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TiO2 China Monthly Report Vol.4 Issue 03 2011

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TiO2 China Monthly Report

Vol.4 Issue 03 2011

Publication date: 25 March 2011 Editor Note Headlines of TiO2 China Monthly Report 1103

II II

Supply & Demand

1

China consolidates TiO2 export in Jan.2011 Thailand's imported TiO2 consolidates in Jan. 2011

1 3

Upstream

3

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

3 4

Company Dynamic

4

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

4 5 6 7

Price update

7

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

7 8

Downstream

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

9 10 11

Global insight

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

11 11 12

Latest reports related to TiO2 from CCM •

Survey of Titanium Dioxide in China 2010 - 5th Edition

Production, Market and Investment 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

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TiO2 China Monthly Report

Vol.4 Issue 03 2011

Editor Note Headlines of TiO2 China Monthly Report 1103

Welcome to 1103 issue of TiO2 China Monthly Report. 2011 is the first year of China's 12th Five-Year-Plan (2011-2015). Chinese government adjusts the annual average GDP growth rate for the next five years from 7.5% to 7.0% in the National People's Congress (CPC) and Chinese People's Political Consultative Conference (CPPCC) held in March 2011, which indicates China will further emphasize its quality of economy growth and eliminate more inefficient capacities. Also in the CPC and CPPCC, Chinese government decides to support water conservancy construction in the coming ten years, which will drive TiO2 demand. Primarily due to the rising cost of raw materials and supply shortage of TiO2, TiO2price keeps increasing in 2011, which is to boost TiO2 producers’ profitability. Attracted by the soaring prices, both titanium miners and TiO2 producers are to expand their production capacities. Thanks to the tight supply and faster price increase of TiO2 outside of China, China’s TiO2 export volume will keep increasing, which will drive domestic TiO2 price. In the meanwhile, the shortage of titanium feedstock will bring more pressure to TiO2 producers. Exchange rate in Mar.2011: USD1=RMB6.57 USD1=EUR0.73

Enjoying the continuous increasing TiO2 prices, China consolidates its TiO2 international 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.

China's import volume of titanium feedstock (excluding titanium slag) retreats in Jan. 2011, primarily due to the short supply and soaring price. 

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

Shandong Dongjia is expected to exploit titanium reserve in Liangshan Prefecture, especially in Huili County.

Jinzhou Titanium is to benefit from being National High Technology Enterprise.

Indemnificatory housing is to promote architectural coating market development

Downstream companies implement measures to avoid profit shrink caused by the rising price of raw materials.

Plastic pipe market is to boom with government’s support.

Main companies covered in this issue

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TiO2 China Monthly Report

Vol.4 Issue 03 2011

Supply & Demand

E

China consolidates TiO2 export in Jan.2011

njoying the continuous increasing TiO2 prices, China consolidates its TiO2 international 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.

FIGURE 1: China’s TiO2 international trade situation, Jan.'10 ~Jan.'11

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 of TiO2 and tight supply outside of China.

Source: China Customs; CCM International

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 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 2: China’s TiO2 import situation by origin, Jan.'10 ~Jan.'11

Source: CCM International TiO2 MTB import analysis

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, foreignowned 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 CCM International Limited

Source: CCM International TiO2 MTB import analysis

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TiO2 China Monthly Report domestic demand in reconstruction after the disaster since March 2011. As a result, global TiO2 supply will even tight in the coming months, which will further boost TiO2 prices.

Vol.4 Issue 03 2011 FIGURE 4: Export volume of China’s TiO2 by destination, Jan.'10 ~Jan.'11

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%. Though the price has increased fast since Q4 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.

Source: CCM International TiO2 export analysis FIGURE 5: Export volume share of top TiO2 exporters, Jan.'11

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 Source: CCM International TiO2 export analysis countries, the strongest demand is from Spain. It is 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.

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Vol.4 Issue 03 2011 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 the soaring price.

Source: CCM International

Upstream China widens ilmenite import origins with rising price

C

hina's import volume of titanium feedstock (excluding titanium slag) 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. 

FIGURE 7: China’s quarterly import volume of titanium feedstock and the average prices, Jan.'10~Jan.'11

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.

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TiO2 China Monthly Report As for China's titanium feedstock import origins, 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.

Vol.4 Issue 03 2011

FIGURE 8: China's titanium feedstock import origins, Jan. 2011

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 origins with lower price.

Source: China Customs; CCM International

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.

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TiO2 China Monthly Report

Vol.4 Issue 03 2011

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 Shandong Dongjia

Output

Export volume

Export average price

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

1,474,286

327,305

1,873

National total

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

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.

