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TiO2 China Monthly Report 201103 .pdf


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It is a professional publication about China’s TiO2 industry published monthly by CCM International Limited, which provides titanium mining companies the cooperation opportunities with Chinese TiO2 producers; presents the competition landscape and the commercial opportunities in China for multinational TiO2 producers; helps TiO2 end users to catch up Chinese TiO2 up-to-date prices and sources the suitable TiO2 from China. The continuous expanding TiO2 industry also brings huge opportunities for investors.
TiO2 China Monthly Report will penetrate into Chinese TiO2 market from a global view, deeply analyse TiO2 industrial chain and manufacturers’ competitiveness and trace the latest industrial hotspots and dynamics, aiming to provide the most valuable information about China’s TiO2 industry.

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TiO2 China Monthly Report 201103 .pdf

  1. 1. TiO2 China Monthly Report Vol.4 Issue 03 2011 Copyright © CCM International Limited
  2. 2. TiO2 China Monthly Report Vol.4 Issue 03 2011 Publication date: 25 March 2011 Editor Note II Headlines of TiO2 China Monthly Report 1103 II Supply & Demand 1 China consolidates TiO2 export in Jan.2011 1 Thailands imported TiO2 consolidates in Jan. 2011 3 Upstream 3 China widens ilmenite import origins with rising price 3 Pangang Groups industrial restructuring plan been approved 4 Company Dynamic 4 Profit analysis of Sichuan Lomon 2010 4 Jinan Yuxing aims to sell 90,000 tonnes TiO2 in 2011 5 Jinzhou Titanium to benefit from being National High Technology Enterprise 6 Shandong Dongjia expects to extend ilmenite production 7 Price update 7 Price update in March 2011 7 TiO2 multinationals announce price hikes in April 8 Downstream 9 Rising TiO2 price shrinks downstream profit 9 Indemnificatory housing promotes architectural coating market development 10 Plastic pipe market to boom with governments support 11 Global insight 11 Earthquake in Japan impacts TiO2 industry 11 Kronos Worldwide produces in full load in 2010 11 KMML to boost titanium industrial capacity 12 Latest reports related to TiO2 from CCM • Survey of Titanium Dioxide in China 2010 - 5th • Production, Market and Investment Edition Opportunities of Masterbatch in China • Specialty Titanium Dioxide in China • The Coating Industry in China • Production and Market of Pigments in China • Future of Specialty Paper Chemicals in China • The Future of Carbon Black in China I CCM International Limited
  3. 3. TiO2 China Monthly Report Vol.4 Issue 03 2011 Editor Note Headlines of TiO2 China Monthly Welcome to 1103 issue of TiO2 China Monthly Report. Report 1103 2011 is the first year of Chinas 12th Five-Year-Plan • Enjoying the continuous increasing TiO2 prices, China (2011-2015). Chinese government adjusts the annual consolidates its TiO2 international trade surplus in Jan. average GDP growth rate for the next five years from 2011 with the export volume increasing by 0.9%, while 7.5% to 7.0% in the National Peoples Congress (CPC) the import volume retreats by 11.3% as compared with and Chinese Peoples Political Consultative Conference that in Dec. 2010. (CPPCC) held in March 2011, which indicates China will further emphasize its quality of economy growth • Chinas import volume of titanium feedstock (excluding and eliminate more inefficient capacities. Also in titanium slag) retreats in Jan. 2011, primarily due to the the CPC and CPPCC, Chinese government decides to short supply and soaring price. support water conservancy construction in the coming ten years, which will drive TiO2 demand. • It makes sense for Sichuan Lomon to gain USD66 million total profit from TiO2 business in 2010. Primarily due to the rising cost of raw materials and supply shortage of TiO2, TiO2price keeps increasing in • Shandong Dongjia is expected to exploit titanium reserve 2011, which is to boost TiO2 producers’ profitability. in Liangshan Prefecture, especially in Huili County. Attracted by the soaring prices, both titanium miners and TiO2 producers are to expand their production • Jinzhou Titanium is to benefit from being National High capacities. Technology Enterprise. Thanks to the tight supply and faster price increase of • Indemnificatory housing is to promote architectural TiO2 outside of China, China’s TiO2 export volume will coating market development keep increasing, which will drive domestic TiO2 price. In the meanwhile, the shortage of titanium feedstock • Downstream companies implement measures to avoid will bring more pressure to TiO2 producers. profit shrink caused by the rising price of raw materials. Exchange rate in Mar.2011: • Plastic pipe market is to boom with government’s USD1=RMB6.57 USD1=EUR0.73 support. Main companies covered in this issue II CCM International Limited
