18 November 2016 23:29 Source:ICIS News
HOUSTON (ICIS)--US TiO2 contract values for the fourth quarter were assessed flat on Friday amid waning demand and growing inventory levels, but it’s not just producers that see pricestrength ahead.
All but one of the major domestic producers had proposed separate 7 cent/lb ($154/tonne) price-hike efforts for the quarter.
Most buyers confirmed broad rollovers for the seasonally weakest demand period of the year.
The settlement holds contract prices within a range of $1.23-1.30/lb FD (free delivered), as assessed by ICIS.
Buying interest, however, has remained steady much longer than usual after a stronger year-on-year US spring paint and coating season.
Demand continues to weaken, sources said, but more gradually this year, mostly due to good spring- and summer-weather patterns. Cooler weather and the US holiday-shortened months of November and December typically contribute to subdued conditions in the predominant downstream TiO2 market of architectural coatings.
Most buyers expect some of the failed fourth-quarter price initiatives to carry over into the first quarter of 2017.
Already, Chemours has proposed a 6 cent/lb increase for North America and the Asia Pacific region, effective 1 November. If successful, that initiative would be implemented on 1 February. Most US TiO2 customers have 90-day price protection.
Huntsman recently announced its intent to raise its pigment price by 7 cent/lb in North America and other regions, effective 1 January. If successful, that price increase would be implemented on 1 April.
“Each of the Chemours and Huntsman increases will likely be effective in the first quarter of 2017,” a buyer said. Huntsman can lean on their increase (initiative) and try implementing that one at about the same time that the Chemours’ increase gets implemented – presumably – in the marketplace.”
And sentiment appears to support future increases.
“Over the next two or three years, pigment producers likely will be in a good spot to improve pricing and profitability because the overhang is over,” a buyer said. “And the market cycle has shifted toward balance this year and a sellers’ market going forward.”
Also, if ilmenite ore price pressure is realized, the buyer said, the TiO2 producers will use that to justify price efforts in the first two quarters of next year.
A source said, however, that pigment increases within the first half of next year will probably be justifiable on supply and demand alone, assuming mild winter weather and a calm spring.
“The pigment guys,” the source added, “are about to get their pound of flesh.”
While none of the pigment producers has cited specific reasons for their initiatives, market consensus is that supply tightened this year on better weather and some capacity rationalisation throughout the global TiO2 industry during the past 18 months.
Another major price driver is profitability, a seller said last week.
“I think people look for one driver of price efforts,” Bryan Snell, president of Chemours Titanium Technologies, told ICIS last week. “It can happen in a tight market, but there are also input costs, profitability and other factors.”
Kronos said earlier this month that it expects long-term TiO2 demand to grow by 2-3% per year, tracking GDP projections. But the seller also noted that TiO2 demand varies on seasonality, broad economic conditions and downstream market expectations.
The seasonally weak domestic demand usually seen in the fourth quarter usually sees inventory growth and little or no upward price movement as suppliers prepare for the paint-blending season early next year. That ushers in the US spring paint and coatings season, which usually peaks in the second quarter of each year.
TiO2 is used in products such as paints and coatings – including glazes and enamels – plastics, paper, inks, fibres, foods, pharmaceuticals and cosmetics.
Other major US TiO2 producers include Tronox and Cristal.
INSET IMAGE: TiO2 used in paint. (Cultura/REX/Shutterstock)
By Larry Terry
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