titanium dioxide, nanometer titanium dioxide, chemical fibre titanium dioxide, paint titanium dioxide, plastic titanium dioxide, paper titanium dioxide, etc. The company's products have excellent high whiteness, high gloss, hiding power, easy dispersion, decoloring force, blue phase and weather resistance, and are widely used in paintings, coatings, plastics, masterbatch, rubber, and other areas of downstream industries.
- Asia Metal: Thank you for joining our interview, Mr. Du. Please introduce about your titanium business briefly to us first.
- Mr. Du: Lubei Group has successfully loaded two titanium sector assets into our listed companies in H2, 2020 with Jinhai Titanium Industry based on sulfuric acid process and Xianghai Titanium Industry based on chloride process. At present, Jinhai Titanium Industry has an annual production capacity of 250,000 tons. Our old factory used to have an annual production capacity of 150,000 tons and we moved another anatase titanium dioxide production line with an annual production capacity of 100,000 tons from the Group before the Chinese Spring Festival Holiday in 2022. At the end of 2021, the chloride titanium dioxide project of Xianghai Titanium Industry finished main construction and equipment installation and went into trial production successfully. The project has three phases with the first phase reaching the production capacity of 60,000tpy, and the second and the third phase reaching 360,000tpy in total. The second phase would start in Q2 and the third phase is still in planning stage. The total production capacity would reach around 400,000-600,000 tons after all the phases finish. The first phase has two production lines. One production line has a production capacity of around 60,000tpy and produced around 20,000 tons so far after it started trial production late last year. After the second production line begins to produce, the total production capacity would reach 120,000tpy. At present, our production remains normal. In the Chinese market, as a new production line of titanium dioxide chloride, there are not many companies that can go into trial production successfully once and run for such a long time. At the same time, our product has good quality and remains popular among downstream customers.
- Asia Metal: The Chinese titanium dioxide market prices continued increasing in H2, 2021. What is the main reason for the increased prices?
- Mr. Du: Titanium concentrate, sulfuric acid and other raw materials' price rise, as well as the increased demand from both domestic and foreign consumers, jointly supported titanium dioxide prices to rise in the second half of 2021. Supported by the rising production costs and the strong downstream demand, most producers raised the price accordingly. At the same time, the majority of traders remained bullish about the market and kept active in building stocks, which reduced the factory inventory. The supply in the spot market became tight and pushed the prices up further. Many end users also raised its regular inventory levels for raw materials, which caused price to rise further.
- Asia Metal: What about the current and future market in 2022?
- Mr. Du: Generally speaking, the oversupply of the Chinese market this year becomes a foregone conclusion and the mainstream market prices expect to decline later this year. Our sales remained good in January and February of this year, which followed up the strong demand since late last year. However, entering March, downstream demand became weaker to some extent and the net profit for producers would decrease further for sure. I will describe the market as a "dumbbell" in 2022. The market in January and February remained booming encouraged by strong demand. Entering March, the global economy began to slow down as a result of reduced liquidity and the end of quantitative easing in the US, combined with the conflict between Russian and Ukraine. The market in Q2 and Q3 would soften with lower prices. As most consumers would come back to the market for rebuilding stocks for the coming year in late Q4, the market prices would increase again at that time. A lot of capital will continue to move to upstream resources such as energy, causing the general manufacturing and general chemical costs rising. However, general chemical products prices fall, resulting in little profit margin of the factories, so most factories will reduce production volume to change the relation between supply and demand.
- Asia Metal: As a major manufacturer of titanium dioxide in China, faced with new opportunities and challenges brought by raw material shortage and demand recovery, what specific plans do you have?