  4. 4. TiO2 China Monthly Report Vol.4 Issue 03 2011 Supply & Demand China consolidates TiO2 export in Jan.2011 E njoying the continuous increasing TiO2 prices, China consolidates its TiO2 international FIGURE 1: China’s TiO2 international trade situation, Jan.10 ~Jan.11 trade surplus in Jan. 2011 with the export volume increasing by 0.9%, while the import volume retreats by 11.3% as compared with that in Dec. 2010. In Jan. 2011, China imported 22,019 tonnes TiO2, decreasing by 11.3% as compared with that in Dec. 2010, which is even lower than that in the same period of last year. Also in Jan. 2011, China exported 35,310 tonnes TiO2, increasing by 0.9% over last month, which is double that of Jan. 2010. As a result, China sees a largest monthly volume surplus since May 2010, with the surplus of 13,291 tonnes in Jan. 2011. Chinas enlarged TiO2 international surplus is primarily thanks to the continuous increasing price Source: China Customs; CCM International of TiO2 and tight supply outside of China. FIGURE 2: China’s TiO2 import situation by origin, Jan.10 ~Jan.11 In Jan. 2011, Chinas average TiO2 CIF and FOB prices reach USD2,629/t and USD2,277/t, increasing by 2.1% and 5.2% respectively over last month. Compared with that in Jan. 2010, the average TiO2 CIF and FOB prices soared by 16.3% and 34.9%, respectively in Jan. 2011. Thanks to the wider increase extent since September 2010, the gap between TiO2 average FOB price and CIF price has been reduced step by step. As mentioned, Chinas import TiO2 monthly average CIF price has increased to USD2,629/t in Jan. 2011, touching the highest level in the past 4 years. It is primarily due to the tight supply and the rising production cost of TiO2 worldwide. The tight supply was attributed to the suspended capacity resulted from the financial crisis. Though the soaring demand after the financial crisis attracted new investment in Source: CCM International TiO2 MTB import analysis TiO2 production, it will take much time to complete the investment. Hence, the price of TiO2 is expected to keep the uptrend within 2 years. FIGURE 3: Top three multinationals’ market share of China’s TiO2 import market, Jan.10 ~Jan.11 As a result of continuous rising price, Chinas TiO2 import volume retreats in Jan. 2011. Perhaps the frequent price hikes have surpassed Chinese customers bearing capability. In Jan. 2011, foreign- owned enterprises consume near 55.0% of the total import volume in January. The rising price is shrinking TiO2 multinationals market share in China. As for the origins, China still imports largest amount of TiO2 from Taiwan in Jan. 2011. Compared with that of last month, the volume from Japan decreases most obviously in Jan. 2011, due to its average price rebounds by 8.4%, leading global TiO2 price hikes. Due to the earthquake disaster in Japan, ISK is expected to cut its TiO2 export volume to meet its Source: CCM International TiO2 MTB import analysis 1 CCM International Limited
  5. 5. TiO2 China Monthly Report Vol.4 Issue 03 2011 domestic demand in reconstruction after the disaster FIGURE 4: Export volume of China’s TiO2 by destination, Jan.10 ~Jan.11 since March 2011. As a result, global TiO2 supply will even tight in the coming months, which will further boost TiO2 prices. Thanks to the supply shortage and rising price of TiO2 outside of China, both Chinas TiO2 export volume and its average FOB price see increase in Jan. 2011. In Jan. 2011, Chinas TiO2 average FOB price touches USD2,277/t. Since Oct. 2010, the average FOB price saw an over USD100/t increase every month, with the increase extent far exceeding that of average CIF price in the same period. The price increase in Jan. 2011 is mainly thanks to the tight supply and the rising cost of raw materials. In January 2011, the average CIF price of Chinas import ilmenite increases 8.7% over that in Dec. 2010. The ex-factory price of homemade ilmenite in Panzhihua City also increases by 4.3%. Source: CCM International TiO2 export analysis Though the price has increased fast since Q4 FIGURE 5: Export volume share of top TiO2 exporters, Jan.11 2010, Chinas TiO2 export volume still increase in Jan. 2011, with a 0.9% growth, reaching 35,310 tonnes, because Chinas TiO2 has seen great quality improvement and it still offers a better price lower USD350/t than that of foreign TiO2. As for the TiO2 exporters, Henan Billions, Shandong Dongjia and Sichuan Lomon still are the top 3 exporters. Besides, two producers, namely Jinan Yuxing Chemical Co., Ltd. (Jinan Yuxing) and Panzhihua Taihai Technology Co., Ltd. (Taihai Technology), their export volumes see strong increase, with the export volume both exceeding 1,100 tonnes in Jan. 2011. In Jan. 2011, Chinas TiO2 export volume to Middle East, Europe and North America all see increase, while the volume to Asia Pacific and South America retreats. Turkey imports 4,711 tonnes TiO2 from China in Jan. 2011, composing 55.0% of Chinas TiO2 total volume to Middle East. Among the European countries, the strongest demand is from Spain. It is Source: CCM International TiO2 export analysis perhaps due to some Chinese TiO2 producers have set agents in Spain, such as Pangang Group. Besides, the demand from Russia sees fast increase. Only in Jan. 2011, Russia imports 739 tonnes TiO2 from China, accounting for 32.7% of its total import volume from China of last year. 2 CCM International Limited
  6. 6. TiO2 China Monthly Report Vol.4 Issue 03 2011 FIGURE 6: Thailand’s TiO2 import situation, Jan.10 ~Jan.11 Thailands imported TiO2 consolidates in Jan. 2011 T hailand imports 6,489 tonnes TiO2 in January 2011, retreating by 2.0% compared with that of last month, while it increased by 31.4% over the same period of last year. As a whole, Thailand imported 72,828 tonnes TiO2 in 2010, increasing by 36.0% year-on-year. It seems that Thailand’s TiO2 import volume is to keep fast increasing in 2011. Of the Thailands TiO2 import volume in Jan. 2011, 1,116 tonnes are imported from China, consisting of 17.2% of the total. The proportion of China’s TiO2 volume deceases from 21.4% in 2010, primarily due to Source: CCM International the soaring price. Upstream China widens ilmenite import origins with rising price C hinas import volume of titanium feedstock (excluding titanium slag) FIGURE 7: China’s quarterly import volume of titanium feedstock and the average prices, Jan.10~Jan.11 retreats in Jan. 2011, primarily due to supply shortage and soaring price. As a result, some