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TiO2 China Monthly Report

Vol.4 Issue 03 2011

Jinzhou Titanium to benefit from being National High Technology Enterprise

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nnounced on Feb. 25, 2011, Jinzhou Titanium Industry Co., Ltd. (Jinzhou Titanium), domestic chloride TiO2 producer, is named as National High Technology Enterprise (NHTE). As a result, Jinzhou Titanium has been the first and unique NHTE among domestic TiO2 enterprise, which helps to boost its capacity expansion.

college education or above account for over 30% of the total staff of enterprise and R&D staff account for over 10% of the total; 4) Proportion of R&D expenses in total revenue should meet the following requirements: - No less than 6% for the enterprises with revenue less than USD7.61 million in recent years; - No less than 4% for the enterprises with revenue between USD7.61 million and USD30.44 million in recent years; - No less than 3% for the enterprises with revenue over USD30.44 million in recent years.

As a National High Technology Enterprise (NHTE), Jinzhou Titanium can gain a lot of support from government, especially getting preferential tax. According to Management Policy of Hi-Tech Enterprise License, jointly formulated by Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation, the operating income tax rate is 20% for lowprofit small enterprises and 15% for NHTE, which are lower than the general operating income tax rate of 33%.

5) Revenue from high-tech products should account for over 60% of enterprise's total revenue. PICTURE 1: National High Technology Enterprise Certificate of Jinzhou Titanium

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 production capacity.

Source: Jinzhou Titanium

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 CCM International Limited

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Vol.4 Issue 03 2011

Shandong Dongjia expects to extend ilmenite production

n Feb. 19, 2011, Hu Kun, a member of standing committee of Liangshan Prefecture and secretary of CPC Huili County Committee, Sichuan Province, visits Shandong Dongjia Group (Shandong Dongjia), inviting Shandong Dongjia to develop titanium industry in Liangshan.

to import a large amount of titanium feedstock every year. Take 2010 for example, Shandong Dongjia imported 67,908 tonnes ilmenite and 78,296 tonnes titanium slag. Generally, the high dependence on imported titanium feedstock brings risk to Shandong Dongjia, especially when the price of titanium feedstock fluctuates frequently. Moreover, the imported titanium feedstock also shrinks Shandong Dongjia's profit.

Actually, it is Mr. Hu's return visit to Shandong Dongjia. Early in Jan. 2011, Shandong Dongjia jointly with Nippon Paint (China) Co., Ltd. and Sapphire Corp. Ltd. have visited Liangshan Prefecture and inspected the local investment circumstances.

Though Shandong Dongjia has exploited titanium reserve in Chengde City, Hebei Province, the limited reserve (converting to 15.93 million tonnes TiO2) can not sustain its long-term development. Hence, Shandong Dongjia will lose its competitiveness as compared with Pangang Group and Sichuan Lomon, both of which hold abundant titanium reserve in Panzhihua-Xichang region.

Border on Panzhihua City, Liangshan Prefecture holds the second largest titanium reserve in Sichuan Province. As a whole, Liangshan Prefecture has over 82.49 million tonnes 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 Huili County.

The abundant titanium reserve has attracted Pangang 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 Dongjia to set up TiO2 production line in Liangshan Prefecture. Besides the abundant titanium reserve, there is stable supply of sulfuric acid here, as Huili County has set up a large Nonferrous Metal Industry Park.

Early in 2008, Pangang Group has confirmed to exploit vanadium-titanium-magnetite reserve in Xichang County, with the total investment of USD2.62 billion. In 2010, Pangang Group has completed USD1.14 billion investment here. The mining exploiting project is expected to be launched in October 2011. After completing the whole investment, Pangang Group will hold the production capacities of 160,000t/a vanadium slag, 300,000t/ a titanium concentrate ore, 160,000t/a titanium slag, 100,000t/a chloride TiO2, etc. in Xichang.

TABLE 2:Titanium reserve distribution situation in Liangshan, 2010 (million tonne) Distribution

Grade 11.76% (19.08 million tonnes)+0.03% Xichang County 62.23 (43.15 million tonnes) 11.80%(15.00million tonnes)+11.11% Huili County 19.86 (4.86 million tonnes) Dechang County 0.40 7.99% Total 82.49 -Source: Huntsman Full 2010 Results

Besides, Xichang Ruikang Titanium Co., Ltd. has also launched a 60,000t/a TiO2 production line in Xichang County.

