China National Radio, Beijing, March 30th. According to the Economic Affairs program on China National Radio, Jinpu Titanium Industry announced last night that as of now, the selling prices of its rutile and anatase titanium white powders for domestic customers have been raised by 1,000 yuan per ton, and for international customers, they have been raised by 100 US dollars per ton. The day before yesterday, the leading domestic titanium white powder enterprise Longban Baoli issued an announcement, stating that the selling prices of its various types of titanium white powder products have been raised by 1,000 yuan per ton for domestic customers and by 100 US dollars per ton for international customers based on the original prices. Since 2017, the leading titanium white powder enterprise Longban Baoli has raised prices four times. In fact, since the fourth quarter of 2015, the price of titanium white powder has risen by more than 80% from the bottom. Is there still a possibility of further increase in the price of titanium white powder?
Zhang Yujing, an analyst from Baichuan Information, conducted an analysis and interpretation of this matter.
Economic News: Since the fourth quarter of 2015, the price of titanium dioxide has risen by nearly 60% from its lowest point. What are the supporting forces that have enabled the titanium dioxide price to continue to increase over the past two years?
Zhang Yujing: “The first reason is that the price of titanium dioxide continued to decline in 2015. As a result, some enterprises couldn’t sustain it and withdrew from this industry. In 2015, foreign countries announced the closure of 400,000 tons of production capacity, and domestically, nearly 300,000 tons of production capacity was withdrawn. In total, there were 700,000 to 800,000 tons.”
The second reason is exports. Last year, our country’s export volume was 720,000 tons, increasing by 33.82% compared to the previous year. The export volume in the first three quarters of last year exceeded the total volume of 2015. The export volume increased significantly.
Thirdly, since 2016, the state has been implementing strict measures for environmental protection. As a result, the production capacity of many manufacturers in the eastern, southern and central regions has not been able to be fully utilized, leading to a persistent shortage of inventory for these manufacturers. This, in turn, has caused prices to continue to rise.
Fourth, the main raw material for titanium dioxide is titanium ore. The price of titanium ore has risen from 520 yuan at the beginning of 2016 to 1850 yuan now, an increase of more than twice. Therefore, the price of titanium dioxide has been on the rise.
Fifth, logistics costs are also a contributing factor. Since the implementation of the new logistics regulations on September 21st, the transportation costs of enterprises have increased by more than 30%.
Finally, on the demand side, titanium dioxide is mainly used in paints. In 2016, the output of paints also continued to rise steadily. The supply from the upstream sector and the demand from the downstream sector jointly led to the continuous increase in the price of titanium dioxide in 2016.
Economic News: Among the factors contributing to the increase in titanium dioxide prices, which ones can sustainably support the further rise in titanium dioxide prices? Which ones have already exhausted their positive effects? What changes should investors pay attention to?
Zhang Yujing: “Currently, due to the influence of environmental protection policies, the production capacity of factories is still not high. The environmental protection team will conduct further investigations in the future. Many factories in Anhui and Sichuan will definitely not be able to fully utilize their production capacity. The supply volume of factory inventories will further decrease.”
Economic News: While the price of titanium dioxide is rising, we can observe that the price of titanium concentrate, which is the main raw material for titanium dioxide, has increased from an average of 510 yuan per ton at the beginning of 2016 to around 1,850 yuan per ton currently, with an increase of more than twice. Do you think the price of titanium concentrate will continue to rise? Can titanium dioxide manufacturers continue to absorb or transfer the cost of the upstream price increase?
Zhang Yujing: “The price of titanium ore is still going to rise because the supply of titanium ore is shrinking. The price of titanium dioxide is also increasing, and the price of titanium ore is definitely going to go up a little more. At the same time, the price of coatings is also rising, so their costs can still be successfully absorbed.”
Economic News: At the end of last year, two companies in Henan Province, Baoli Lian and Sichuan Longmang Titanium, announced that they had become “one family” and would jointly build a “giant” in the domestic titanium dioxide industry. After the merger, the total production capacity will exceed 600,000 tons, ranking first in Asia and fourth in the world. Not long ago, the global titanium dioxide giant Tenneco confirmed its intention to acquire the titanium dioxide business of Costar. After the acquisition, it will become the world’s largest titanium dioxide producer. How is the industry concentration in the domestic titanium dioxide industry at present? Will acquisition and merger be a trend in the future?
Zhang Yujing: “At present, the industry concentration in our country is still relatively low. The top ten production capacities account for approximately 52% of the domestic production capacity. After Longban Baoli merged, its market share reached 24%, making it the absolute leader in the industry.”
Economic News: Longmang Baoli (002601) is currently the leading company in the domestic titanium dioxide powder industry. The company’s current titanium dioxide powder production capacity is 560,000 tons. The company stated that in the next five years, it plans to strive to increase the total production capacity of titanium dioxide powder to 1.3 million tons. Among this, the production capacity of sulfuric acid method titanium dioxide powder will be 700,000 tons, and the production capacity of chlorination method titanium dioxide powder will be 600,000 tons. That is to say, the company’s production capacity will double in the next five years. Do you think it is possible to achieve this goal?
Zhang Yujing: “It seems that it can be achieved at present. First of all, since Longmang Titanium Industry has its own titanium ore, the cost is approximately 400 yuan. The current market price of titanium ore has reached 1800 to 1900 yuan. The annual output is 700,000 tons. Some analysis suggests that the profit could reach 40% to 50%. At the same time, the processing cost is also relatively low. Longmang Titanium Industry has a sulfur-phosphorus-titanium circular economy model, which enables recycling. Moreover, the energy costs of electricity and natural gas in Sichuan region, as well as the costs of industrial wastewater, are relatively low. In addition, Mianzhu and Xiangyang are different from the north, with abundant surface water and good water quality. Therefore, they are more suitable for being used as wastewater for power generation. Moreover, Longmang recently acquired Ruixin Mining, which has further reduced the raw material cost.”
Economic Voice: What are the potential highlights of this company in the future?
Zhang Yujing: “Longmang Baoli is building a 60,000-ton sponge titanium project. It is extending from the downstream to titanium alloy materials, and then extracting scandium oxide from titanium dioxide. The current 50,000-ton scandium oxide project is being expanded to 200,000 tons. At the same time, Longmang Baoli is extending its foundation scandium and scandium core materials downward. It aims to achieve a 30% share of the main revenue from the military new materials business by the end of the ’13th Five-Year Plan’, realizing a leap from transformation to upgrading.”