TiO2 China Monthly Report 201103 .pdf

TiO2 China Monthly Report

Vol.4 Issue 03 2011

Copyright © CCM International Limited

TiO2 China Monthly Report Vol.4 Issue 03 2011

Publication date: 25 March 2011

Editor Note II
Headlines of TiO2 China Monthly Report 1103 II

Supply & Demand 1
China consolidates TiO2 export in Jan.2011 1
Thailand's imported TiO2 consolidates in Jan. 2011 3

Upstream 3
China widens ilmenite import origins with rising price 3
Pangang Group's industrial restructuring plan been approved 4

Company Dynamic 4
Profit analysis of Sichuan Lomon 2010 4
Jinan Yuxing aims to sell 90,000 tonnes TiO2 in 2011 5
Jinzhou Titanium to benefit from being National High Technology Enterprise 6
Shandong Dongjia expects to extend ilmenite production 7

Price update 7
Price update in March 2011 7
TiO2 multinationals announce price hikes in April 8

Downstream 9
Rising TiO2 price shrinks downstream profit 9
Indemnificatory housing promotes architectural coating market development 10
Plastic pipe market to boom with government's support 11

Global insight 11
Earthquake in Japan impacts TiO2 industry 11
Kronos Worldwide produces in full load in 2010 11
KMML to boost titanium industrial capacity 12

Latest reports related to TiO2 from CCM

• Survey of Titanium Dioxide in China 2010 - 5th • Production, Market and Investment
Edition Opportunities of Masterbatch in China

• Specialty Titanium Dioxide in China • The Coating Industry in China

• Production and Market of Pigments in China • Future of Specialty Paper Chemicals in China

• The Future of Carbon Black in China

I
CCM International Limited www.cnchemicals.com


Editor Note
Headlines of TiO2 China Monthly
Welcome to 1103 issue of TiO2 China Monthly Report.
Report 1103
2011 is the first year of China's 12th Five-Year-Plan
• Enjoying the continuous increasing TiO2 prices, China
(2011-2015). Chinese government adjusts the annual
consolidates its TiO2 international trade surplus in Jan.
average GDP growth rate for the next five years from
2011 with the export volume increasing by 0.9%, while
7.5% to 7.0% in the National People's Congress (CPC)
the import volume retreats by 11.3% as compared with
and Chinese People's Political Consultative Conference
that in Dec. 2010.
(CPPCC) held in March 2011, which indicates China
will further emphasize its quality of economy growth
• China's import volume of titanium feedstock (excluding
and eliminate more inefficient capacities. Also in
titanium slag) retreats in Jan. 2011, primarily due to the
the CPC and CPPCC, Chinese government decides to
short supply and soaring price.
support water conservancy construction in the coming
ten years, which will drive TiO2 demand.
• It makes sense for Sichuan Lomon to gain USD66 million
total profit from TiO2 business in 2010.
Primarily due to the rising cost of raw materials and
supply shortage of TiO2, TiO2price keeps increasing in
• Shandong Dongjia is expected to exploit titanium reserve
2011, which is to boost TiO2 producers’ profitability.
in Liangshan Prefecture, especially in Huili County.
Attracted by the soaring prices, both titanium miners
and TiO2 producers are to expand their production
• Jinzhou Titanium is to benefit from being National High
capacities.
Technology Enterprise.

Thanks to the tight supply and faster price increase of
• Indemnificatory housing is to promote architectural
TiO2 outside of China, China’s TiO2 export volume will
coating market development
keep increasing, which will drive domestic TiO2 price.
In the meanwhile, the shortage of titanium feedstock
• Downstream companies implement measures to avoid
will bring more pressure to TiO2 producers.
profit shrink caused by the rising price of raw materials.

Exchange rate in Mar.2011:
• Plastic pipe market is to boom with government’s
USD1=RMB6.57
USD1=EUR0.73 support.

Main companies covered in this issue

II


Supply & Demand
China consolidates TiO2 export in Jan.2011
E njoying the continuous increasing TiO2 prices,
China consolidates its TiO2 international
FIGURE 1: China’s TiO2 international trade situation, Jan.'10 ~Jan.'11
trade surplus in Jan. 2011 with the export volume
increasing by 0.9%, while the import volume
retreats by 11.3% as compared with that in Dec.
2010.

In Jan. 2011, China imported 22,019 tonnes TiO2,
decreasing by 11.3% as compared with that in Dec.
2010, which is even lower than that in the same
period of last year. Also in Jan. 2011, China exported
35,310 tonnes TiO2, increasing by 0.9% over last
month, which is double that of Jan. 2010. As a result,
China sees a largest monthly volume surplus since
May 2010, with the surplus of 13,291 tonnes in Jan.
2011.

China's enlarged TiO2 international surplus is
primarily thanks to the continuous increasing price Source: China Customs; CCM International
of TiO2 and tight supply outside of China.
FIGURE 2: China’s TiO2 import situation by origin, Jan.'10 ~Jan.'11
In Jan. 2011, China's average TiO2 CIF and FOB
prices reach USD2,629/t and USD2,277/t, increasing
by 2.1% and 5.2% respectively over last month.
Compared with that in Jan. 2010, the average TiO2
CIF and FOB prices soared by 16.3% and 34.9%,
respectively in Jan. 2011. Thanks to the wider increase
extent since September 2010, the gap between TiO2
average FOB price and CIF price has been reduced
step by step.