TiO2 enterprises in China have widened the import origins of titanium feedstock, and it is the development tendency in the future in China. In Jan. 2011, China totally imported 178,167 tonnes titanium feedstock, decreasing by 12.6% and 31.7% compared with that in Dec. 2010 and Jan. 2010, respectively, which is primarily due to the soaring price with supply shortage from miners. According to many ilmenite suppliers, although they have signed supply contracts for 2011, the new inquiries and demands are springing up. Source: China Customs; CCM International As a result, the price of titanium feedstock is soaring. The average CIF price of Chinas imported titanium feedstock reaches USD143.2/t in Jan. 2011, increasing by 8.7% and 34.1% compared with that in Dec. 2010 and Jan. 2010, respectively. To avoid the price rising, all Chinas end users of titanium feedstock, no matter how many volume they consume, are endeavor to look for a stable and long term supply. In the meanwhile, the soaring price also draws trading companies attention. According to Mr. Rory, Marketing Consultant at Anglo Pacific Minerals, a Chinese trader has offered to buy Mexican ilmenite 50,000 tonnes per month at FOB USD225/t in February, 2011. Mining companies are also attracted to increase investment in titanium resource. Richards Bay Minerals (RBM), a Rio Tinto-BHP Billiton joint venture, claims to build a large plant in KwaZulu-Natal, a province in the south-eastern region of South Africa. RBM is to start producing titanium feedstock and iron ore in the plant in 2016. Accordingly, boosted by the booming demand, price of titanium feedstock is expected to keep rising in 2011. 3 CCM International Limited
  7. 7. TiO2 China Monthly Report Vol.4 Issue 03 2011 As for Chinas titanium feedstock import origins, FIGURE 8: Chinas titanium feedstock import origins, Jan. 2011 Vietnam is still the largest origin while its proportion is shrunk by other news origins. In Jan. 2011, Chinas average CIF price of titanium feedstock from Vietnam touches USD146.2/t, increasing by 15.0% and 55.7% compared with that in Dec. 2010 and Jan. 2010, respectively. As a result, its volume proportion in Chinas total imported titanium feedstock decreased to 37.0% in Jan. 2011, from 41.1% in 2010. Vietnams volume proportion is shrunk by South Korea and North Korea. In Jan. 2011, China totally imported 14,156 tonnes titanium feedstock from these two countries, with the average CIF price of USD98.4/t. With the continuous increasing price, China will tend to import a larger volume of titanium feedstock from more Source: China Customs; CCM International origins with lower price. Pangang Groups industrial restructuring plan been approved I n March, 2011, Pangang Groups Vanadium-Titanium Industrial Restructuring Plan has been approved by National Development and Reform Commission.According to the plan, Pangang Group is to enlarge its mining capacity, by adding production capacities of10,000,000t/a raw ore, 2,840,000t/a iron fine ore and 500,000t/a titanium concentrate ore. Besides, Pangang Groupis to enhance vanadium-titanium industry development, by adding production capacities of 0.5 million tonnes peryear of titanium slag, 200,000t/a TiO2, 15,000t/a titanium sponge and 22,000t/a vanadium. These projects are to setup in Panzhihua, Chengdu and Xichang Cities.In the first two months of 2011, Pangang Group exploited 79,400 tonnes titanium concentrate ore, which increases by181.5% over the same period of last year. Pangang Group aims to exploit 480,000 tonnes titanium concentrate ore in2011. With the technical improvement, Pangang Groups utilization rate of titanium resource has touched 37.5%.Company Dynamic Profit analysis of Sichuan Lomon 2010 I n TiO2 China Monthly Report 1102 issue, CCM reports that Sichuan Lomon Titanium Industry Co., Ltd. (Sichuan Lomon) is estimated to gain USD66 million total profit from its TiO2 business in 2010, which leads among domestic TiO2 producers. In 1103 issue, CCM is to analyze Sichuan Lomons profit situation over other TiO2 producers. As one of domestic largest TiO2 producers, Sichuan Lomon holds 120,000t/a production capacity with output of over 100,000 tonnes in 2010. With good reputation for its high-quality products, Sichuan Lomon enjoys higher TiO2 selling prices in foreign and domestic markets. Take the export price for example. Sichuan Lomon enjoys the highest average FOB price among the top TiO2 exporters in 2010. Its average FOB price is USD44/t higher than that of Shandong Dongjia and USD111/t higher than that of Henan Billions. Moreover, Sichuan Lomon enjoys many preferential policies, as it is located in West China. Companies investing in West China can enjoy preferential tax rate, with the operating income tax rate of 15%, which is far less than the general operating income tax rate of 33%. Accordingly, the preferential tax rate brings more profit to Sichuan Lomon, compared with that of Shandong Dongjia. 4 CCM International Limited
