Inorganic Pigments: Foreign Companies Are Optimistic About China!

Currently, China is already the world’s largest producer of iron oxide, lithopone, and chromium pigments, and its titanium dioxide output ranks second only to that of the United States. In recent years, rising energy and raw material prices, coupled with the fact that titanium dioxide in developed countries has entered the mature stage of its product life cycle, mean that demand growth is expected to average just 1.4% per year over the next few years, making it unlikely that new investments will significantly boost production capacity. As a result, multinational companies are pinning their hopes for future titanium dioxide development on Asia—especially China—and titanium dioxide production has already begun to shift toward China. Large-scale chloride-process titanium dioxide projects being built by Huntsman in Ningbo, DuPont in Dongying, Shandong, and Australian manufacturers in Yingkou, Liaoning, are all set to come on stream around 2010. Based on currently available expansion and new construction plans—both domestic and foreign-invested—as well as ongoing projects, China’s titanium dioxide capacity is expected to increase by 300,000 tons before 2008 and by another approximately 500,000 tons around 2010. By then, China’s titanium dioxide capacity will reach about 1.6 million tons per year, potentially surpassing the United States to become the world’s largest titanium dioxide producer. Chloride-process titanium dioxide capacity will see significant growth, and product quality will improve markedly, positioning China to become a true global center for the manufacture of inorganic pigments. The Chinese iron oxide industry shares a similar outlook; renowned overseas iron oxide manufacturers are also optimistic about the Chinese market. German company Bayer, British firm Lockwood, and Elyemins have all established wholly-owned or joint-venture enterprises in China’s coastal, economically developed cities such as Shanghai, Fuyang in Zhejiang, Changshu and Taicang in Jiangsu, and Shenzhen in Guangdong. Today, the coastal regions of Jiangsu, Zhejiang, Shanghai, and Guangdong have become bases for overseas companies’ iron oxide production, with these enterprises now boasting a combined capacity of 120,000 tons per year—accounting for 15% of China’s total iron oxide production capacity. The shift of overseas inorganic pigment production to China is accelerating China’s rise as both a global manufacturing base and sales market for inorganic pigments, while simultaneously intensifying competition within China’s inorganic pigment industry. Exports are poised for strong growth. For a long time, China’s exports of iron oxide, lithopone, and chromium pigments have far exceeded their imports; only titanium dioxide has consistently seen imports exceeding exports. However, looking at the import and export trade patterns for titanium dioxide, since some products are imported via processing trade and bonded-zone warehousing for re-export, they ultimately end up being exported abroad anyway. Thus, it can be said that titanium dioxide imports and exports are essentially balanced. In 2005, China imported a total of 228,000 tons of titanium dioxide, of which about 76,000 tons were imported through processing trade and bonded-zone warehousing for re-export; titanium dioxide exports totaled 155,000 tons. In the future, as China’s titanium dioxide capacity and output continue to grow and product quality further improves, the volume of titanium dioxide imported under general trade arrangements will gradually decline, while the proportion of titanium dioxide imported via processing trade will increase. Meanwhile, titanium dioxide exports will continue to show robust growth, making it only a matter of time before China becomes a net exporter of titanium dioxide worldwide. The future trade trends for iron oxide will largely mirror those for titanium dioxide: the share of imports via processing trade will remain above 50%, and export volumes will continue to rise. The strategic significance of titanium ore resources is becoming increasingly apparent. As the titanium dioxide industry continues to develop, future competition will largely hinge on access to titanium ore resources. Although China is one of the world’s richest countries in terms of titanium ore reserves, more than 90% of its reserves are associated ores with low TiO2 grades, complex compositions, and difficult extraction. Moreover, due to fragmented operations, low levels of mechanization, and unstable product quality, there is serious waste of titanium ore resources. Currently, China’s titanium dioxide producers require about 1.8 million tons of ilmenite annually, yet domestic production capacity stands at only around 1 million tons. Consequently, China must import ilmenite and high-titanium slag from places such as Australia, Canada, and Vietnam. It is estimated that by 2010, China’s domestic demand for titanium dioxide will reach about 1.1 million tons, with production reaching roughly 1.2 million tons, requiring about 3 million tons of ilmenite. Domestic self-sufficiency in titanium ore will then stand at only 37%. Faced with this shortage of titanium ore supplies, domestic enterprises must prepare early. One approach is external procurement, which can be divided into two channels: domestic and international. International procurement itself can take two forms: independent purchasing and group purchasing. Relatively speaking, group purchasing offers many advantages: not only are prices lower and transportation costs reduced, but users can also precisely import raw materials according to their production needs, avoiding issues such as capital lock-up and warehousing. Group purchasing is undoubtedly the best solution for most titanium dioxide companies seeking to secure titanium ore supplies; companies might consider forming regional alliances for raw material supply and centralizing imports of titanium ore.