As mentioned, China's import TiO2 monthly average
CIF price has increased to USD2,629/t in Jan. 2011,
touching the highest level in the past 4 years. It
is primarily due to the tight supply and the rising
production cost of TiO2 worldwide. The tight supply
was attributed to the suspended capacity resulted
from the financial crisis. Though the soaring demand
after the financial crisis attracted new investment in Source: CCM International TiO2 MTB import analysis
TiO2 production, it will take much time to complete
the investment. Hence, the price of TiO2 is expected
to keep the uptrend within 2 years. FIGURE 3: Top three multinationals’ market share of China’s TiO2 import
market, Jan.'10 ~Jan.'11

As a result of continuous rising price, China's
TiO2 import volume retreats in Jan. 2011. Perhaps
the frequent price hikes have surpassed Chinese
customers' bearing capability. In Jan. 2011, foreign-
owned enterprises consume near 55.0% of the
total import volume in January. The rising price
is shrinking TiO2 multinationals' market share in
China.

As for the origins, China still imports largest amount
of TiO2 from Taiwan in Jan. 2011. Compared with
that of last month, the volume from Japan decreases
most obviously in Jan. 2011, due to its average price
rebounds by 8.4%, leading global TiO2 price hikes.

Due to the earthquake disaster in Japan, ISK is
expected to cut its TiO2 export volume to meet its Source: CCM International TiO2 MTB import analysis

1


domestic demand in reconstruction after the disaster FIGURE 4: Export volume of China’s TiO2 by destination, Jan.'10 ~Jan.'11
since March 2011. As a result, global TiO2 supply will
even tight in the coming months, which will further
boost TiO2 prices.

Thanks to the supply shortage and rising price of
TiO2 outside of China, both China's TiO2 export
volume and its average FOB price see increase in
Jan. 2011.

In Jan. 2011, China's TiO2 average FOB price touches
USD2,277/t. Since Oct. 2010, the average FOB price
saw an over USD100/t increase every month, with
the increase extent far exceeding that of average
CIF price in the same period. The price increase in
Jan. 2011 is mainly thanks to the tight supply and
the rising cost of raw materials. In January 2011,
the average CIF price of China's import ilmenite
increases 8.7% over that in Dec. 2010. The ex-factory
price of homemade ilmenite in Panzhihua City also
increases by 4.3%. Source: CCM International TiO2 export analysis

Though the price has increased fast since Q4 FIGURE 5: Export volume share of top TiO2 exporters, Jan.'11
2010, China's TiO2 export volume still increase in
Jan. 2011, with a 0.9% growth, reaching 35,310
tonnes, because China's TiO2 has seen great quality
improvement and it still offers a better price lower
USD350/t than that of foreign TiO2.

As for the TiO2 exporters, Henan Billions, Shandong
Dongjia and Sichuan Lomon still are the top 3
exporters. Besides, two producers, namely Jinan
Yuxing Chemical Co., Ltd. (Jinan Yuxing) and
Panzhihua Taihai Technology Co., Ltd. (Taihai
Technology), their export volumes see strong
increase, with the export volume both exceeding
1,100 tonnes in Jan. 2011.

In Jan. 2011, China's TiO2 export volume to Middle
East, Europe and North America all see increase,
while the volume to Asia Pacific and South America
retreats. Turkey imports 4,711 tonnes TiO2 from
China in Jan. 2011, composing 55.0% of China's TiO2
total volume to Middle East. Among the European
countries, the strongest demand is from Spain. It is Source: CCM International TiO2 export analysis
perhaps due to some Chinese TiO2 producers have
set agents in Spain, such as Pangang Group. Besides,
the demand from Russia sees fast increase. Only
in Jan. 2011, Russia imports 739 tonnes TiO2 from
China, accounting for 32.7% of its total import volume
from China of last year.

2


FIGURE 6: Thailand’s TiO2 import situation, Jan.'10 ~Jan.'11
Thailand's imported TiO2
consolidates in Jan. 2011

T hailand imports 6,489 tonnes TiO2 in January
2011, retreating by 2.0% compared with that
of last month, while it increased by 31.4% over
the same period of last year. As a whole, Thailand
imported 72,828 tonnes TiO2 in 2010, increasing by
36.0% year-on-year. It seems that Thailand’s TiO2
import volume is to keep fast increasing in 2011.

Of the Thailand's TiO2 import volume in Jan. 2011,
1,116 tonnes are imported from China, consisting of
17.2% of the total. The proportion of China’s TiO2
volume deceases from 21.4% in 2010, primarily due to
Source: CCM International
the soaring price.

Upstream
China widens ilmenite import origins with rising price

C hina's import volume of titanium
feedstock (excluding titanium slag)
FIGURE 7: China’s quarterly import volume of titanium feedstock and the
average prices, Jan.'10~Jan.'11
retreats in Jan. 2011, primarily due to supply
shortage and soaring price. As a result, some
TiO2 enterprises in China have widened the
import origins of titanium feedstock, and it
is the development tendency in the future in
China.

