“Closure unlikely to have immediate impact on availabilities”
Chemours closes Kuan Yin plant in northwest Taiwan. Can you give some background to the decision?
Reg Adams: Against the backdrop of a sharp drop in profits at Chemours Titanium Technologies in the second quarter of 2023, a 27% drop in global sales volumes and a worsening overcapacity situation in the global Titanium dioxide pigment industry, this was not really a surprise. According to Chemours, global demand for Titanium dioxide in 2022 as a whole was 6.2 million tonnes, 13% lower than in 2021 and only slightly higher than in 2017, but in those five years global capacity has increased from 7.3 million tonnes per year to 8.9 million tonnes per year. The ratio of global demand to capacity has decreased from 84% to 70%, and Chemours’ capacity utilisation has also decreased. Chemours has been careful not to build up excessive inventories of unsold pigments and has been quite successful in securing long-term supply contracts with customers at inflation-protected prices, its so-called “value stabilisation strategy”. The 27% decline in revenue in the second quarter of 2023 was entirely due to a decrease in sales volume, while price levels (in US dollars) remained unchanged. From its four plants, Chemours sells Titanium dioxide to virtually every country in the world. Over the past six years, Asia-Pacific accounted for 27-34% of total sales, North America for 26-28%, Latin America for 13-15%, the Middle East and Africa for 3-4% and Europe for 17-23%.
What impact will the Kuan Yin plant closure have on the availability of titanium dioxide for paint manufacturers?
Adams: There should be no immediate impact from the closure. Chemours will step up production at its US and Mexican plants to make up for the removal of about 10,000-12,000 tonnes per month sourced from Kuan Yin. In the medium-term, Chemours will seek to maintain its global market share at around 14 %. It will be in a better position to do so than its multinational rivals, but the major competitive threat will come from several Chinese suppliers offering increasing quantities of good-quality chloride-route Titanium dioxide.
Are the effects to be felt only regionally or globally?
Adams: Intensified competition from Chinese suppliers will affect markets across the world, but the US market is shielded to a large extent by virtue of the 31 % import duty on Chinese Titanium dioxide that has been in place since the beginning of 2019. Taiwan has been exporting more than 100,000 t.p.a. of Titanium dioxide in recent years, mostly to Asian markets (notably China, India, Japan, Singapore, Thailand and Vietnam). About 4,000-6,000 t.p.a. has been supplied to the Chemours’ European hub-terminal in Antwerp. In addition, Chemours has been supplying about 30,000 t.p.a. from its Kuan Yin plant to Taiwanese customers. As well as the Chinese suppliers, Tronox – having two chloride-route plants in Western Australia, with a combined capacity of 260,000 t.p.a. – will be keen to try to “fill the gap” in Asian markets caused by the withdrawal of the Taiwanese source.
To what extent can further closures by other manufacturers be expected?
Adams: All manufacturers have been affected by rising costs for titanium dioxide feedstock and energy, the downturn in demand and the worsening overcapacity. Newly installed capacity in China, coupled with a slowdown in the Chinese economy, will exacerbate the situation. Among the multinationals, Venator has been hit hardest and the company has declared voluntary bankruptcy as a prelude to financial restructuring. Venator’s 50,000 t.p.a. plant at Duisburg (Germany) and its 80,000 t.p.a. plant at Scarlino (Italy) will probably shut down. In Crimea, the 100,000 t.p.a. plant at Armyansk has been disabled as a consequence of the Kakhovka Dam disaster.
Regardless of the outcome of the war, this plant will be out of action for at least three years. For the time being, no other major plant closures are anticipated in Europe or elsewhere. Nevertheless, the decisive action of Chemours, closing its highest-cost plant, will doubtless cause other producers to seriously consider taking similar action.