Reg Adams - Artikol

Informa MinSands, Perth, Mar 2017 1, Reg Adams (ARTIKOL) 1

Double Rainbow over ClockHouse. © M.A. Adams, 2006

Reg Adams (ARTIKOL)

PEERING THROUGH THE MIST

TOWARDS THE FUTURE

By Reg Adams

ARTIKOL, London

Reg Adams (ARTIKOL) 2Reg Adams (ARTIKOL) 2

UPHEAVALS IN THE MACRO BACKGROUND

New era of cheaper oil & gas. Crude oil in $US 50-70 range for next 3 years (maybe lower, maybe for longer). Vs $US 100-130 in 3½ years up to Aug 2014. Saudi Arabia vows not to reduce output to “stabilise price” in order to protect market share against non-OPEC suppliers (US shale, Russians, Brazilians, etc)

Collapse in commodity prices from Feb 2011 peaks. Prices now ($US/tonne): IronOre: $60 (vs $187). Copper: $4752 (vs $9880). Nickel: $10336 (vs $28412)

Slower than previously expected economic growth in China, Europe & Japan. Stronger & faster recovery in US economy, which may now be faltering.

Volatile currency exchange-rates. Stronger $US. Weaker Euro & Yen. Also, softer currencies for major commodity-exporters (Australia, Canada, SthAfrica)

Regional political upheavals increase uncertainty of economic & business forecasting. Russian annexation of Crimea & hostile attitude towards Ukraine; Spread of ISIS jihadi activity across Middle East & North Africa; Tensions between Saudi Arabia & Iran; China’s more assertive stance vis-à-vis neighbours; Dissension within EU over austerity, migration, internal border controls & post-Brexit future; Trade & foreign relations strategy of the USA in the wake of November 2016 elections.

Informa MinSands, Perth, Mar 2017


PERILS OF PREDICTION

“It is exceedingly difficult to make predictions, particularly about the Future.” (Niels Bohr, quantum-physicist, 1931)

Predictions that looked fairly reasonable at the time:

“Fooling around with alternating current (AC) is just a waste of time. Nobody will use it, ever.” (Thomas Edison, inventor/businessman, 1889)

“Road traffic density is increasing so fast that in fifty years’ time, every street in London will be buried under nine feet of horse manure.” (‘Times of London’ newspaper leader article, 1894)

“Heavier-than-air flying machines are impossible.” (Lord Kelvin, physicist/engineer, 1895)

“There isn’t the slightest indication that nuclear energy will ever be obtainable. It would mean that the atom would have to be shattered at will.” (Albert Einstein, theoretical physicist, 1934)

“Dewey defeats Truman” (‘Chicago Daily Tribune’ front-page headline, 3 Nov 1948, the day after the US Presidential election)

“I think there is a world market for maybe five computers.” (Thomas Watson, IBM President, 1943)

“There is no reason anyone would want a computer in their home.” (Ken Olsen, Digital Equipment Corp. Founder, 1977)

BUT:

“Without a good understanding of where you are and how you got here, you will never get to where you want to go.” (Source unidentified. Claimable?)



FACTORS AFFECTING TiO2 FEEDSTOCK DEMAND

Trends in TiO2 feedstock demand will continue to be driven mainly by:

Demand for TiO2 (especially as a pigment), titanium metal & TiO2-coated welding-rods.

Manufacturing methods – especially sulfate vs chloride processes for making TiO2.

Trends in TiO2 pigment demand will continue to be driven mainly by:

Demand for paint, plastics, decorative laminates & printing inks.

Success (or failure) of moves for TiO2 thrifting or substitution in end-uses.

Trends in demand for titanium metal will continue to be driven mainly by:

Demand for aircraft (military & civil), plant & equipment (desalination, nuclear power, chloralkali & other chemical), sports equipment & medical applications.