In Jan. 2011, China totally imported 178,167
tonnes titanium feedstock, decreasing by 12.6%
and 31.7% compared with that in Dec. 2010
and Jan. 2010, respectively, which is primarily
due to the soaring price with supply shortage
from miners. According to many ilmenite
suppliers, although they have signed supply
contracts for 2011, the new inquiries and
demands are springing up.
Source: China Customs; CCM International
As a result, the price of titanium feedstock is
soaring. The average CIF price of China's imported titanium feedstock reaches USD143.2/t in Jan. 2011, increasing by
8.7% and 34.1% compared with that in Dec. 2010 and Jan. 2010, respectively.

To avoid the price rising, all China's end users of titanium feedstock, no matter how many volume they consume, are
endeavor to look for a stable and long term supply.

In the meanwhile, the soaring price also draws trading companies' attention. According to Mr. Rory, Marketing
Consultant at Anglo Pacific Minerals, a Chinese trader has offered to buy Mexican ilmenite 50,000 tonnes per month
at FOB USD225/t in February, 2011.

Mining companies are also attracted to increase investment in titanium resource. Richards Bay Minerals (RBM), a
Rio Tinto-BHP Billiton joint venture, claims to build a large plant in KwaZulu-Natal, a province in the south-eastern
region of South Africa. RBM is to start producing titanium feedstock and iron ore in the plant in 2016.

Accordingly, boosted by the booming demand, price of titanium feedstock is expected to keep rising in 2011.

3


As for China's titanium feedstock import origins, FIGURE 8: China's titanium feedstock import origins, Jan. 2011
Vietnam is still the largest origin while its proportion
is shrunk by other news origins. In Jan. 2011, China's
average CIF price of titanium feedstock from Vietnam
touches USD146.2/t, increasing by 15.0% and 55.7%
compared with that in Dec. 2010 and Jan. 2010,
respectively. As a result, its volume proportion in
China's total imported titanium feedstock decreased to
37.0% in Jan. 2011, from 41.1% in 2010.

Vietnam's volume proportion is shrunk by South Korea
and North Korea. In Jan. 2011, China totally imported
14,156 tonnes titanium feedstock from these two
countries, with the average CIF price of USD98.4/t.

With the continuous increasing price, China will tend to
import a larger volume of titanium feedstock from more Source: China Customs; CCM International
origins with lower price.

Pangang Group's industrial restructuring plan been approved

I n March, 2011, Pangang Group's Vanadium-Titanium Industrial Restructuring Plan has been approved by
National Development and Reform Commission.

According to the plan, Pangang Group is to enlarge its mining capacity, by adding production capacities of
10,000,000t/a raw ore, 2,840,000t/a iron fine ore and 500,000t/a titanium concentrate ore. Besides, Pangang Group
is to enhance vanadium-titanium industry development, by adding production capacities of 0.5 million tonnes per
year of titanium slag, 200,000t/a TiO2, 15,000t/a titanium sponge and 22,000t/a vanadium. These projects are to set
up in Panzhihua, Chengdu and Xichang Cities.

In the first two months of 2011, Pangang Group exploited 79,400 tonnes titanium concentrate ore, which increases by
181.5% over the same period of last year. Pangang Group aims to exploit 480,000 tonnes titanium concentrate ore in
2011. With the technical improvement, Pangang Group's utilization rate of titanium resource has touched 37.5%.

Company Dynamic
Profit analysis of Sichuan Lomon 2010

I n TiO2 China Monthly Report 1102 issue, CCM reports that Sichuan Lomon Titanium Industry Co., Ltd. (Sichuan
Lomon) is estimated to gain USD66 million total profit from its TiO2 business in 2010, which leads among domestic
TiO2 producers. In 1103 issue, CCM is to analyze Sichuan Lomon's profit situation over other TiO2 producers.

As one of domestic largest TiO2 producers, Sichuan Lomon holds 120,000t/a production capacity with output of over
100,000 tonnes in 2010. With good reputation for its high-quality products, Sichuan Lomon enjoys higher TiO2 selling
prices in foreign and domestic markets.

Take the export price for example. Sichuan Lomon enjoys the highest average FOB price among the top TiO2 exporters in
2010. Its average FOB price is USD44/t higher than that of Shandong Dongjia and USD111/t higher than that of Henan
Billions.

Moreover, Sichuan Lomon enjoys many preferential policies, as it is located in West China.

Companies investing in West China can enjoy preferential tax rate, with the operating income tax rate of 15%, which is far
less than the general operating income tax rate of 33%. Accordingly, the preferential tax rate brings more profit to Sichuan
Lomon, compared with that of Shandong Dongjia.

4


Primarily thanks to its integrated production system (see TiO2 China Monthly Report 1102 issue, page 7), Sichuan Lomon
enjoys a lower TiO2 production cost as compared with other companies.

According to its IPO application material, Sichuan Lomon can save 672 KW.h electricity and 0.9 tonnes sulfuric acid
in producing one tonne TiO2, compared with other TiO2 producers. In the meanwhile, the unit human cost of Sichuan
Lomon is also lower than the industrial average unit cost.

Moreover, fulfilling titanium concentrate ore demand itself also saves production cost for Sichuan Lomon.

Based on the electricity price of USD0.084/KW.h and the average sulfuric acid price of USD60.88/t, Sichuan Lomon
totally saves USD11.12 million production cost in 2010, benefiting from its integrated production system.

