US Tronox sees gradual TiO2 demand recovery after longer than expected downturn

Aug 23, 2023

Deniz Koray

27-Jul-2023

HOUSTON (ICIS)–Though the downturn in titanium dioxide (TiO2) demand continues, Tronox remained confident in its Q2 ’23 earnings call that the trough was reached in Q4 ’22 and that it is well-positioned as the market gradually improves.

Tronox management said TiO2 was well beyond the midpoint of its downturn from last year.

Q1 TiO2 demand was down 30% year on year, and Tronox said it was still down 21% year on year in Q2. Though projected to remain negative in Q3, it is again expected to improve.

SUBTLE PRICING CHANGESAlthough demand remains soft compared to 2021 and H1 ’22, Tronox pointed to subtle pricing changes in TiO2 this year.

Quarter-on-quarter pricing was down 1% in Q2, while year-on-pricing was up 1%.

Although there is a possibility for continued lower global pricing for Tronox next quarter, the extent of the decline is expected to be no more than 3%, quarter on quarter.

The company said Asia-Pacific, Latin America, and the Middle East were the regions most likely to experience an additional price cut.

Tronox management said the company’s prices would remain at a sizable premium to Chinese spot prices.

TRONOX CONFIDENT IN LONG-TERM MARKET POSITIONAlthough Tronox’s production and sales volumes are down year on year for Q2 ’22, quarter-on-quarter numbers have improved, leading the company to believe that the TiO2 market is gradually picking up.

The downturn in TiO2 demand has run longer than expected, but unlike companies such as Venator that have undergone financial restructuring this year, Tronox management said they are well positioned to make it through this slump due to their vertical integration.

Tronox also mentioned their surprise that Chinese production has expanded, even when likely facing losses.

In response to analyst questions about Chinese production, Tronox co-CEO Jean-Francois Turgeon said he had doubts that Chinese producers can run on lower margins than Tronox and other multinational producers for much longer.

Tronox management also mentioned anecdotal evidence that Chinese production may come down this summer due to higher-than-expected temperatures and energy costs.

Globally, Tronox will run at less than 70% capacity in Q3 and expects this to continue in Q4.

DEMAND FOR PLASTICS WEAKER THAN PAINTS & COATINGSAmong TiO2 end-use markets, the plastics sector has been weaker than both paints & coatings and paper.

When running at full capacity, more than three-fourths of Tronox material has paints and coatings end use. Plastics take up 16% of the company’s sales volume, with paper and specialty goods taking up only 7%.

While the sales volume is dominated by paints and coatings, its sales by region is more evenly distributed.

Europe and the Middle East made up 38% of its 2022 sales, while Asia-Pacific was at 31%. The North American market made up 23% of sales, with Latin America at 8%.

Tronox is a fully integrated TiO2 producer that is headquartered in Stamford, Connecticut, USA.

TiO2 is used as a white powder pigment in products such as paints, coatings, plastics, paper, inks, fibres, food and cosmetics.

Thumbnail shows white paint, which is made with TiO2. Image by Shutterstock.

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