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Monday, 19 November 2018

Competition: Are there too few suppliers of titanium dioxide?

Tuesday, 12 December 2017 | Posted by: Jan Gesthuizen, European Coatings Journal

Last week, the news spread that the "white wedding” between the two pigment manufacturers Tronox and Cristal had come under fire from the Federal Trade Commission in the USA, which fears that Tronox could cut back on production of TiO2 to further drive up the price. Is it right?

Back in the spring it looked as if Tronox could become the supreme ruler among TiO2 producers. The US company wanted to acquire Cristal’s TiO2 business for almost $1.6 billion and a 24 percent stake in Tronox. Tronox boasted of creating the largest and most integrated TiO2 producer in the world.

Oligopoly feared

But that is precisely where the problem lies. The Federal Trade Commission (FTC) has lodged an administrative complaint with the aim of preventing the deal going through. If it were to go through, between them the two companies Tronox and Chemours would have carved up 80% of the US market. Such an oligopoly would likely be a thorn in the side of US paints and coatings manufacturers too.

Tronox, of course, sees the matter differently and argues that the FTC is focusing only on TiO2, which is produced by the chloride process. It contends that TiO2 made by the sulphate process accounts for almost half of the world market.

Switching to sulphate process possible?

I don’t quite follow this line of reasoning because, as in other industrial nations, TiO2 from the chloride process dominates the US market. According to the FTC, Tronox and Chemours would then account for 80% of chloride-produced TiO2 in North America. It wouldn’t always be an easy matter for users to switch to sulphate-produced TiO2, it says. That would entail additional costs and great outlay. 

And of course, this issue is bigger than the USA itself because, on a global level too, the number of TiO2 producers is comparatively small. Complaints about prices being dictated by the big producers are already the order of the day and are growing louder.

Market domination ahed

Between them, Tronox and Cristal have an annual production capacity for TiO2-pigments of approximately 1.3 million tons. The figure for Chemours is currently estimated at less than 1.2 million tons per year. Total annual production in 2015 was put at around 5.3 million tons.

While these figures are just estimates and while there have been some changes here and there, there is no question where this is headed. If this purchase goes ahead, the TiO2 market is set for domination by just two companies. That could lead to further mergers and acquisitions by other major producers – which would mean even less competition.

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