TiO2

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 Feb.'11

South west East China Central China South China

Mar.'11

Anatase TiO2 Feb.'11

Mar.'11

2,478-2,660 2,747-2,945 2,052-2,204 2,365-2,518

Sulfuric acid 98% Feb.'11

Mar.'11

65-84

69-89

1,832-2,128 2,060-2,411

85-105

85-105

2,356-2584 2,579-2,823 1,824-2,098 2,060-2,365

76-99

76-99

68-96

76-104

2,356-2,584 2,625-2,838 N/A

1,870-2,022 2,106-2,289

Source: CCM International

TiO2

The period of March to June is the traditional peak season for construction and real estate industries, thus, the demand of TiO2 has a large increase in March 2011. The demand from abroad has stayed robust; however, TiO2 products are in short supply in domestic market. 

With the increasing cost and advancing demand, domestic TiO2 prices increase in March 2011.

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TiO2 China Monthly Report

Vol.4 Issue 03 2011

In addition, the prices of TiO2 major raw materials continue to go up this period. Take titanium concentrate ore for example, its price has increased to more than USD153/t in some areas. 

reveal that the price of rutile TiO2 is expected to increase to USD3,052/t in the next coming months.

Due to the above factors, TiO2 prices have a remarkable increase in March 2011 especially in Shandong and Sichuan Province. The prices in these two areas increase by about USD229 to USD305 per tonne.

Although sulfur price has decreased slightly, the price of sulfuric acid has kept stable in March 2011.

Sulfuric acid

In March, one of sulfuric acid's downstream industries, fertilizer's market is sluggish. Thus, the fertilizer manufacturers have reduced the purchase amount of sulfuric acid. However, because some sulfuric acid manufacturers have stopped production and the strong demand from TiO2 manufacturers, the demand of sulfuric acid still exceeds its supply in domestic market and its price has kept stable.

Although the cost is increasing, the TiO2 manufacturers still make profits with the strong demand in the first quarter. For example, Anhui Annada Titanium Industry Co., Ltd. claimed that its retained profits would be about USD0.9 million to USD1.68 million in Q1 2011. 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 Grade 40%-46%

Sichuan Hainan Yunnan Guangxi Liaoning

Feb.'11 150-158

Titanium slag

Mar.'11 182-189

Grade 74%-78%

Feb.'11 654-684

Mar.'11 654-684

45%-54%

134-144

140-151

N/A

N/A

N/A

45%-47% 50%-52% N/A

146-149 190-196 N/A

150-168 200-206 N/A

77%-92% N/A 92%

623-775 N/A 790-806

717-870 N/A 790-806

Source: CCM International

Titanium concentrate ore Titanium slag

Being impacted by the soaring demand and tight supply, titanium concentrate ore price sees a remarkable increase in March 2011.

Titanium slag is in short supply and its price keeps an upswing in March 2011. Continuing to be impacted by the increasing price of titanium concentrate ore, its major raw material, the titanium slag price hikes in this period. In addition, the titanium concentrate ore is in insufficient supply, limiting titanium slag yields. The titanium slag price increases to about USD961/t in some areas. And its downstream product prices also advance in this period, such as titanium tetrachloride and sponge titanium.

 In March, the inventories of titanium concentrate ore manufacturers were still small, especially in Hainan and Yunnan Province. Many producers stopped to offer quotation to the new customers. Besides, the bad weather limits the exploitation, the titanium concentrate ore is in short supply in this period. Thus, the price of titanium concentrate ore increases 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

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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 Company

Asia Pacific

Middle East

Africa

North America

USD300/t

USD0.15 per pound

Remark Effective April 1, 2011 An additional USD50/t will be applied to all sales of Tiona 188 grade sold within the Asia Pacific region.

Cristal

USD300/t

USD300/t

Kronos

--

--

--

USD0.15 per pound

Effective April 1, 2011

Huntsman

--

--

--

USD0.15 per pound

Tronox

--

--

--

USD0.15 per pound

Effective April 1, 2011 Effective April 1, 2011 An additional USD0.15/pound will be applied to all anatase, inks, 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

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TiO2 China Monthly Report

Vol.4 Issue 03 2011

Downstream Rising TiO2 price shrinks downstream profit

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he rising TiO2 price shrinks downstream companies' profit. Coatings, inks and other downstream industries face serious economic pressures. These industries have come into the strange "produce more, earn less" cycle. Zhejiang Dilong New Material Co. Ltd. (Zhejiang Dilong), a decorative paper manufacturer, saw lower net profit growth rate than operating income growth rate according to its Annual Performance Report 2010 issued on 28th Jan.2011. In 2010, Zhejiang Dilong achieved total revenue of USD56 million (RMB367 million), seeing a year-on-year increase of 51.59%. However, its net profit for shareholders was USD6 million (RMB39.9 million), just increased 1.26% over 2009. The main reason for the shrinking net profit growth of Zhejiang Dilong was raising raw material prices, as explained by the company's board of directors in the report. Inks industry also suffered a lot from raw material rising prices. Zhuhai Letong Chemical Co., Ltd. (Zhuhai Letong) even saw net profit declining 13.91% in 2010 over 2009, whereas its total operating income had a year-on-year increase of 41.94% in 2010. In Zhuhai Letong's 2010 Annual Performance Report, rising raw material prices was considered to be one of the main reasons for decreasing profits, coupled with increasing sales cost resulted from marketing enhancement.