  8. 8. TiO2 China Monthly Report Vol.4 Issue 03 2011 Primarily thanks to its integrated production system (see TiO2 China Monthly Report 1102 issue, page 7), Sichuan Lomon enjoys a lower TiO2 production cost as compared with other companies. According to its IPO application material, Sichuan Lomon can save 672 KW.h electricity and 0.9 tonnes sulfuric acid in producing one tonne TiO2, compared with other TiO2 producers. In the meanwhile, the unit human cost of Sichuan Lomon is also lower than the industrial average unit cost. Moreover, fulfilling titanium concentrate ore demand itself also saves production cost for Sichuan Lomon. Based on the electricity price of USD0.084/KW.h and the average sulfuric acid price of USD60.88/t, Sichuan Lomon totally saves USD11.12 million production cost in 2010, benefiting from its integrated production system. According to Sichuan Lomon Corporation (Lomon Corporation), it totally achieves near USD0.91 billion revenue in 2010, with export revenue of USD150 million. Of the export revenue, TiO2 export revenue consists of 45.7% of the total. As shown in its IPO application material, Sichuan Lomon produced 36,140 tonnes TiO2 and sold 38,279 tonnes in H1 2009, which brought USD60.88 million revenue and USD12.39 million operating profit. Compared with that in H1 2009, TiO2 output of Sichuan Lomon achieved near threefold increase and its average price increased by over 30% in 2010. Though the average price of suluric acid also increased by over 20% in the same period, while Sichuan Lomon avoided the price fluctuation of titanium concentrate ore to some extent. Accordingly, it makes sense for Sichuan Lomon to gain USD66 million total profit from TiO2 business in 2010. TABLE 1: Sichuan Lomon enjoys higher TiO2 selling price over other producers, 2010 (volume: tonne, price: USD/t) Company Output Export volume Export average price Shandong Dongjia 115,000 37,630 2,031 Henan Billions 104,000* 51,987 1,964 Sichuan Lomon 100,000 13,828 2,075 Pangang Group 62,578 13,828 1,963 National total 1,474,286 327,305 1,873 *Note: TiO2 output of Henan Billions reported in 1102 issue is 98,274 tonnes, which is Henan Billions total sales volume in 2010. Source: CCM International Jinan Yuxing aims to sell 90,000 tonnes TiO2 in 2011 J inan Yuxing Chemical Co., Ltd. (Jinan Yuxing), completed relocation and launched its 100,000t/a TiO2 production lines in 2010, aiming to sell 90,000 tonnes TiO2 in 2011. To achieve its sales target, Jinan Yuxing is widening its distribution channel, by selling to both terminal customers and distributors. As a result, the sales volume of Jinan Yuxing is soaring in January 2011. Take its export for example, Jinan Yuxing exported 1,142 tonnes TiO2 in Jan. 2011, accounting for 52.7% of its total export volume of last year. 5 CCM International Limited
  9. 9. TiO2 China Monthly Report Vol.4 Issue 03 2011 Jinzhou Titanium to benefit from being National High Technology Enterprise A nnounced on Feb. 25, 2011, Jinzhou Titanium Industry Co., Ltd. (Jinzhou Titanium), domestic college education or above account for over 30% of the total staff of enterprise and R&D staff account for over 10% of the chloride TiO2 producer, is named as National High total; Technology Enterprise (NHTE). As a result, Jinzhou Titanium has been the first and unique NHTE among 4) Proportion of R&D expenses in total revenue should domestic TiO2 enterprise, which helps to boost its meet the following requirements: capacity expansion. - No less than 6% for the enterprises with revenue less than USD7.61 million in recent years;As a National High Technology Enterprise (NHTE), Jinzhou - No less than 4% for the enterprises with revenue betweenTitanium can gain a lot of support from government, USD7.61 million and USD30.44 million in recent years;especially getting preferential tax. - No less than 3% for the enterprises with revenue over USD30.44 million in recent years.According to Management Policy of Hi-Tech EnterpriseLicense, jointly formulated by Ministry of Science and 5) Revenue from high-tech products should account for overTechnology, Ministry of Finance and State Administration 60% of enterprises total revenue.of Taxation, the operating income tax rate is 20% for low- PICTURE 1: National High Technology Enterprise Certificate of Jinzhouprofit small enterprises and 15% for NHTE, which are Titaniumlower than the general operating income tax rate of 33%.In the meanwhile, the research & development expenseof new technology, product and process can be convertedinto income tax. As the NHTE, its annual R&D expenseshould not be less than 3% of its operating income (forthose whose operating income is larger than USD30.44million).In 2010, Jinzhou Titanium achieves USD68.49 millionrevenue and USD7.61 million profit from TiO2 business.Accordingly, Jinzhou Titanium can gain financial supportwith over USD3.42 million in 2010.Besides the preferential taxation policy, NHTE can alsogain support in acquisition of land, credit and loan, etc.Jinzhou Titanium can enjoy the preferential tax policyand other support for three years, from Jan. 2010 to Dec.2012. It is helpful for Jinzhou Titanium to boost its TiO2 Source: Jinzhou Titaniumproduction capacity.At present, Jinzhou Titaniums 30,000t/a chloride TiO2production line is under construction, which is expected tobe launched in Mar. 2012. Besides, Jinzhou Titanium willset up two 100,000t/a chloride TiO2 production lines inLinghai City, Liaoning Province, in the 12th Five-Year-Planperiod (2011-2015).Conditions for Chinas National High TechnologyEnterprises:1) Registered in China with independent intellectualproperty right over the core technology of major productsthrough independent research and development, transfer,recipient, mergers and acquisitions within 3 years orthrough licensing over five years;2) Products belong to the range regulated in the Innovativeand High Technology Areas with the governments primarysupport;3) Scientific and technological specialists with three-year 6 CCM International Limited
