Titanium dioxide: “Keeping a watchful eye”
What is the outlook for the TiO2 market?
Reg Adams: From the perspective of most TiO2 pigment suppliers, the market situation is much better now than it was two years ago. World demand increased by 4.4 % in 2016 and by 5.3 % in 2017, so that producers have been able to run their plants at high operating rates (typically 90-100 %), apart from plants in Finland, Ukraine and India that were seriously affected by outages. Excessive inventories, which were exerting a drag on the market, have been reduced to more normal levels representing sales volume equivalents of 40-45 days, instead of 60-70 days. In Q1 2016, the average realized selling price of TiO2 in the U.S. market was at the lowest ever level (in real terms) in the industry’s 100-year history; but following step-by-step increases each quarter, it has risen by just over 30 %. Over the same period, the average TiO2 price in Northwest Europe has increased by nearly 70 % in $US terms, partly as a result of a stronger euro exchange-rate.
To what extent are developments in China affecting the TiO2 market?
Adams: Throughout the TiO2 value-chain, one of the major factors affecting supply, demand and prices in 2016/17 was the unexpected severity of the Chinese government’s crackdown on pollution. This resulted in the permanent closure of a number of small and medium-size plants, accounting for 300,000 t.p.a. of TiO2 pigment capacity (more than 8 % of the national total).
The crackdown on pollution is now having an impact on the operations of some of the larger Chinese producers that have been ordered to curtail their operating rates to comply with government guidelines on air quality for the 2017/18 winter season, resulting in a net “loss of output” of about 90,000 tonnes for Q1 2018. A tighter supply/demand balance in China, coupled with higher anti-pollution costs, has supported a firmer tone in Chinese TiO2 pigment export prices as well as leading to a reduction in China’s TiO2 exports – estimated at 180,000 tonnes for Q1 2018, versus 250,000 tonnes in Q4 2017 and 190,000 tonnes in Q1 2017.
How will the market develop?
Adams: For 2018 and 2019, there should be continued synchronized macroeconomic growth in all the major regions – the IMF is forecasting global GDP growth at 3.9 % per annum, despite myriad political uncertainties. Artikol is forecasting world TiO2 consumption growth at 4.8 % per annum over the next two years. There should be further rises in TiO2 pigment prices in Q2 2018 but during the second half of the year the global supply/demand balance should ease, with more Chinese pigment available on export markets and an anticipated uptick in production from key producers.
To what extent would you say that the proposed classification for TiO2 in Europe would affect the global market, and the U.S. market?
Adams: The EU authorities responsible for setting consumer health and safety standards are seriously considering draft legislation that would require all TiO2-containing products sold in the EU (cans of paint, PVC window-frames, packs of decorative laminate flooring, etc.) to have labels on the packaging with words and icons warning that the product contains a potential carcinogen. The decision as to whether or not to proceed along this legal pathway was expected in mid-March 2018 and the labeling directive would then begin to take effect in 2019. European paint manufacturers – and other TiO2 pigment users – are fearful that the public will be unnecessarily worried about the new labeling regime, resulting in falling sales, rising costs and a widening gap between consumer expectations and actual product performance. Non-European trade associations have been keeping a watchful eye on regulatory developments in Europe: several of them submitted arguments against unjustified labeling of TiO2 during the public consultation phase of the EU’s legal process.
As of yet, there are no signs that the United States, Canada or any other country is considering legislation on product labeling that would adversely affect TiO2. However, California has shown TiO2 (airborne unbound particles of respirable size) on its Proposition-65 list of potential carcinogens since September 2011, which means that certain TiO2-containing cosmetic products sold in California must carry appropriate warning labels. Following this, TiO2 has been demonized by certain consumer groups in the United States and elsewhere, spreading misinformation about TiO2 and cancer via printed magazines, leaflets and social media. To minimise damage to brand reputations, several leading confectionery manufacturers with U.S. headquarters (Dunkin Donuts, Mars, Mondelez and others) have implemented a policy of removing TiO2 as an ingredient in all their food product formulations. In the case of food products, the removal or substitution of TiO2 as an ingredient does not have a significant impact in terms of performance (taste, appearance, shelf-life, etc.); but in the case of paint products, the removal or substitution of TiO2 would have a huge detrimental impact on product performance. Therefore, such a move would meet with strong consumer resistance from DIY and professional painters and decorators, as well as from industrial paint users.
To sum up, the impact of EU legislation on carcinogenic classification and labelling for TiO2 will not have a major impact on the US market in the short- to medium-term. However, if U.S. regulators decide to follow their EU counterparts and enact similar regulations on labeling cans of paint and other TiO2-containing products, this would be very bad news for the future health of both the TiO2 industry and the paint industry.