- Mr. Du: From the perspective of raw material supply, we mainly use half domestic ore, half imported ore and sulfuric acid to produce rutile titanium dioxide. The main raw material for chloride titanium dioxide is titanium slag 90%min (Ca0.3%max,Mg 1.0%max) at the moment and we would consider to use natural rutile, artificial rutile and titanium slag mixtures to produce chloride titanium dioxide. No matter sulfuric acid processing or chloride processing, the mainstream prices for raw materials show uptrend all the time. Especially after the conflict between Russia and Ukraine, resources prices remain at a high level. Higher oil prices caused increased transportations fees and higher sulfur prices, which made sulfuric acid prices increase further. Sulfuric acid pricesvary widely by region in China. As sulfuric acid acts as by-products of refining enterprises and metal smelting enterprises, its output varied according to mainproduct output and prices varied greatly due to unstable output in the spot market. For example, when the mainstream price of sulfuric acid in Shandong reached around RMB700/t (USD110/t), the mainstream prices in South China reached as high as RMB2,000/t (USD314/t) late last year. The mainstream prices of sulfuric acid hover at RMB1,500-1,600/t (USD236-252/t) since early this year and we find it hard to purchase any materials lower than RMB1,000/t (USD157/t) in the spot market. We have an advantage for producing acid with 400,0000tpy of gypsum acid and 400,000tpy of sulfuric acid. Currently, our acid output could satisfy half of our total consumption volume, which acts as a support for our rutile titanium dioxide production. Although production cost continues to increase, considering supply over demand, we think that we cannot make profits only through raising our sales prices. We try to stabilize customer relations and expand the market to occupy more market share in the future.
- Asia Metal: The supply of international titanium raw materials remains tight and the demand for titanium dioxide continues being strong in the global market. Will the global titanium dioxide industry face a new round of reshuffle?
- Mr. Du: I think the main factor is cost instead of resource exhaustion. One is the operation cost for titanium concentrate and other raw materials and the other is the production cost for titanium dioxide. When Chinese titanium dioxide products in the international market share remained small, European and American titanium dioxide products kept popular in the world. They can accept higher production cost considering big profit margin at that time. But the supply pattern of global titanium dioxide market changes now as China's share in the international market keeps increasing. The total output for titanium dioxide in the global market reaches around 6,500,000tpy, while the output in China reaches more than 3,000,000tpy. For titanium dioxide producers out of China, if the factory has a high technical level, obvious product differentiation and is separated from the competition, it can still maintain a certain market share. However, if their products have ordinary quality while higher production cost, it would be replaced by Chinese materials. As a result, I believe that China would occupy bigger share in the international market in the future. The release of Chinese production capacity benefits from the prosperity of overseas market. To some extent, the increasing Chinese titanium dioxide production capacity and the increasing overseas market share complement and promote each other.
- Asia Metal: Can you share some basic situation about your new chloride titanium dioxide project after trial production in late 2021?
- Mr. Du: Xianghai Titanium Industry owned this chloride titanium dioxide project of a designed capacity of 60,000tpy. The total investment of the project is 890 million yuan, covering an area of 404.54mu. The project started construction in late December, 2019 and completed in late December,2021. The sales revenue expects to reach 1.238 billion yuan and 250 million yuan of profit and tax in 2022, with good comprehensive economic and social benefits. We use boiling chlorination production process and the construction of chloride titanium dioxide device mainly has chlorination, oxidation, post-treatment workshop and supporting public auxiliary engineering, forming an annual production capacity of 60,000t.
- Asia Metal: What is your advantage to produce titanium dioxide compared with peers in domestic market?
- Mr. Du: The recycling of waste sulfuric acid and titanium gypsum produced in the production process of Jinhai Titanium Industry not only reduces the production cost, but also improves the resource utilization rate of waste by-products. In line with the national circular economy industrial policy, set economic benefits, social benefits, environmental benefits, the listed companies would develop circular economy and achieve business synergy. Xinghai Titanium uses waste acid to make high grade titanium material as the main raw material of titanium dioxide by chloride method. Compared with the traditional titanium dioxide production process by sulfuric acid method, it has advantages of shorter process, higher degree of automation, lower energy consumption and greener environmental protection, so it is called "clean industry". The products have the advantages of fluidity, yellowing resistance, color stability and high quality, which can replace imported products for high gloss, high covering power of the industry. The process lists in the national industrial policy to encourage the category.
- Asia Metal: Thank you again for accepting this interview and wish the company a prosperous future!