  10. 10. TiO2 China Monthly Report Vol.4 Issue 03 2011 Shandong Dongjia expects to extend ilmenite production O n Feb. 19, 2011, Hu Kun, a member of standing committee of Liangshan Prefecture and secretary of to import a large amount of titanium feedstock every year. Take 2010 for example, Shandong Dongjia imported CPC Huili County Committee, Sichuan Province, visits 67,908 tonnes ilmenite and 78,296 tonnes titanium slag. Shandong Dongjia Group (Shandong Dongjia), inviting Generally, the high dependence on imported titanium Shandong Dongjia to develop titanium industry in feedstock brings risk to Shandong Dongjia, especially Liangshan. when the price of titanium feedstock fluctuates frequently. Moreover, the imported titanium feedstock also shrinks Actually, it is Mr. Hus return visit to Shandong Dongjia. Shandong Dongjias profit. Early in Jan. 2011, Shandong Dongjia jointly with Nippon Paint (China) Co., Ltd. and Sapphire Corp. Though Shandong Dongjia has exploited titanium reserve Ltd. have visited Liangshan Prefecture and inspected the in Chengde City, Hebei Province, the limited reserve local investment circumstances. (converting to 15.93 million tonnes TiO2) can not sustain its long-term development. Hence, Shandong Dongjia will Border on Panzhihua City, Liangshan Prefecture holds the lose its competitiveness as compared with Pangang Group second largest titanium reserve in Sichuan Province. As a and Sichuan Lomon, both of which hold abundant titanium whole, Liangshan Prefecture has over 82.49 million tonnes reserve in Panzhihua-Xichang region. titanium reserve (converting into TiO2 volume) which distributes in Xichang, Huili and Dechang Counties. Accordingly, Shandong Dongjia is expected to exploit titanium reserve in Liangshan Prefecture, especially in The abundant titanium reserve has attracted Pangang Huili County. Group to develop vanadium-titanium industry here and it will also attract Shandong Dongjia. In the meanwhile, the high freight cost from Liangshan to Shandong Province perhaps will drive Shandong Early in 2008, Pangang Group has confirmed to exploit Dongjia to set up TiO2 production line in Liangshan vanadium-titanium-magnetite reserve in Xichang County, Prefecture. Besides the abundant titanium reserve, there is with the total investment of USD2.62 billion. In 2010, stable supply of sulfuric acid here, as Huili County has set Pangang Group has completed USD1.14 billion investment up a large Nonferrous Metal Industry Park. here. The mining exploiting project is expected to be launched in October 2011. After completing the whole TABLE 2:Titanium reserve distribution situation in Liangshan, 2010 investment, Pangang Group will hold the production (million tonne) capacities of 160,000t/a vanadium slag, 300,000t/ Distribution TiO2 Grade a titanium concentrate ore, 160,000t/a titanium slag, 11.76% (19.08 million tonnes)+0.03% 100,000t/a chloride TiO2, etc. in Xichang. Xichang County 62.23 (43.15 million tonnes) 11.80%(15.00million tonnes)+11.11% Huili County 19.86 (4.86 million tonnes) Besides, Xichang Ruikang Titanium Co., Ltd. has also Dechang County 0.40 7.99% launched a 60,000t/a TiO2 production line in Xichang Total 82.49 -- County. Source: Huntsman Full 2010 Results As Chinas largest TiO2 producer, Shandong Dongjia has Price update Price update in March 2011 I mpacted by the increasing demand and manufacturing cost, TiO2 prices increase in March 2011. The prices of titanium concentrate ore and titanium slag have also kept an uptrend in this period. Ex-factory prices of TiO2 and sulfuric acid, Mar. 2011, USD/t Area Rutile TiO2 Anatase TiO2 Sulfuric acid 98% Feb.11 Mar.11 Feb.11 Mar.11 Feb.11 Mar.11 South west 2,478-2,660 2,747-2,945 2,052-2,204 2,365-2,518 65-84 69-89 East China 2,356-2,584 2,625-2,838 1,832-2,128 2,060-2,411 85-105 85-105 Central China 2,356-2584 2,579-2,823 1,824-2,098 2,060-2,365 76-99 76-99 South China N/A 1,870-2,022 2,106-2,289 68-96 76-104 Source: CCM InternationalTiO2 The period of March to June is the traditional peak season for construction and real estate industries, thus, theWith the increasing cost and advancing demand, domestic demand of TiO2 has a large increase in March 2011. TheTiO2 prices increase in March 2011. demand from abroad has stayed robust; however, TiO2 products are in short supply in domestic market. 7 CCM International Limited
  11. 11. TiO2 China Monthly Report Vol.4 Issue 03 2011 In addition, the prices of TiO2 major raw materials continue reveal that the price of rutile TiO2 is expected to increase to to go up this period. Take titanium concentrate ore for USD3,052/t in the next coming months. example, its price has increased to more than USD153/t in some areas. Sulfuric acid Due to the above factors, TiO2 prices have a remarkable Although sulfur price has decreased slightly, the price of increase in March 2011 especially in Shandong and Sichuan sulfuric acid has kept stable in March 2011. Province. The prices in these two areas increase by about USD229 to USD305 per tonne. In March, one of sulfuric acids downstream industries, fertilizers market is sluggish. Thus, the fertilizer Although the cost is increasing, the TiO2 manufacturers manufacturers have reduced the purchase amount still make profits with the strong demand in the first of sulfuric acid. However, because some sulfuric acid quarter. For example, Anhui Annada Titanium Industry manufacturers have stopped production and the strong Co., Ltd. claimed that its retained profits would be about demand from TiO2 manufacturers, the demand of sulfuric USD0.9 million to USD1.68 million in Q1 2011. acid still exceeds its supply in domestic market and its price has kept stable. With the high cost and large demand, some manufactures Ex-factory prices of titanium concentrate ore and titanium slag in Feb. 2011, USD/t Area Titanium concentrate ore Titanium slag Grade Feb.11 Mar.11 Grade Feb.11 Mar.11 Sichuan 40%-46% 150-158 182-189 74%-78% 654-684 654-684 Hainan 45%-54% 134-144 140-151 N/A N/A N/A Yunnan 45%-47% 146-149 150-168 77%-92% 623-775 717-870 Guangxi 50%-52% 