After a wave of rising prices at the beginning of the year, titanium dioxide price entered a downward channel. According to business news agency, on May 11, the average price of titanium dioxide in China was 15266.67 yuan / ton, and on May 15, the average price was 14166.67 yuan / ton, with a drop of 7.21% in the week.

Liu Henghui, a researcher of CNR Puhua, analyzed to the reporter of China Business Daily that China is a big exporter of titanium dioxide, with an annual export volume of nearly 900000 tons. Since March 2020, the outbreak of the epidemic in foreign countries has been rapid, and the main areas have begun to limit work and stop production. Affected by the epidemic, the demand for foreign trade of titanium dioxide continues to weaken. On the other hand, the domestic wait-and-see mood is strong, the market demand is not as expected, and the inventory pressure of domestic titanium dioxide enterprises is large, so that the market price of titanium dioxide has declined to a certain extent.

A titanium dioxide executive told reporters that the price reduction makes the production and operation of small and medium-sized enterprises more difficult, which will accelerate market polarization, and the industry merger and reorganization will become the normal in the next 3 years.

Weak demand drags down prices

Before and after the Spring Festival this year, due to insufficient construction, domestic titanium dioxide enterprises have announced price increases. According to Zhuo Chuang information data, in late March, the average domestic price of sulfuric acid titanium dioxide was about 15000 yuan / ton, and the average price of chlorinated titanium dioxide was about 16000 yuan / ton. Since the Spring Festival, each ton has increased by about 200 yuan.

At the same time, international titanium dioxide giant tronox announced on March 11, 2020 that it would increase the price of all products of Tronox TiO2 (titanium dioxide) from April 1, 2020. Among them, the Asia Pacific region was increased by 120 US dollars / ton. As another titanium dioxide giant, comer also announced that from April 1, 2020, all specifications of Ti-Pure titanium dioxide purchased by Comer in China will increase by US $50 per ton.

Nowadays, with the spread of the COVID-19 world wide, the market sees a weak demand and the price of domestic manufacturers has been reduced by 300-500 yuan / ton.

On May 19, the quotation of rutile series titanium dioxide products of sulfuric acid process of Lomon Billions Group Co., Ltd. (hereinafter referred to as "Lomon Billions ", 002601. SZ) has been reduced to 14500 yuan / ton; the quotation of Panzhihua haifengxin Chemical Co., Ltd. has also been reduced to 13500 yuan / ton.

Before that, the export volume of domestic titanium dioxide increased year by year. In 2018, the export volume of domestic titanium dioxide reached 908000 tons, accounting for 30.7% of the total domestic output. In the first three quarters of 2019, the export volume reached 741000 tons. According to this estimate, the export volume in 2019 will reach 1 million tons, and the proportion of export will continue to rise.

However, in an interview with the media, Wang Juan, an analyst with Zhuo Chuang, said that in the past more than 1 month, the domestic titanium dioxide market has not been optimistic. In the context of price decline, secondary traders are eager to ship goods, have no intention to stock up and purchase, and basically purchase the products when need.

In fact, she said, many products are stored in the customs and not fully released to overseas downstream clients. In recent years, affected by the spread of the overseas epidemic, domestic titanium dioxide manufacturers have reported that exports have been frustrated and demand has been reduced. On the one hand, the production of overseas downstream enterprises has stopped and export orders have decreased. On the other hand, the export orders of domestic downstream enterprises have also shrunk, which has affected domestic demand.

Concentration will be further improved

Liu Henghui told reporters that at present, titanium dioxide market is accelerating polarization, leading enterprises rely on their own advantages including no worry for orders and inventory pressure. With the price reduction of leading enterprises, the factory price of titanium dioxide of small and medium-sized enterprises is forced to reduce, which makes the production and operation of small and medium-sized enterprises more difficult.

Although the industry was depressed by the epidemic, the first quarter performance of leading enterprises was outstanding. According to the first quarter report in 2020, Lomon Billions achieved an operating revenue of 3.69 billion yuan, a year-on-year increase of 32.84%; and a net profit of 901 million yuan, a year-on-year increase of 44.68%. CNNP titanium dioxide (002145. SZ) achieved an operating revenue of 827 million yuan in the first quarter of 2020, an increase of 1.02% year on year; and a net profit of 162 million yuan, an increase of 50.12% year on year.

At the same time, the sluggish market has not stopped the pace of expansion of leading enterprises. CNNC HUA YUAN and Lomon Billions in China have successively issued plans for non-public issuance, with a fixed increase in production.

Among them, on April 23, Lomon Billions announced that it planned to issue no more than 368 million shares in non-public and raise no more than 4.387 billion yuan in total for the production and construction of titanium chloride slag, titanium dioxide powder by chlorination process and supplement of working capital.

In this regard, Liu Henghui told reporters that in the future, the concentration and scale of titanium dioxide enterprises will be the development trend of the industry, and the development mode of "the strong will always be strong" is inevitable.

Lomon Billions said that in 2019, the company's titanium dioxide production by chlorination method will be 74700 tons, accounting for 11.86% of the company's total titanium dioxide production, accounting for 35.74% of the national total titanium dioxide production by chlorination method, which is far lower than the proportion of titanium dioxide by chlorination method of international giants such as Como and Koster.

Qin Chong, a researcher of CNR Puhua, told reporters that in 2019, the top five enterprises in the global titanium dioxide production capacity accounted for 90% of the production capacity, while the top 10 enterprises in China's titanium dioxide industry had a concentration of about 68%. According to the global situation, China's titanium dioxide industry will still generate purchase in the future to meet the development trend of the industry. At the same time, with the help of listing, enterprises expand the capital channel and enhance the ability of anti risk.

In Qin Chong's opinion, due to environmental protection reasons, the chlorination process in line with the policy guidance will become the mainstream, and the newly increased production capacity is basically based on the chlorination process, which is also a manifestation of enterprises catering to the market.

According to the data of China research and PricewaterhouseCoopers, in 2018, there are only 11 domestic titanium dioxide manufacturers with a production capacity of more than 100000 tons. Of the 39 full process large-scale titanium dioxide enterprises that can maintain normal production, 17 have a production capacity of less than 30000 tons, and the concentration of production capacity needs to be further improved.

Wang Chunna, an analyst with jinlianchuang titanium dioxide, said in an interview that the contradiction between supply and demand in the industry is still continuing at this stage. In 2019, new production capacity will be released in succession, and some enterprises still have plans to expand production. It is estimated that the total production capacity will reach 4.2 million tons in recent years. According to incomplete statistics, as of January to October 2019, the domestic titanium dioxide output is nearly 2.6 million tons, with a year-on-year growth. In addition, the export volume has increased, while the import volume has declined. The domestic apparent consumption is expected to be basically consistent with that in 2018, with limited volatility. Driven by export demand, the capacity utilization rate of the whole industry will be greatly improved, but there is still overcapacity.

Liu Henghui told reporters that the domestic titanium dioxide market is in chaos, and the phenomenon of overcapacity is still prominent. In 2019, the capacity of domestic titanium dioxide enterprises with capacity below 50000 tons still accounts for 13%, and the small capacity is still large. Nowadays, the leading enterprises take the lead in price reduction when the market demand weakens, which will bring greater pressure on some small and medium-sized titanium dioxide enterprises, and the concentration of titanium dioxide industry is expected to further improve in the future.

CNNC titanium dioxide said that in the next three to five years, the merger and reorganization of the industry will be further accelerated, and the number of production enterprises will be further reduced. Finally, several influential titanium dioxide enterprises will form to participate in the competition in the international market, which will make China's titanium dioxide production from large to strong.

Source: Beijing Report