Manufacturing methods – especially novel methods promising low-cost production: AAC/Peruke Fluorotitanate (South Africa); Cristal Armstrong (Ottawa, IL, US); CSIRO TiRO (Australia);MER Spheroidal Powder (Tucson, AZ, US); Metalysis (UK); Norsk Titanium (Norway); Okabe/Tokyo University EMR/MSE (Japan).

Demand for end-use products within specific counties is driven mainly by:

Economic (GDP) growth; Affluence & life-style; Urbanisation



ULTIMATE END-USER DEMAND DRIVERS

TiO2

Pigments

Milled Synrutile

Pigments

Titanium

Metal

Welding Rod

Coatings

Abrasives

Metallurgical Fluxes

& Refractory Linings

Paint Plastics

Paper Inks

Aircraft

Decorative

LaminatesSports

Equipt

Desalination &

Chemical Equipt

Food &

Pharma

Catalysts

Cosmetics

Rubber

ProductsMedical

Prosthetics

TITANIFEROUS (TiO2-containing) FEEDSTOCKS

TextilesElectronic

Equipt

Enamels

Social

Infrastructure:

Healthcare,

Education,

Leisure, etc

Transport

Infrastructure:

Road, Rail, Air, Sea,

Waterways Moving

Goods & People

Consumer

Goods &

Services

(inc Food &

Housing)

Businesses

Agri & Extractive

Manufacturing

Tertiary Sector

Public Safety

Law & Order,

Military, etc

Info &

Comms


Informa MinSands, Perth, Mar 2017 Reg Adams (ARTIKOL) 6

TiO2 INDUSTRY FEATURES

TiO2 pigment: specialty chemical (many different grades) sold in commodity volume. Market currently worth more than $US 15 bn.

Pure TiO2 produced by sulfate (SP) or chloride (CP) process, then milled & surface treated to make pigment (containing 80-98% TiO2).

Rutile grades (higher refractive index, but more abrasive) account for 85% of global demand. Made by SP & CP plants. Anatase grades made by SP plants, not by CP plants.

CP feedstocks are: natural rutile, synrutile, chemically upgraded & coarse-grained slags (>85%TiO2). Also ilmenite (>55% TiO2) – for Chemours only. SP feedstocks are: slags (>75% TiO2) & ilmenite (>45% TiO2).

Historically not much vertical integration within the industry – either upstream (feedstocks) or downstream (end-use sectors). But this is changing – recent moves by Tronox & Cristal and by PPG & AkzoNobel in China.

Usage of TiO2 is extremely widespread: over 170 countries each spend over $US 10,000 per year on TiO2 pigment.

TiO2 is non-recoverable from post-consumer waste, so this does not exert dampening influence on demand/price.

Reg Adams (ARTIKOL) 6


MAJOR RECENT EVENTS – TiO2 FEEDSTOCK

2013q1: Rio Tinto abandons $US 4 bn ilmenite smelter project at Bécancour (Canada) & suspends project to double ilmenite capacity in Madagascar to 1.5 mn tpa.

2013q2: Kenmare completes 50% expansion at Moma mine (Mozambique).

July 2013: Rio Tinto idles one of its nine furnaces at Sorel (Canada) ilmenite smelter. Rio Tinto idles a second furnace at Sorel in April 2015. Still idled.

2013q4: Base Resources opens Kwale mine (Kenya).

2014q1: TiZir (MDL/Eramet) opens Diogo mine (Senegal). 2015q4: Converts Tyssedal (Norway) smelter to use only Diogo ilmenite, raises slag capacity & now makes chlorinatable, as well as sulfatable, slag.

2015q2: Iluka resumes synrutile production after 22-month hiatus. One kiln (SR-2 at Capel, WA) at full capacity throughout 2016. A second kiln may be reopened in 2017, depending on market prospects.

2015q3: Rio Tinto idles one of its four furnaces at Richards Bay (South Africa). Still idled.

2015q4: Iluka ceases US mineral sands mining operations.

2015/16: Collapse in iron ore prices precipitates closure of several Chinese mines which were generating by-product ilmenite.

2016q1: IRC (formerly Aricom) ceases mining at Kuranakh (Eastern Siberia).