According to Sichuan Lomon Corporation (Lomon Corporation), it totally achieves near USD0.91 billion revenue in 2010,
with export revenue of USD150 million. Of the export revenue, TiO2 export revenue consists of 45.7% of the total.

As shown in its IPO application material, Sichuan Lomon produced 36,140 tonnes TiO2 and sold 38,279 tonnes in H1
2009, which brought USD60.88 million revenue and USD12.39 million operating profit.

Compared with that in H1 2009, TiO2 output of Sichuan Lomon achieved near threefold increase and its average price
increased by over 30% in 2010. Though the average price of suluric acid also increased by over 20% in the same period,
while Sichuan Lomon avoided the price fluctuation of titanium concentrate ore to some extent.

Accordingly, it makes sense for Sichuan Lomon to gain USD66 million total profit from TiO2 business in 2010.

TABLE 1: Sichuan Lomon enjoys higher TiO2 selling price over other producers, 2010 (volume: tonne, price: USD/t)

Company Output Export volume Export average price

Shandong Dongjia 115,000 37,630 2,031

Henan Billions 104,000* 51,987 1,964

Sichuan Lomon 100,000 13,828 2,075

Pangang Group 62,578 13,828 1,963

National total 1,474,286 327,305 1,873

*Note: TiO2 output of Henan Billions reported in 1102 issue is 98,274 tonnes, which is Henan Billions' total sales volume in 2010.

Jinan Yuxing aims to sell 90,000 tonnes TiO2 in 2011

J inan Yuxing Chemical Co., Ltd. (Jinan Yuxing), completed relocation and launched its 100,000t/a TiO2
production lines in 2010, aiming to sell 90,000 tonnes TiO2 in 2011.

To achieve its sales target, Jinan Yuxing is widening its distribution channel, by selling to both terminal customers
and distributors.

As a result, the sales volume of Jinan Yuxing is soaring in January 2011. Take its export for example, Jinan Yuxing
exported 1,142 tonnes TiO2 in Jan. 2011, accounting for 52.7% of its total export volume of last year.

5


Jinzhou Titanium to benefit from being
National High Technology Enterprise

A nnounced on Feb. 25, 2011, Jinzhou Titanium
Industry Co., Ltd. (Jinzhou Titanium), domestic
college education or above account for over 30% of the total
staff of enterprise and R&D staff account for over 10% of the
chloride TiO2 producer, is named as National High total;
Technology Enterprise (NHTE). As a result, Jinzhou
Titanium has been the first and unique NHTE among 4) Proportion of R&D expenses in total revenue should
domestic TiO2 enterprise, which helps to boost its meet the following requirements:
capacity expansion. - No less than 6% for the enterprises with revenue less than
USD7.61 million in recent years;
As a National High Technology Enterprise (NHTE), Jinzhou - No less than 4% for the enterprises with revenue between
Titanium can gain a lot of support from government, USD7.61 million and USD30.44 million in recent years;
especially getting preferential tax. - No less than 3% for the enterprises with revenue over
USD30.44 million in recent years.
According to Management Policy of Hi-Tech Enterprise
License, jointly formulated by Ministry of Science and 5) Revenue from high-tech products should account for over
Technology, Ministry of Finance and State Administration 60% of enterprise's total revenue.
of Taxation, the operating income tax rate is 20% for low-
PICTURE 1: National High Technology Enterprise Certificate of Jinzhou
profit small enterprises and 15% for NHTE, which are Titanium
lower than the general operating income tax rate of 33%.

In the meanwhile, the research & development expense
of new technology, product and process can be converted
into income tax. As the NHTE, its annual R&D expense
should not be less than 3% of its operating income (for
those whose operating income is larger than USD30.44
million).

In 2010, Jinzhou Titanium achieves USD68.49 million
revenue and USD7.61 million profit from TiO2 business.
Accordingly, Jinzhou Titanium can gain financial support
with over USD3.42 million in 2010.

Besides the preferential taxation policy, NHTE can also
gain support in acquisition of land, credit and loan, etc.

Jinzhou Titanium can enjoy the preferential tax policy
and other support for three years, from Jan. 2010 to Dec.
2012. It is helpful for Jinzhou Titanium to boost its TiO2
Source: Jinzhou Titanium
production capacity.

At present, Jinzhou Titanium's 30,000t/a chloride TiO2
production line is under construction, which is expected to
be launched in Mar. 2012. Besides, Jinzhou Titanium will
set up two 100,000t/a chloride TiO2 production lines in
Linghai City, Liaoning Province, in the 12th Five-Year-Plan
period (2011-2015).

