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Environmental inspections reduced TiO2 supplies from China
Environmental inspections reduced TiO2 supplies from China

22.09.2017

Environment experts of China have been testing the local TiO2 mines for compliance with the environment protection standards and for the level of environment pollution. As many as 73 mines could be shut down in Panzhihua prefecture alone, which has the largest capacity of ilmenite processing into pigment. Other players see in this an opportunity for increasing supplies of their titanium raw materials and some increase of prices for them.
A series of environmental inspections in the Chinese titanium industry has caused output indicators of local producers slide and supply of several products decrease, causing concern among market players as to the influence of this situation on the market prices.
Despite September being, as a rule, the peak season for TiO2 sales in China, due to the down time caused by the environmental inspections, the average production load of companies was only around 50% this past summer.
According to the data of Chinese TiO2 Association, the series of environmental inspections affects not only TiO2 output or a particular province, but also extends to all provinces and all industries, including pigment subordinate segments, such as coatings, plastic, oils, inks and paper.
Paint and coating companies are in the worst conditions, as they are limited from two sides. The prices for the raw materials grew, while the buyers did not agree to a price increase for the coatings.
In Panzhihua, Sichuan province (one of the key centers of ilmenite production in China), the territory for processing slag at the industrial park was shut down in the end of July. Then followed closure of all chemical companies inside the park, including several TiO2 producing plants. TiO2 producing plants restored production, although increased environmental control on the part of the central government could repeat in the end of the year.
In the end of July, Li Ganjie was appointed the new Minister of the Environment Protection of China. He updated the list of inspections that could continue until the end of the year. The inspection group from the central government must cover all provinces in 2017 and no company or sector, big or small, will be able to avoid an inspection.
Titanium market players have already reacted to the situation in China. Prices for ilmenite, as well as for titanium dioxide, have been stable so far, but seasonality and concerns about the supply balance against the backdrop of ongoing inspections in China have provoked the market. “Supply slight dropped with China, as many manufacturers are under close scrutiny on environmental issues,” commented Mark Vergano, CEO at Chemours  (the dominant processor of ilmenite in the world). He said the prices for titanium products rose in ‘high single digits’ over the last quarter, against the lower reserves of Chinese competitors.
Many market players predicted that prices for ilmenite could rise after the closure of Chinese ilmenite mines and lower levels of reserves.
Traders said that access to cheap local ilmenite in China would depend on the closure of 73 ilmenite mines in Panzhihua that do not meet the environmental standards of pollution. With the exception of the mines operated by the Pansteel Group, all ilmenite mines in the area were closed. This will affect the availability of local, cheap ilmenite used for mixing with high-quality ilmenite.
 
Another trader said closure of mines would have a domino effect, saying that ‘smaller TiO2 producers would suffer’ and that would add pressure on these companies. They will either close or be acquired by larger producers.
 
A third trader claimed that ‘high reserve in ports’, which, as it was reported, was a factor for declining prices ‘is mainly low-quality cargo from Australia and South Africa’, which cannot be used to production of TiO2, which is why the factual port reserves haven’t increased significantly.
 
Despite the influence of the Chinese factor, the market players believe that any potential increase as a result of closing of mines could be alleviated by availability of ilmenite produced outside China.
 
Other players, Ukraine including, thus have a chance to ‘play’ with the prices on the market in conditions of declining presence of such powerful competitor as China.


Source: news from analytical agences