2017h1: Cristal ilmenite smelter at Jazan (Saudi Arabia) due on-flow, after 2-3 years’ delay. Design capacity: 500 ktpa of 85-87% TiO2 slag.



MAJOR RECENT EVENTS – TiO2 PIGMENT

2014/15: New chloride plants come on-stream in China (Henan Billions, Yunnan Xinli & Luohe Xingmao) – 220 ktpa altogether. These three companies, plus Jinzhou Titanium (Citic group), produced 105,000 tonnes of chloride TiO2 pigment in 2016.

2015/16: Huntsman rationalises capacity. Reduces manpower & effective capacity by 10-20 ktpa at Krefeld & Duisburg (2015h1). Shuts 95 ktpa Calais plant black-end (2015q3), but maintains 30-40 ktpa white-end section (until Nov 2018) to meet commitment to Lomon Billions re TR-52 grade. Shuts 25 ktpa Umbogintwini plant (2016q4).

2015q3: Tronox idles lines at Kwinana (Australia) & Hamilton (US), reducing capacity by 15% to 400 ktpa. Brings both lines back into operation in 2016q1.

2015q3: Chemours shuts EdgeMoor plant + a small unit at New Johnsonville (totalling150 ktpa in the US), offset by start-up of second 200 ktpa line at Altamira (Mexico) in 2016q2.

Jan 2017: Fire at Huntsman’s Pori (Finland) plant, forcing closure of the white-end for 2 months & closure of the black-end for 4-6 months



CHANGED IDENTITIES OF MAJOR PLAYERS Oct 2011: TiZir created as 50:50 joint venture, amalgamating Eramet’s Norwegian ilmenite smelter &

MDL’s Senegalese mineral sands assets.

June 2012: Tronox buys Exxaro’s mineral sands assets, with Exxaro acquiring 38.5% stake in enlarged Tronox (subsequently raised to 44%). Tronox becomes fully vertically integrated.

Sep 2012: Rio Tinto buys BHP Billiton’s stake in RBM (South Africa) to take 74% majority control. Remaining 26% stake owned by Black Employee Empowerment entities.

2014q4: Huntsman buys Rockwood assets, including two TiO2 plants in Germany & one in Finland. Divests TR-52 inks business to Henan Billions, but retains Pori-based inks business.

2015q2: Tasnee (HQ in Riyadh) raises stake in Cristal from 66% to 79%. Buys Jiangxi Tikon (with sulfate-route at Fuzhou, China, now rated at 46 ktpa).

July 2015: Chemours (TiO2 + fluoro + cyanide, etc.) floated off by DuPont.

Oct 2016: Henan Billions completes reverse takeover of Sichuan Lomon, creating Lomon Billions –world’s 4th largest TiO2 pigment supplier, with 630 ktpa of TiO2 pigment capacity plus captive feedstock sources.

2016q3: Kenmare refinanced, with Oman Govt. now owning just under 30% of equity.

Dec 2016: Iluka buys Sierra Rutile.

2017q2: Venator Materials (TiO2 + coloured pigments + water & timber treatment chems) floated off by Huntsman – 782 ktpa TiO2 pigment capacity.

2018q1: Tronox acquires Cristal’s TiO2 pigment & feedstock assets, with existing Cristal shareholders acquiring 24% stake in enlarged Tronox.



EXISTENTIAL THREATS & OPPORTUNITIES

CARBON FOOTPRINT. AkzoNobel aims to reduce its cradle-to-gate carbon footprint by 20-25% between 2009 & 2020. Focus on TiO2 pigment & binder resins. TDMA collated data from 33 TiO2 plants (16 sulfate, 17 chloride), showing an average footprint of 5.3 tonnes CO2 equivalent per tonne pigment product in 2012. But, white walls & roofs achieve energy savings (infrared reflectance & less internal lighting). So, increased (rather than decreased TiO2

loadings) could be a better route towards lowering overall CO2 emissions.