190-196 200-206 N/A N/A N/A Liaoning N/A N/A N/A 92% 790-806 790-806 Source: CCM International Titanium concentrate ore Titanium slag Being impacted by the soaring demand and tight supply, titanium concentrate ore price sees a remarkable increase Titanium slag is in short supply and its price keeps an in March 2011. upswing in March 2011. In March, the inventories of titanium concentrate ore Continuing to be impacted by the increasing price of manufacturers were still small, especially in Hainan titanium concentrate ore, its major raw material, the and Yunnan Province. Many producers stopped to offer titanium slag price hikes in this period. In addition, the quotation to the new customers. titanium concentrate ore is in insufficient supply, limiting titanium slag yields. The titanium slag price increases Besides, the bad weather limits the exploitation, the to about USD961/t in some areas. And its downstream titanium concentrate ore is in short supply in this period. product prices also advance in this period, such as titanium Thus, the price of titanium concentrate ore increases tetrachloride and sponge titanium. substantially. For example, titanium concentrate ore price has advanced from USD176/t to USD206/t in Panzhihua City. TiO2 multinationals announce price hikes in April I n March 2011, TiO2 multinationals, including Cristal, Huntsman, Kronos and Tronox, announce new price hikes, being effective April 1, 2011. These price hikes are mainly focused on North America. All the TiO2 multinationals did not increase their prices in these regions in the former round of increase announcement.TABLE 3: TiO2 multinationals announce new price hikes, effective April 2011 Asia Middle Company Pacific East Africa North America Remark Effective April 1, 2011 Cristal USD300/t USD300/t USD300/t USD0.15 per pound An additional USD50/t will be applied to all sales of Tiona 188 grade sold within the Asia Pacific region. Kronos -- -- -- USD0.15 per pound Effective April 1, 2011 Huntsman -- -- -- USD0.15 per pound Effective April 1, 2011 Effective April 1, 2011 An additional USD0.15/pound will be applied to all anatase, inks, Tronox -- -- -- USD0.15 per pound and polymer products (TIOXIDE®TR28, TIOXIDE®R-TC30 and TIOXIDE®R-FC5), TIOXIDE®R-XL and the DELTIO® free-flow pigment range. Source: Companies announcements 8 CCM International Limited
  12. 12. TiO2 China Monthly Report Vol.4 Issue 03 2011 Downstream Rising TiO2 price shrinks downstream profit T he rising TiO2 price shrinks downstream companies profit. Coatings, inks and other resin and TiO2 forces us to adjust the price of electrophoresis coatings and related products." downstream industries face serious economic pressures. These industries have come into the strange "produce Raising prices is only a short-term quick strategy to keep or more, earn less" cycle. increase profits, while enhancing the competitiveness of a company is the long-term way.Zhejiang Dilong New Material Co. Ltd. (Zhejiang Dilong), adecorative paper manufacturer, saw lower net profit growth "The soaring price has caused great difficulties in marketingrate than operating income growth rate according to its for coating industry. As a manufacturing industry, theAnnual Performance Report 2010 issued on 28th Jan.2011. raw material cost accounts for 50% to 70%.Therefore, theIn 2010, Zhejiang Dilong achieved total revenue of USD56 rise of TiO2 price can seriously lower the profits of coatingmillion (RMB367 million), seeing a year-on-year increase industry." Said Shen Jujun, Deputy Minister of Marketof 51.59%. However, its net profit for shareholders was Department of Hangzhou Chuanhua Coating Co., LtdUSD6 million (RMB39.9 million), just increased 1.26% over (hereafter called Chuanhua).2009. The main reason for the shrinking net profit growthof Zhejiang Dilong was raising raw material prices, as Facing this situation, Chuanhua proposed its 2011explained by the companys board of directors in the report. development strategy as follows. Firstly, optimize product structure and strengthen research & development; secondly,Inks industry also suffered a lot from raw material rising realize technological breakthroughs; thirdly, open up newprices. Zhuhai Letong Chemical Co., Ltd. (Zhuhai Letong) markets; last, enhance brand value as well as customereven saw net profit declining 13.91% in 2010 over 2009, services.whereas its total operating income had a year-on-yearincrease of 41.94% in 2010. In Zhuhai Letongs 2010 Some people think hard to find the solution for the TiO2Annual Performance Report, rising raw material prices was price rise. "It is most significant to improve competencyconsidered to be one of the main reasons for decreasing and risk resistance capacity of coating industry in 2011."profits, coupled with increasing sales cost resulted from Said Sun Lianying, President of China Coating Industrymarketing enhancement. Association.Since 1st January 2011, international TiO2 giants--DuPont, As a director of China Coating Industry Association ExpertsHuntsman, Tronox and Kronos, have raised the price Committee, Liu Dengliang reckoned that though coatingsof their subsidiary products by USD200/t. It is understood production in China ranks first in the world, the quality ofthat almost simultaneously they released this years second coatings still needs improvement. The gap is large comparedtime global price rise, which will enter into force on April 1. with multinational coating companies in profit margin andDupont, Cristal, and Tronox respectively decided raise the added value, which restricts the Chinas development from aprice by USD300/t in Asia-Pacific region. big coating country to a powerful one.In response to the