International Coatings Scene

EUROPE

BY SEAN MILMO

EUROPEAN CORRESPONDENT

MILMOCW@RODPUB.COM

TiO2 market under pressure

The TiO2

market is

readjusting

itself to

the current

economic

situation.

Titanium producers are closing or mothballing plants in Europe raising fears that once demand for the pigment picks up again shortages will trigger big price increases.

The plants being shut down are facilities with high production costs, in particular those using the sulphate process, which in recent years has accounted for about two thirds of total annual capacity in Europe of around 1.5 million tons.

The TiO sector in the region is effectively 2

going through a restructuring exercise, which could result in less capacity in Europe a lot of which could be under different ownership.

Even financially hard-pressed producers are positioning themselves to take advantage of a reorganization which could provide some acquisition bargains.

Kronos Worldwide Inc, Dallas, TX, over half of whose volume sales of 530,000 tons of TiO were

2

sold in Europe where it has plants in Germany, Belgium and Norway, suspended its quarterly dividend earlier this year to prepare itself for possible plant purchases.

“It is prudent to maintain our liquidity and strengthen our balance sheet in order to take advantage of potential opportunities in the chemical markets, including acquisitions of TiO

2

manufacturing facilities,” said Steven Watson, vice chairman of Kronos, which declared a $26 million loss in the first quarter of this year and expects to make a loss for the whole of 2009.

A possible worsening imbalance between supply and demand in the region’s TiO sector

2
the majority of whose output goes into the coat-
ings market will mean that a higher proportion
than usual will have to be imported into
Europe. DuPont, a major player in Europe but
without any local production capacity, ships in
most of the TiO for its European customers
2
from North America.

Over the last one to two years, an appreciating euro, particularly against the U.S. dollar, has triggered an even higher level of imports from outside Europe, although the inflow has eased in recent months as the dollar strengthened against the euro.

Within the global TiO market, the European
2
titanium dioxide sector is competitively vulnera-
ble because of its reliance on the traditional sul-
phate process which is more expensive than the
chloride method, or the other main production
technology for making the pigment and which
was first introduced into Europe in the 1970s.
The recession has made the high production
expenses of Europe’s TiO producers an even
2
heavier financial burden because they are
absorbing the costs while demand has been
plummeting.

With their inventories rising they have had little alternative but to reduce production either permanently or temporarily.

Huntsman Corporation, Salt Lake City, UT, which has around 60% of its 560,000 tons-a-year of global TiO capacity and a similar proportion

2
of sales in Europe, much of it using the sulphate
process, has just closed a 40,000 ton-a-year sul-
phate plant at Grimsby, northeast England, in
favor of a UK-based chloride unit. It is also moth-
balling another sulphate unit at Huelva, Spain.
“In TiO in the first quarter, we probably
2
operated our plants at just over 50% utilization
rates,” Peter Huntsman, the company’s presi-
dent and chief executive officer, told an analyst-
s’ conference call in May. “Annual operating
costs savings from the Grimsby closure will be
approximately $28 million. The production
demand from Grimsby has been absorbed by
the Greatham facility (in the UK), which we
believe is the lowest cost TiO chloride facility
2
in Europe.”
“Additional cost controls were implemented to
lower fixed costs and reduce inventory,” he
added. “We plan to reduce inventory further by
idling our TiO facility in Huelva at the end of
2
the second quarter while running other assets at
full capacity.”

Tronox Inc., Oklahoma City, OK, which filed for Chapter 11 bankruptcy protection in January this year, has put up for sale its 100,000 ton-a-year sulphate plant at Uerdingen, Germany.