Conditions for China's National High Technology
Enterprises:

1) Registered in China with independent intellectual
property right over the core technology of major products
through independent research and development, transfer,
recipient, mergers and acquisitions within 3 years or
through licensing over five years;

2) Products belong to the range regulated in the Innovative
and High Technology Areas with the government's primary
support;

3) Scientific and technological specialists with three-year

6


Shandong Dongjia expects to extend ilmenite production
O n Feb. 19, 2011, Hu Kun, a member of standing
committee of Liangshan Prefecture and secretary of
to import a large amount of titanium feedstock every
year. Take 2010 for example, Shandong Dongjia imported
CPC Huili County Committee, Sichuan Province, visits 67,908 tonnes ilmenite and 78,296 tonnes titanium slag.
Shandong Dongjia Group (Shandong Dongjia), inviting Generally, the high dependence on imported titanium
Shandong Dongjia to develop titanium industry in feedstock brings risk to Shandong Dongjia, especially
Liangshan. when the price of titanium feedstock fluctuates frequently.
Moreover, the imported titanium feedstock also shrinks
Actually, it is Mr. Hu's return visit to Shandong Dongjia. Shandong Dongjia's profit.
Early in Jan. 2011, Shandong Dongjia jointly with
Nippon Paint (China) Co., Ltd. and Sapphire Corp. Though Shandong Dongjia has exploited titanium reserve
Ltd. have visited Liangshan Prefecture and inspected the in Chengde City, Hebei Province, the limited reserve
local investment circumstances. (converting to 15.93 million tonnes TiO2) can not sustain
its long-term development. Hence, Shandong Dongjia will
Border on Panzhihua City, Liangshan Prefecture holds the lose its competitiveness as compared with Pangang Group
second largest titanium reserve in Sichuan Province. As a and Sichuan Lomon, both of which hold abundant titanium
whole, Liangshan Prefecture has over 82.49 million tonnes reserve in Panzhihua-Xichang region.
titanium reserve (converting into TiO2 volume) which
distributes in Xichang, Huili and Dechang Counties. Accordingly, Shandong Dongjia is expected to exploit
titanium reserve in Liangshan Prefecture, especially in
The abundant titanium reserve has attracted Pangang Huili County.
Group to develop vanadium-titanium industry here and it
will also attract Shandong Dongjia. In the meanwhile, the high freight cost from Liangshan
to Shandong Province perhaps will drive Shandong
Early in 2008, Pangang Group has confirmed to exploit Dongjia to set up TiO2 production line in Liangshan
vanadium-titanium-magnetite reserve in Xichang County, Prefecture. Besides the abundant titanium reserve, there is
with the total investment of USD2.62 billion. In 2010, stable supply of sulfuric acid here, as Huili County has set
Pangang Group has completed USD1.14 billion investment up a large Nonferrous Metal Industry Park.
here. The mining exploiting project is expected to be
launched in October 2011. After completing the whole TABLE 2:Titanium reserve distribution situation in Liangshan, 2010
investment, Pangang Group will hold the production (million tonne)
capacities of 160,000t/a vanadium slag, 300,000t/ Distribution TiO2 Grade
a titanium concentrate ore, 160,000t/a titanium slag, 11.76% (19.08 million tonnes)+0.03%
100,000t/a chloride TiO2, etc. in Xichang. Xichang County 62.23 (43.15 million tonnes)
11.80%(15.00million tonnes)+11.11%
Huili County 19.86 (4.86 million tonnes)
Besides, Xichang Ruikang Titanium Co., Ltd. has also Dechang County 0.40 7.99%
launched a 60,000t/a TiO2 production line in Xichang Total 82.49 --
County. Source: Huntsman Full 2010 Results

As China's largest TiO2 producer, Shandong Dongjia has

Price update
Price update in March 2011
I mpacted by the increasing demand and manufacturing cost, TiO2 prices increase in March 2011. The prices of
titanium concentrate ore and titanium slag have also kept an uptrend in this period.
Ex-factory prices of TiO2 and sulfuric acid, Mar. 2011, USD/t
Area Rutile TiO2 Anatase TiO2 Sulfuric acid 98%
Feb.'11 Mar.'11 Feb.'11 Mar.'11 Feb.'11 Mar.'11
South west 2,478-2,660 2,747-2,945 2,052-2,204 2,365-2,518 65-84 69-89
East China 2,356-2,584 2,625-2,838 1,832-2,128 2,060-2,411 85-105 85-105
Central China 2,356-2584 2,579-2,823 1,824-2,098 2,060-2,365 76-99 76-99
South China N/A 1,870-2,022 2,106-2,289 68-96 76-104
TiO2 The period of March to June is the traditional peak season
for construction and real estate industries, thus, the
With the increasing cost and advancing demand, domestic demand of TiO2 has a large increase in March 2011. The
TiO2 prices increase in March 2011. demand from abroad has stayed robust; however, TiO2
products are in short supply in domestic market.

7


In addition, the prices of TiO2 major raw materials continue reveal that the price of rutile TiO2 is expected to increase to
to go up this period. Take titanium concentrate ore for USD3,052/t in the next coming months.
example, its price has increased to more than USD153/t in
some areas. Sulfuric acid