shortage of global supply chain and raw Thus, he pointed out that its necessary to improvematerial price rise, Sun Chemical--one of the worlds largest industry access threshold, as well as increase the industrialmanufacturers of printing inks and pigments announced concentration by supporting large coating companies andon 6th March 2011 that it will raise inks price in North eliminating small companies with backward productionAmerican from 1st April 2011. Sun Chemical expressed that capacity. Meanwhile, it urgently needs to strengthenthey had no better choice but to raise prices. technical innovation, including building innovative platforms as well as cultivating talents.The Automotive OEM (original equipment manufacturer)Coatings Department of PPG Industries announced on 18th It is supposed that coating industry is to be re-shuffled.March 2011 that the department will increase the price Yue Wangkun, general secretary of China Coating Industryand additional fees of its electrophoretic coatings and Association, once said that industry shuffle was good forrelated products. It will enter into force on 1st May 2011, or technology innovation, which can improve product quality.according to contract provisions. PPG senior vice president The price will fall when the industrys scale reaches a certainof Automotive OEM Coatings Cynthia A. Niekamp said, "The degree. Then people can enjoy better quality with lowerfast increasing price of important raw materials like epoxy price." 9 CCM International Limited
  13. 13. TiO2 China Monthly Report Vol.4 Issue 03 2011 Indemnificatory housing promotes architectural coating market development I ndemnificatory housing (including affordable housing and low-rent housing), as one item of Chinese the buyers of indemnificatory housing are mainly the consumers with limited purchasing power. Therefore, 12th Five-Year Plan (2011-2015), will promote the lower and medium building materials will get a good market development of architectural coating market in coming five years. industry. Considering the close link between real estate industry and building decoration industry, the It may strengthen the motivation of coating industry that construction of indemnificatory housing will similarly the financial foundation for indemnificatory housing lead to large-scale demand of architectural coatings. program is assured to be completely viable, according to government report as below. The Chinese architectural coating industry has developed well with an increasing annual growth. The "The total investment of this year(2011) will be USD198 annual output of architectural coating was 3.52 million billion (RMB1.3 trillion), more than USD76 billion tonnes (nearly 40% of coating industrys total output) (RMB500 billion) will be provided by the central and local in 2010, seeing a year-on-year rise of 23.7%. It shows governments, with the remainder channeled from social that architectural coating industry has developed quickly institutions and individuals; to ensure sufficient finance, and played an important role in coating industry. central authorities are also mulling rules covering the entry of insurance funds into the subsidized projects." Said Qi Ji, Indemnificatory housing becomes a new growth point of vice-minister of housing and urban-rural development, at architectural coating industry. Different from previous a press conference on 9th March 2011. years, architectural coating industry is under dual pressures: one is the price hike in raw materials, the other Although the proportion of indemnificatory housing is depressed real estate market caused by government is small, it contributes a lot to a positive adjustment of policy. market expectations. On one hand, most raw material prices increase, mainly Cao Yuanzheng, chief economist at Bank of China affected by the international crude oil price rise. As for International believes that a lot of investment to build TiO2, its price rises because of increasing production cost indemnificatory housing and other indemnificatory and large consumption market. housing is short-term effective way to boost domestic On the other hand, the real estate industry suffers from demand. Commercial real estate pattern inhibits peoples both government restriction policy and high interest rate consumption impulse, a large number of low-profit set by the Peoples Bank of China. To relieve its pressure, indemnificatory housing building can quickly stimulate the real estate industry delays payment to architectural the development of building materials, automotive, home coating companies, which has bad influence on the latter. appliances and other 50 more related industries. Luckily, the governments indemnificatory housing It is foreseeable that guided by the 12th Five-Year-Plan programme brings hope for coating industry. and driven by the market, building decoration industry will enter a new period of development; coatings production "To raise the level of housing security, China will build 10 will increase year after year; the Chinese architectural million indemnificatory housing in 2011, as a part of the coatings market has a good prospect. plan to build 36 million houses (as shown in figure below) for low-income families during the 12th Five-Year Plan FIGURE 9: Construction target of indemnificatory housing, 2010- period (2011-2015). When completed, the program 2015 is expected to cover 20 percent of the countrys total housing supply," said Xu Xianping, deputy director of the National Development and Reform Commission, at the press conference of National Peoples Congress at the Great Hall on 6th March 2011. Wall decoration occupies a weight of 80% in the whole housing decoration in China. For a 70 square meters house, according to industry standard, the coating coverage should be 8.6 mm, which means 17.67 liters decorative coatings. With 10 million indemnificatory housing to be built this year, the coating demand adds up to 176.7 million liters. Thus, indemnificatory housing will largely promote architectural coatings market. The indemnificatory housing building has set the tone for the market demand of building material industry. Lower and medium products will be preferred. Besides, Source: China Customs; CCM International 10 CCM International Limited