HEALTH RISK. Evaluation by IARC (Nov 2010) determined TiO2 (in dry pigment form) is a Class 2B carcinogen. Therefore, EU-OSHA & similar Govt agencies insist on monitoring workers’ exposure to airborne TiO2 particles of respirable size. Proposition 65 (California) extends this precaution to labelling for some TiO2-containing products (cosmetics) used in dry powder form. Such labels trouble consumers & prompt cosmetics formulators to seek TiO2 substitutes. ANSES (French OSHA) proposes that the EU should adopt even more stringent measures applicable to all TiO2-containing products.

ESPIONAGE. In April 2011, DuPont filed a civil lawsuit alleging theft of trade secrets re chloride TiO2 manufacturing technology. Effectively superseded by US Dept. of Justice lawsuit filed in August 2011. In March 2014, two men were judged guilty of theft & resale of trade secrets to Pangang (a Chinese State enterprise) for help designing a new TiO2 plant at Chongqing. Trial for other indicted parties began in mid-December 2016.



-25

-20

-15

-10

-5

0

5

10

15

20

25

1970 1980 1990 2000 2010 2015

WORLD TiO2 PIGMENT DEMAND GROWTH

(% year-on-year change)

Building-up & drawing-down inventories all along the value-chain

exacerbates “normal” cyclical demand growth


Paint, 56.0%

Ink, 3.2%

Catalysts, 2.4%

Plastic, 25.6%

Enamel, 1.0%

Paper, 7.7%

Other, 3.2%Textiles, 1.1%

WORLD: TiO2 PIGMENTS CONSUMPTIONby End-use Sector (2016 data)

Total World = 6.15 mn tonnes

Rutile: 85% Anatase: 15%


Europe, 19.5%

CIS, 1.6%

ME/Africa, 4.1%

China, 34.0%

OthEastAsia, 7.9%

CentSthAsia, 4.4%

Aus/SEAsia, 5.4%

NthAmerica, 15.9%

LatAmerica, 7.2%

WORLD: TiO2 PIGMENTS CONSUMPTIONby Region (2016 data)



SHARE OF GLOBAL TiO2 PIGMENT DEMAND

vs SHARE OF GLOBAL GDP (2016 data)

14

34.0

16.8

3.4

4.0

7.2

4.1

15.9

1.3

13.3

17.9

18.0

7.3

4.1

8.3

9.8

17.0

3.1

14.5

China

Europe

India

Japan

LatAmerica

ME+Africa

NthAmerica

Russia

Other

Share of Global TiO2 Pigment Demand & Share of Global GDP


USA, 15.6%

EU, 16.8%

Japan, 4.1%China, 17.9%

India, 7.3%

Russia, 3.1%

LatAmerica, 8.3%

ME+Africa, 9.8%

Other, 17.1%

SHARE OF GLOBAL GDPby Country/Region (2016 data)


GDP GROWTH-RATES, 2016 to 2021(At Constant Prices, % change year-on-year )

16

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

WORLD China EU (exc UK) India Japan Russia USA

DataSource: IMF, January 2017


MAJOR COUNTRIES GDP, 2015 & 2021(At Purchasing Power Parity, international G-K $US billion )

17

0

2500

5000

7500

10000

12500

15000

17500

20000

22500

25000

27500

30000

32500

Aus Brz Can Chi Egy EU-22

Fra Ger Ind Indo Iran Ita Jap Kor Nig Pak Pol Rus Sau Spa Tai Thai Trk UK US

These countries + the entire EU bloc account for 83% of world

GDP & for about 85% of world TiO2 pigment consumption.

DataSource: IMF, October 2016


17.3

17.0

10.2

8.2

7.2

3.5

2.3

2.2

1.7

1.5

1.3

1.3

1.3

1.3

15.3

2.5

2.2

2.3

1.4

0 5 10 15 20

Tronox+Cristal

Chemours

Huntsman

LomonBillions

Kronos

CNNC HuaYuan

Shandong Doguide

Ishihara Sangyo

Bluestar (Yuxing+Dahua)

Anhui Annada

GPRO (Nanjing+Xuzhou)

Lubei (ShandongJinhai)

Ningbo Xinfu

Shandong Dawn

Other Chinese

Other Japanese+Korean

Other EU

Ukrainian+Russian

Indian

WORLD TiO2 PIGMENT CAPACITY, END-2016(% Share of Total, by Owner)

Total Capacity = 7.66 mn t.p.a.