resin and TiO2 forces us to adjust the price of electrophoresis coatings and related products." Raising prices is only a short-term quick strategy to keep or increase profits, while enhancing the competitiveness of a company is the long-term way. "The soaring price has caused great difficulties in marketing for coating industry. As a manufacturing industry, the raw material cost accounts for 50% to 70%.Therefore, the rise of TiO2 price can seriously lower the profits of coating industry." Said Shen Jujun, Deputy Minister of Market Department of Hangzhou Chuanhua Coating Co., Ltd (hereafter called Chuanhua).  Facing this situation, Chuanhua proposed its 2011 development strategy as follows. Firstly, optimize product structure and strengthen research & development; secondly, realize technological breakthroughs; thirdly, open up new markets; last, enhance brand value as well as customer services. Some people think hard to find the solution for the TiO2 price rise. "It is most significant to improve competency and risk resistance capacity of coating industry in 2011." Said Sun Lianying, President of China Coating Industry Association.

Since 1st January 2011, international TiO2 giants--DuPont, Huntsman, Tronox and Kronos, have raised the price of their subsidiary products by USD200/t. It is understood that almost simultaneously they released this year's second time global price rise, which will enter into force on April 1. Dupont, Cristal, and Tronox respectively decided raise the price by USD300/t in Asia-Pacific region.

As a director of China Coating Industry Association Experts Committee, Liu Dengliang reckoned that though coatings production in China ranks first in the world, the quality of coatings still needs improvement. The gap is large compared with multinational coating companies in profit margin and added value, which restricts the China's development from a big coating country to a powerful one.

In response to the shortage of global supply chain and raw material price rise, Sun Chemical--one of the world's largest manufacturers of printing inks and pigments announced on 6th March 2011 that it will raise inks price in North American from 1st April 2011. Sun Chemical expressed that they had no better choice but to raise prices.

Thus, he pointed out that it's necessary to improve industry access threshold, as well as increase the industrial concentration by supporting large coating companies and eliminating small companies with backward production capacity. Meanwhile, it urgently needs to strengthen 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 March 2011 that the department will increase the price and additional fees of its electrophoretic coatings and related products. It will enter into force on 1st May 2011, or according to contract provisions. PPG senior vice president of Automotive OEM Coatings Cynthia A. Niekamp said, "The fast increasing price of important raw materials like epoxy

It is supposed that coating industry is to be re-shuffled. Yue Wangkun, general secretary of China Coating Industry Association, once said that industry shuffle was good for technology innovation, which can improve product quality. The price will fall when the industry's scale reaches a certain degree. Then people can enjoy better quality with lower price."

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TiO2 China Monthly Report

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Vol.4 Issue 03 2011

Indemnificatory housing promotes architectural coating market development

ndemnificatory housing (including affordable housing and low-rent housing), as one item of Chinese 12th Five-Year Plan (2011-2015), will promote market development of architectural coating industry. Considering the close link between real estate industry and building decoration industry, the construction of indemnificatory housing will similarly lead to large-scale demand of architectural coatings.

the buyers of indemnificatory housing are mainly the consumers with limited purchasing power. Therefore, the lower and medium building materials will get a good market in coming five years. It may strengthen the motivation of coating industry that the financial foundation for indemnificatory housing 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 annual output of architectural coating was 3.52 million tonnes (nearly 40% of coating industry's total output) in 2010, seeing a year-on-year rise of 23.7%. It shows that architectural coating industry has developed quickly and played an important role in coating industry.

"The total investment of this year(2011) will be USD198 billion (RMB1.3 trillion), more than USD76 billion (RMB500 billion) will be provided by the central and local governments, with the remainder channeled from social institutions and individuals; to ensure sufficient finance, central authorities are also mulling rules covering the entry of insurance funds into the subsidized projects." Said Qi Ji, vice-minister of housing and urban-rural development, at a press conference on 9th March 2011.

Indemnificatory housing becomes a new growth point of architectural coating industry. Different from previous years, architectural coating industry is under dual pressures: one is the price hike in raw materials, the other is depressed real estate market caused by government policy.