  14. 14. TiO2 China Monthly Report Vol.4 Issue 03 2011 Plastic pipe market to boom with governments support P lastic pipe market is about to boom along with governments new plans on agriculture. water conservancy construction is lucrative, but only competitive and innovative companies can benefit from The 2011 Central No. 1 Document focuses on water it. conservancy construction, which is surely a good opportunity for plastic pipe industry. The water Its time for companies to release their production capacity conservancy construction mainly includes farmland and improve techniques. Those who seize the opportunity water conservancy, water saving projects and rural will hopefully have a leaping development. drinking water projects. Plastic pipe will be preferred because of its advantages such as light weight, corrosion Guo Runming, General Manager of Xian Hi-Tech Building resistance, weather resistance and easy installation. Materials Co., Ltd. (Xian Hi-Tech), told the journalist, "We are setting about expansion and transformation, in Wang Zhanjie, Secretary of Pipe Committee of Chinese order to seize the opportunity. By the time all projects Plastics Processing Industry Association, pointed out that finished, the company will have a production capacity of there will be a total of USD717 billion (RMB4,700 billion) 105,000 t/a plastic pipe and 80,000 t/a plastic profiles, direct funds for the water conservancy construction in to be a large national production base of plastic building coming ten years. materials." Wang reckoned that 30% of the funds for rural drinking Guo reckoned that the demand for large diameter plastic water projects will be used to purchase plastic pipes pipe will increase by an annual growth rate of more than and tubes. Besides, large-scale demand for plastic pipes 50%, thanks to water conservancy construction. Therefore, occurs in other projects such as urban water network and Xian Hi-Techs new plastic pipe production line will farmland water conservancy construction. mainly produce large diameter irrigation pipes and PE (polyethylene) pipes, PVC (polyvinyl chloride) pipes and In 2010, the plastic pipe companies in China had a total other water supply or drainage pipes, with the diameter to production capacity of more than 17 million tonnes, be more than 800 millimetres. while the output of 2010 was 8 million tonnes, leaving more than half of the capacity lie idle. The market of Global insight Earthquake in Japan impacts TiO2 industry A ccording to Sakai Chemical Industry Co., Ltd. (Sakai), a Japanese TiO2 producer with some ilmenite orders will be suspended, as TiO2 production in Japan is to be impacted due to the power production capacity of 60,000t/a, it has been suffered shortage after the earthquake. Hence, they can divert some from the damage caused by the earthquakes which hit volumes to meet Chinas end users in April. As a result, the Northern Japan on March 11th 2011. price of titanium feedstock is expected to retreat to some extent in April. After the disaster, Sakais TiO2 facility has been halted because utilities such as electricity and water supply have The reconstruction after the earthquake will certainly been shut down since the earthquake struck. boost TiO2 demand in Japan, which will shrink ISKs TiO2 export volume. Moreover, the halt of Sakai will further Though Ishihara Sangyo Kaisha, Ltd. (ISK), Japans largest intensify the shortage of TiO2 worldwide, especially in TiO2 producer with production capacity of 160,000t/a, Asia Pacific. As a result, TiO2 price is expected to witness a did not suffer from the damage, TiO2 industry will still be faster increase. affected. In 2010, Japan totally exported 70,673 tonnes TiO2. According to one of Indian titanium feedstock suppliers, Kronos Worldwide produces in full load in 2010 A ccording to Kronos Worldwide Inc. (Kronos Worldwide), it produced 132,000 tonnes TiO2 in Q4 2010 and sold 119,000 tonnes. As a result, the total output and sales volume of Kronos Worldwide were boosted to 524,000 tonnes and 528,000 tonnes, respectively in 2010. Both the output and sales volume achieved new historic records in 2010, increasing by 30.3% and 18.7% respectively year-on-year. In 2010, Kronos Worldwide operated 533,000t/a TiO2 production capacity in Germany, Canada, the US, Belgium and Norway. 402,000t/a capacity are for chloride process and the other are for sulfate process. 11 CCM International Limited
  15. 15. TiO2 China Monthly Report Vol.4 Issue 03 2011 KMML to boost titanium industrial capacity K erala Minerals and Metals Limited (KMML), Indian chloride TiO2 producer, is to boost its titanium industrial capacity in the coming years. According to KMML, it will expand its TiO2 capacity to 60,000t/a within two years, from current 40,000t/a in 2011. Moreover, it will also enhance its titanium feedstock production, by expanding its synthetic rutile capacity from 35,000t/a to 55,000t/a, ilmenite production capacity from 50,000t/a to 63,000t/a and rutile from 3,000t/a to 4,000t/a. 12 CCM International Limited
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