Due to the above factors, TiO2 prices have a remarkable Although sulfur price has decreased slightly, the price of
increase in March 2011 especially in Shandong and Sichuan sulfuric acid has kept stable in March 2011.
Province. The prices in these two areas increase by about
USD229 to USD305 per tonne. In March, one of sulfuric acid's downstream industries,
fertilizer's market is sluggish. Thus, the fertilizer
Although the cost is increasing, the TiO2 manufacturers manufacturers have reduced the purchase amount
still make profits with the strong demand in the first of sulfuric acid. However, because some sulfuric acid
quarter. For example, Anhui Annada Titanium Industry manufacturers have stopped production and the strong
Co., Ltd. claimed that its retained profits would be about demand from TiO2 manufacturers, the demand of sulfuric
USD0.9 million to USD1.68 million in Q1 2011. acid still exceeds its supply in domestic market and its
price has kept stable.
With the high cost and large demand, some manufactures
Ex-factory prices of titanium concentrate ore and titanium slag in Feb. 2011, USD/t
Area Titanium concentrate ore Titanium slag
Grade Feb.'11 Mar.'11 Grade Feb.'11 Mar.'11
Sichuan 40%-46% 150-158 182-189 74%-78% 654-684 654-684
Hainan 45%-54% 134-144 140-151 N/A N/A N/A
Yunnan 45%-47% 146-149 150-168 77%-92% 623-775 717-870
Guangxi 50%-52% 190-196 200-206 N/A N/A N/A
Liaoning N/A N/A N/A 92% 790-806 790-806

Titanium concentrate ore
Titanium slag
Being impacted by the soaring demand and tight supply,
titanium concentrate ore price sees a remarkable increase Titanium slag is in short supply and its price keeps an
in March 2011. upswing in March 2011.

In March, the inventories of titanium concentrate ore Continuing to be impacted by the increasing price of
manufacturers were still small, especially in Hainan titanium concentrate ore, its major raw material, the
and Yunnan Province. Many producers stopped to offer titanium slag price hikes in this period. In addition, the
quotation to the new customers. titanium concentrate ore is in insufficient supply, limiting
titanium slag yields. The titanium slag price increases
Besides, the bad weather limits the exploitation, the to about USD961/t in some areas. And its downstream
titanium concentrate ore is in short supply in this period. product prices also advance in this period, such as titanium
Thus, the price of titanium concentrate ore increases tetrachloride and sponge titanium.
substantially. For example, titanium concentrate ore price
has advanced from USD176/t to USD206/t in Panzhihua
City.

TiO2 multinationals announce price hikes in April
I n March 2011, TiO2 multinationals, including Cristal, Huntsman, Kronos and Tronox, announce new price hikes, being
effective April 1, 2011. These price hikes are mainly focused on North America. All the TiO2 multinationals did not increase their
prices in these regions in the former round of increase announcement.

TABLE 3: TiO2 multinationals announce new price hikes, effective April 2011
Asia Middle
Company Pacific East Africa North America Remark
Effective April 1, 2011
Cristal USD300/t USD300/t USD300/t USD0.15 per pound An additional USD50/t will be applied to all sales of Tiona 188 grade sold
within the Asia Pacific region.

Kronos -- -- -- USD0.15 per pound Effective April 1, 2011

Huntsman -- -- -- USD0.15 per pound Effective April 1, 2011
Effective April 1, 2011
An additional USD0.15/pound will be applied to all anatase, inks,
Tronox -- -- -- USD0.15 per pound and polymer products (TIOXIDE®TR28, TIOXIDE®R-TC30 and
TIOXIDE®R-FC5), TIOXIDE®R-XL and the DELTIO® free-flow pigment
range.
Source: Companies' announcements

8


Downstream
Rising TiO2 price shrinks downstream profit

T he rising TiO2 price shrinks downstream
companies' profit. Coatings, inks and other
resin and TiO2 forces us to adjust the price of electrophoresis
coatings and related products."
downstream industries face serious economic pressures.
These industries have come into the strange "produce Raising prices is only a short-term quick strategy to keep or
more, earn less" cycle. increase profits, while enhancing the competitiveness of a
company is the long-term way.
Zhejiang Dilong New Material Co. Ltd. (Zhejiang Dilong), a
decorative paper manufacturer, saw lower net profit growth "The soaring price has caused great difficulties in marketing
rate than operating income growth rate according to its for coating industry. As a manufacturing industry, the
Annual Performance Report 2010 issued on 28th Jan.2011. raw material cost accounts for 50% to 70%.Therefore, the
In 2010, Zhejiang Dilong achieved total revenue of USD56 rise of TiO2 price can seriously lower the profits of coating
million (RMB367 million), seeing a year-on-year increase industry." Said Shen Jujun, Deputy Minister of Market
of 51.59%. However, its net profit for shareholders was Department of Hangzhou Chuanhua Coating Co., Ltd
USD6 million (RMB39.9 million), just increased 1.26% over (hereafter called Chuanhua).
2009. The main reason for the shrinking net profit growth
of Zhejiang Dilong was raising raw material prices, as Facing this situation, Chuanhua proposed its 2011
explained by the company's board of directors in the report. development strategy as follows. Firstly, optimize product
structure and strengthen research & development; secondly,
Inks industry also suffered a lot from raw material rising realize technological breakthroughs; thirdly, open up new
prices. Zhuhai Letong Chemical Co., Ltd. (Zhuhai Letong) markets; last, enhance brand value as well as customer
even saw net profit declining 13.91% in 2010 over 2009, services.
whereas its total operating income had a year-on-year
increase of 41.94% in 2010. In Zhuhai Letong's 2010 Some people think hard to find the solution for the TiO2
Annual Performance Report, rising raw material prices was price rise. "It is most significant to improve competency
considered to be one of the main reasons for decreasing and risk resistance capacity of coating industry in 2011."
profits, coupled with increasing sales cost resulted from Said Sun Lianying, President of China Coating Industry
marketing enhancement. Association.