Although the proportion of indemnificatory housing is small, it contributes a lot to a positive adjustment of market expectations.

On one hand, most raw material prices increase, mainly affected by the international crude oil price rise. As for TiO2, its price rises because of increasing production cost and large consumption market. On the other hand, the real estate industry suffers from both government restriction policy and high interest rate set by the People's Bank of China. To relieve its pressure, the real estate industry delays payment to architectural coating companies, which has bad influence on the latter.

Cao Yuanzheng, chief economist at Bank of China International believes that a lot of investment to build indemnificatory housing and other indemnificatory housing is short-term effective way to boost domestic demand. Commercial real estate pattern inhibits people's consumption impulse, a large number of low-profit indemnificatory housing building can quickly stimulate the development of building materials, automotive, home appliances and other 50 more related industries. 

Luckily, the government's indemnificatory housing programme brings hope for coating industry.

It is foreseeable that guided by the 12th Five-Year-Plan and driven by the market, building decoration industry will enter a new period of development; coatings production will increase year after year; the Chinese architectural coatings market has a good prospect.

"To raise the level of housing security, China will build 10 million indemnificatory housing in 2011, as a part of the plan to build 36 million houses (as shown in figure below) for low-income families during the 12th Five-Year Plan period (2011-2015). When completed, the program 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. 

FIGURE 9: Construction target of indemnificatory housing, 20102015

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,

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Source: China Customs; CCM International

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TiO2 China Monthly Report

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Vol.4 Issue 03 2011

Plastic pipe market to boom with government's support

lastic pipe market is about to boom along with government's new plans on agriculture. The 2011 Central No. 1 Document focuses on water conservancy construction, which is surely a good opportunity for plastic pipe industry. The water conservancy construction mainly includes farmland water conservancy, water saving projects and rural drinking water projects. Plastic pipe will be preferred because of its advantages such as light weight, corrosion resistance, weather resistance and easy installation.

water conservancy construction is lucrative, but only competitive and innovative companies can benefit from it. It's time for companies to release their production capacity and improve techniques. Those who seize the opportunity will hopefully have a leaping development. Guo Runming, General Manager of Xi'an Hi-Tech Building Materials Co., Ltd. (Xi'an Hi-Tech), told the journalist, "We are setting about expansion and transformation, in order to seize the opportunity. By the time all projects finished, the company will have a production capacity of 105,000 t/a plastic pipe and 80,000 t/a plastic profiles, to be a large national production base of plastic building materials."

Wang Zhanjie, Secretary of Pipe Committee of Chinese Plastics Processing Industry Association, pointed out that there will be a total of USD717 billion (RMB4,700 billion) direct funds for the water conservancy construction in coming ten years.

Guo reckoned that the demand for large diameter plastic pipe will increase by an annual growth rate of more than 50%, thanks to water conservancy construction. Therefore, Xi'an Hi-Tech's new plastic pipe production line will mainly produce large diameter irrigation pipes and PE (polyethylene) pipes, PVC (polyvinyl chloride) pipes and other water supply or drainage pipes, with the diameter to be more than 800 millimetres.

Wang reckoned that 30% of the funds for rural drinking water projects will be used to purchase plastic pipes and tubes. Besides, large-scale demand for plastic pipes occurs in other projects such as urban water network and farmland water conservancy construction. In 2010, the plastic pipe companies in China had a total production capacity of more than 17 million tonnes, while the output of 2010 was 8 million tonnes, leaving more than half of the capacity lie idle. The market of

Global insight

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Earthquake in Japan impacts TiO2 industry

ccording to Sakai Chemical Industry Co., Ltd. (Sakai), a Japanese TiO2 producer with production capacity of 60,000t/a, it has been suffered from the damage caused by the earthquakes which hit Northern Japan on March 11th 2011. 

some ilmenite orders will be suspended, as TiO2 production in Japan is to be impacted due to the power shortage after the earthquake. Hence, they can divert some volumes to meet China's end users in April. As a result, the 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 been shut down since the earthquake struck.  Though Ishihara Sangyo Kaisha, Ltd. (ISK), Japan's largest TiO2 producer with production capacity of 160,000t/a, did not suffer from the damage, TiO2 industry will still be affected. 

The reconstruction after the earthquake will certainly boost TiO2 demand in Japan, which will shrink ISK's TiO2 export volume. Moreover, the halt of Sakai will further intensify the shortage of TiO2 worldwide, especially in Asia Pacific. As a result, TiO2 price is expected to witness a faster increase. 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

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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. CCM International Limited

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TiO2 China Monthly Report

Vol.4 Issue 03 2011

KMML to boost titanium industrial capacity

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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.

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