An Increase in Titanium Dioxide Demand Over the Next Two Years Could Prompt Capital Spending

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The following is an advisory by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Titanium dioxide producers witnessed a dramatic fall in both demand and pricing during 2001. Only recently have they begun to see an improvement in pricing with an increase of 3 cents  5 cents per pound in the U.S., despite operating rates that are estimated to be as low as 70%.

As the outlook for 2003 and 2004 is now beginning to take shape, we anticipate an increase in demand will likely lead to a modest amount of new spending to be announced within the next twelve months, commented Trey Hamblet, Chemical Group Manager with Industrialinfo.com. Over the last two years, we have identified very few capital projects in titanium dioxide production plants, but already this year we are seeing some activity. One major U.S. producer is re-studying plans to add a new unit that had been proposed prior to the market softening in 2001.

There are currently only five producers operating eleven North American titanium dioxide plants using either a chloride or sulfate process. Titanium dioxide is derived from mined titanium ore and used as a pigment for paints, inks, paper, rubbers, and plastics. Titanium dioxide had been experiencing a decline in demand prior to 9/11 and took an even steeper dive in the fourth quarter, falling victim to an overall economic slowdown. The outlook for the remainder of the year indicates pricing could continue to improve and if utilization rates improve as well, demand in 2003 and 2004 could warrant a new round of spending to increase capacity. Most dollars spent in existing plants will be focused on energy reliability and efficiency improvements that yield an increase in output.