Since 1st January 2011, international TiO2 giants--DuPont, As a director of China Coating Industry Association Experts
Huntsman, Tronox and Kronos, have raised the price Committee, Liu Dengliang reckoned that though coatings
of their subsidiary products by USD200/t. It is understood production in China ranks first in the world, the quality of
that almost simultaneously they released this year's second coatings still needs improvement. The gap is large compared
time global price rise, which will enter into force on April 1. with multinational coating companies in profit margin and
Dupont, Cristal, and Tronox respectively decided raise the added value, which restricts the China's development from a
price by USD300/t in Asia-Pacific region. big coating country to a powerful one.

In response to the shortage of global supply chain and raw Thus, he pointed out that it's necessary to improve
material price rise, Sun Chemical--one of the world's largest industry access threshold, as well as increase the industrial
manufacturers of printing inks and pigments announced concentration by supporting large coating companies and
on 6th March 2011 that it will raise inks price in North eliminating small companies with backward production
American from 1st April 2011. Sun Chemical expressed that capacity. Meanwhile, it urgently needs to strengthen
they had no better choice but to raise prices. technical innovation, including building innovative
platforms as well as cultivating talents.
The Automotive OEM (original equipment manufacturer)
Coatings Department of PPG Industries announced on 18th It is supposed that coating industry is to be re-shuffled.
March 2011 that the department will increase the price Yue Wangkun, general secretary of China Coating Industry
and additional fees of its electrophoretic coatings and Association, once said that industry shuffle was good for
related products. It will enter into force on 1st May 2011, or technology innovation, which can improve product quality.
according to contract provisions. PPG senior vice president The price will fall when the industry's scale reaches a certain
of Automotive OEM Coatings Cynthia A. Niekamp said, "The degree. Then people can enjoy better quality with lower
fast increasing price of important raw materials like epoxy price."

9


Indemnificatory housing promotes
architectural coating market development
I ndemnificatory housing (including affordable housing
and low-rent housing), as one item of Chinese
the buyers of indemnificatory housing are mainly the
consumers with limited purchasing power. Therefore,
12th Five-Year Plan (2011-2015), will promote the lower and medium building materials will get a good
market development of architectural coating market in coming five years.
industry. Considering the close link between real
estate industry and building decoration industry, the It may strengthen the motivation of coating industry that
construction of indemnificatory housing will similarly the financial foundation for indemnificatory housing
lead to large-scale demand of architectural coatings. program is assured to be completely viable, according to
government report as below.
The Chinese architectural coating industry has
developed well with an increasing annual growth. The "The total investment of this year(2011) will be USD198
annual output of architectural coating was 3.52 million billion (RMB1.3 trillion), more than USD76 billion
tonnes (nearly 40% of coating industry's total output) (RMB500 billion) will be provided by the central and local
in 2010, seeing a year-on-year rise of 23.7%. It shows governments, with the remainder channeled from social
that architectural coating industry has developed quickly institutions and individuals; to ensure sufficient finance,
and played an important role in coating industry. central authorities are also mulling rules covering the entry
of insurance funds into the subsidized projects." Said Qi Ji,
Indemnificatory housing becomes a new growth point of vice-minister of housing and urban-rural development, at
architectural coating industry. Different from previous a press conference on 9th March 2011.
years, architectural coating industry is under dual
pressures: one is the price hike in raw materials, the other Although the proportion of indemnificatory housing
is depressed real estate market caused by government is small, it contributes a lot to a positive adjustment of
policy. market expectations.

On one hand, most raw material prices increase, mainly Cao Yuanzheng, chief economist at Bank of China
affected by the international crude oil price rise. As for International believes that a lot of investment to build
TiO2, its price rises because of increasing production cost indemnificatory housing and other indemnificatory
and large consumption market. housing is short-term effective way to boost domestic
On the other hand, the real estate industry suffers from demand. Commercial real estate pattern inhibits people's
both government restriction policy and high interest rate consumption impulse, a large number of low-profit
set by the People's Bank of China. To relieve its pressure, indemnificatory housing building can quickly stimulate
the real estate industry delays payment to architectural the development of building materials, automotive, home
coating companies, which has bad influence on the latter. appliances and other 50 more related industries.

Luckily, the government's indemnificatory housing It is foreseeable that guided by the 12th Five-Year-Plan
programme brings hope for coating industry. and driven by the market, building decoration industry will
enter a new period of development; coatings production
"To raise the level of housing security, China will build 10 will increase year after year; the Chinese architectural
million indemnificatory housing in 2011, as a part of the coatings market has a good prospect.
plan to build 36 million houses (as shown in figure below)
for low-income families during the 12th Five-Year Plan FIGURE 9: Construction target of indemnificatory housing, 2010-
period (2011-2015). When completed, the program 2015
is expected to cover 20 percent of the country's total
housing supply," said Xu Xianping, deputy director of
the National Development and Reform Commission, at
the press conference of National People's Congress at the
Great Hall on 6th March 2011.

Wall decoration occupies a weight of 80% in the whole
housing decoration in China. For a 70 square meters
house, according to industry standard, the coating
coverage should be 8.6 mm, which means 17.67 liters
decorative coatings. With 10 million indemnificatory
housing to be built this year, the coating demand adds up
to 176.7 million liters. Thus, indemnificatory housing will
largely promote architectural coatings market.

