Liu Guoxing: Titanium dioxide industry to struggle in H2

Asian Metal: Hello, Mr. Liu. Thank you very much for accepting Asian Metal’s interview. Could you please introduce current status of the whole titanium dioxide industry firstly?

Liu: International enterprises including Dupont, Tronox, Kronos and Ishihara Sangyo Kaisha exported almost 230,000t of titanium dioxide in 2011, while the volume reduced to 160,000t in 2012. Overseas enterprises adjusted marketing strategy and did not compete with domestic enterprises recklessly after 2012. Overseas enterprises keep selling prices at RMB19,800-22,000/t and domestic enterprises keep prices of rutile at RMB13,000-15,000/t. Jinzhou Titanium Industry quotes around RMB19,000/t. The selling price of anatase titanium dioxide has reduced to as low as RMB12,000/t in China. Overall, there is an unprecedented pressure on China’s titanium dioxide market with less than 60% of operating rates.

Asian Metal: Could you please describe the development of domestic titanium dioxide market in the first half of this year?

Liu: China produced roughly 2.7Mt of titanium dioxide with 1.8Mt of consumption volume last year. Titanium dioxide market has experienced rapid growth averaging over 10% growth rate in the past decade, while the rate was only 6% last year. Growth for demand may reduce or even shrink this year. However, newly added production capacity will be over 800,000t this year, and the market will see more serious oversupply.

Asian Metal: Does your company also keep the operating rate low?

Liu: We are a small entity by size, and we operated at full capacity with increased output and sales in the first half of this year. The market was flourishing, and enterprises were also busy last year, while the market performed undesirably with shutdown or losses of numerous enterprises this year.

Asian Metal: It is rare for your company to balance output and sales despite sluggish market with increased output, and what leverage and competitiveness do your products possess over other brands?

Liu: Our advantages are techniques and quality. Titanium dioxide is mainly applied in coating, plastic materials and papermaking. As for coating industry, Jinzhou Titanium Industry is the only one enterprise supplying high-grade titanium dioxide for many international major coating enterprises domestically. We are also the only one company producing titanium dioxide with chlorination process in China and have produced for over twenty years. In recent years, product quality of our company has improved tremendously, and main technique indicators also reached world-class levels. We have also developed specialized products for plastic materials, papermaking, color masterbatch and wool lacquer to meet special demand from clients. Stable product quality and outstanding innovation ability enable us to have our products sold-out.

Asian Metal: What is your expectation toward the market in the second half of this year?

Liu: Domestic titanium dioxide market saw relatively low production and sales in H1, 2013, and the market will worsen in the second half of this year, especially the third quarter when slack season comes in July and August amid high temperature and rainy days in South China. However, most market analysts noted that the market may recover in September.

Asian Metal: Do you think the price of titanium dioxide will continue to slide down in H2?

Liu: Overseas enterprises raised selling prices of titanium dioxide in July. As for domestic market, all overseas enterprises did not raise selling prices as planned but only slightly adjusted prices upward for some certain products or some clients. There is no enterprise increasing prices ostensibly but lowering numbers actually, which stabilizes the market. In fact, domestic enterprises come under huger cost pressure, and most even incur losses.

However, there are still some factors pushing down further price reductions of titanium dioxide. Firstly, the demand remains weak with severe overcapacity. Secondly, prices of all raw materials are in decline. Thirdly, producers are under pressure to go on aggressive pricing tactics aim at reducing large inventories. Hence, I anticipate that prices of titanium dioxide will drop again in August, but at a limited pace.

Asian Metal: Does domestic titanium dioxide industry keep in line with international industry?

Liu: 70% of overseas enterprises produce with chlorination process as well as mature and complete production techniques or equipments, while 99% of domestic enterprises adopt sulfuric acid process and continue to seek their way for improvements. It is noteworthy to confirm that seven large-sized enterprises foreign enterprises possess almost 4million tons of production capacity, while only 2.8million tons of the material is produced by more than ninety domestic enterprises.

Asian Metal: Will domestic titanium dioxide industry follow overseas development pattern?

Liu: We will see an adjustment period as well as a consolidation period for domestic titanium dioxide industry in the coming five years, and concentration ratio of the industry will be much higher that it is now.

The government will also push forward industrial consolidation and technical progress, and will introduce some enforceable polices to eliminate some enterprises with serious pollution or outdated techniques.

Asian Metal: What is the plan for your company in view of current status?

Liu: We ever had two production lines with 15,000tpy of capacity and total capacity of 30,000t, and a newly built production line with 30,000tpy of capacity is in the course of trial production and will be put into full operation in late Q3. The company will increase investment to realize 300,000tpy of capacity in the coming three to five years.

Asian Metal: As the first chlorination process titanium dioxide producer, your company is developing and making progress rapidly with each passing day, we wish your company a brighter future!

Liu: Thanks.