The indemnificatory housing building has set the tone
for the market demand of building material industry.
Lower and medium products will be preferred. Besides, Source: China Customs; CCM International

10


Plastic pipe market to boom with government's support
P lastic pipe market is about to boom along
with government's new plans on agriculture.
water conservancy construction is lucrative, but only
competitive and innovative companies can benefit from
The 2011 Central No. 1 Document focuses on water it.
conservancy construction, which is surely a good
opportunity for plastic pipe industry. The water It's time for companies to release their production capacity
conservancy construction mainly includes farmland and improve techniques. Those who seize the opportunity
water conservancy, water saving projects and rural will hopefully have a leaping development.
drinking water projects. Plastic pipe will be preferred
because of its advantages such as light weight, corrosion Guo Runming, General Manager of Xi'an Hi-Tech Building
resistance, weather resistance and easy installation. Materials Co., Ltd. (Xi'an Hi-Tech), told the journalist,
"We are setting about expansion and transformation, in
Wang Zhanjie, Secretary of Pipe Committee of Chinese order to seize the opportunity. By the time all projects
Plastics Processing Industry Association, pointed out that finished, the company will have a production capacity of
there will be a total of USD717 billion (RMB4,700 billion) 105,000 t/a plastic pipe and 80,000 t/a plastic profiles,
direct funds for the water conservancy construction in to be a large national production base of plastic building
coming ten years. materials."

Wang reckoned that 30% of the funds for rural drinking Guo reckoned that the demand for large diameter plastic
water projects will be used to purchase plastic pipes pipe will increase by an annual growth rate of more than
and tubes. Besides, large-scale demand for plastic pipes 50%, thanks to water conservancy construction. Therefore,
occurs in other projects such as urban water network and Xi'an Hi-Tech's new plastic pipe production line will
farmland water conservancy construction. mainly produce large diameter irrigation pipes and PE
(polyethylene) pipes, PVC (polyvinyl chloride) pipes and
In 2010, the plastic pipe companies in China had a total other water supply or drainage pipes, with the diameter to
production capacity of more than 17 million tonnes, be more than 800 millimetres.
while the output of 2010 was 8 million tonnes, leaving
more than half of the capacity lie idle. The market of

Global insight
Earthquake in Japan impacts TiO2 industry
A ccording to Sakai Chemical Industry Co.,
Ltd. (Sakai), a Japanese TiO2 producer with
some ilmenite orders will be suspended, as TiO2
production in Japan is to be impacted due to the power
production capacity of 60,000t/a, it has been suffered shortage after the earthquake. Hence, they can divert some
from the damage caused by the earthquakes which hit volumes to meet China's end users in April. As a result, the
Northern Japan on March 11th 2011. price of titanium feedstock is expected to retreat to some
extent in April.
After the disaster, Sakai's TiO2 facility has been halted
because utilities such as electricity and water supply have The reconstruction after the earthquake will certainly
been shut down since the earthquake struck. boost TiO2 demand in Japan, which will shrink ISK's TiO2
export volume. Moreover, the halt of Sakai will further
Though Ishihara Sangyo Kaisha, Ltd. (ISK), Japan's largest intensify the shortage of TiO2 worldwide, especially in
TiO2 producer with production capacity of 160,000t/a, Asia Pacific. As a result, TiO2 price is expected to witness a
did not suffer from the damage, TiO2 industry will still be faster increase.
affected.
In 2010, Japan totally exported 70,673 tonnes TiO2.
According to one of Indian titanium feedstock suppliers,

Kronos Worldwide produces in full load in 2010

A ccording to Kronos Worldwide Inc. (Kronos Worldwide), it produced 132,000 tonnes TiO2 in Q4 2010 and sold
119,000 tonnes. As a result, the total output and sales volume of Kronos Worldwide were boosted to 524,000
tonnes and 528,000 tonnes, respectively in 2010. Both the output and sales volume achieved new historic records in
2010, increasing by 30.3% and 18.7% respectively year-on-year.

In 2010, Kronos Worldwide operated 533,000t/a TiO2 production capacity in Germany, Canada, the US, Belgium and
Norway. 402,000t/a capacity are for chloride process and the other are for sulfate process.

11


KMML to boost titanium industrial capacity

K erala Minerals and Metals Limited (KMML), Indian chloride TiO2 producer, is to boost its titanium industrial capacity
in the coming years.

According to KMML, it will expand its TiO2 capacity to 60,000t/a within two years, from current 40,000t/a in 2011.
Moreover, it will also enhance its titanium feedstock production, by expanding its synthetic rutile capacity from 35,000t/a to
55,000t/a, ilmenite production capacity from 50,000t/a to 63,000t/a and rutile from 3,000t/a to 4,000t/a.

12

CCM International Limited
17th Floor, Huihua Commercial & Trade Building, No.80 Xianlie
Zhong Road Guangzhou, 510070, P.R.China

Tel: +86-20-37616606
Fax: +86-20-37616968
E-mail: econtact@cnchemicals.com
Website: www.cnchemicals.com

TiO2 China Monthly Report 201103 .pdf

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