WORLD TiO2 CAPACITY: SULFATE vs CHLORIDE(End-year Capacity, ‘000 t.p.a. TiO2 pigment)


0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Sulfate Process

Chloride ProcessForecast


TiO2 CAPACITY, BY REGION: SULFATE vs CHLORIDE

(End-year Capacity, 1996-2006-2016-2026)


0

500

1000

1500

2000

2500

3000

3500

4000Chloride

Sulfate

The Americas Europe (inc. CIS) China Rest of the World

‘000 t.p.a., TiO2 pigment


1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000

1975 1985 1995 2005 2015 2025

WORLD TiO2 PIGMENT SUPPLY/DEMAND(‘000 tonnes, TiO2 pigment)

Potential Supply =

Effective Capacity

Demand =

Producer Shipments

DEMAND GROWTH: Average 3.8% p.a., 1975-2007. Then: 1.6% p.a., 2007-2015

FORECAST, 2015-2025: 4.1% p.a., to 8.825 mn by 2025.


Forecast


1500

2000

2500

3000

3500

Jan12 Jan13 Jan14 Jan15 Jan16 Jan17

US TiO2 EXPORT PRICE($US per tonne fob, IHCs 282300 & 320611 )


2000

2500

3000

3500

4000

4500

5000

2000 2004 2008 2012 2016

US TiO2 PIGMENT PRICE(per tonne, in “Dollars of the Day” & in Constant $US2016 )

in Constant $US2016 per tonne

in $US at prevailing values per tonne

Average Market Price, standard rutile-grade pigment


2500

3000

3500

4000

4500

5000

1970 1980 1990 2000 2010 2020 2025

Averages are for Trough-to-Peak & Peak-to-Trough

2012-15

Avge=3664

Avge=3047

US TiO2 PIGMENT PRICE($US/tonne, constant-2016 dollars)

1999-2004Avge=3224

1984-89

1973-76Avge=3781

Avge=3889

Avge=3829

1989-971976-84

Avge=3762

1997-99

Avge=3518

2005,peak3103

2005-09Avge=2957

2009-12

Avge=3499

2015-22


0

500

1000

1500

2004 2008 2012 2016

Aluminium

WORLD PRICES: COMMODITIES & MINERAL SANDS

INDEX, 2000 =100 (“dollars of the day”)

Iron Ore

Zircon

Rutile

Copper

Nickel

TiO2 Pigment


0

20

40

60

80

100

120

82 85 90 95 00 05 10 15 20 25

Prevailing-value “dollars of the day”

World Bank

Forecast,

24 Jan 2017

CRUDE OIL PRICE: TRIPLE COMPOSITE(Avge of Brent, Dubai & WTexas, $US per barrel)

Constant-value $US2016


US: PRICE INCREASES, 5-YEAR SPANSTiO2 & Other Pigments & End-use Products

27

-12.0

-8.0

-4.0

0.0

4.0

8.0

12.0

16.0

1993/98 1998/03 2003/08 2008/13 2013/16

ConsumerPriceIndex (CPI) TiO2Pigments

IronOxidePigments OtherInorgPigments

OrganicPigments CarbonBlack

Paint,Architectural Plastic,ConstructionProds

Inks

DataSource: USGovt-BLS, Mar 2017% p.a.

Increase


90

120

150

180

2011q1 2012q2 2013q3 2014q4 2016q1

Paint, Architec

CarbonBlack

ConsPrice

Index (CPI)

US: QUARTERLY PRICE TRENDSTiO2 & Other Pigments & End-use Products

TiO2 Pigment

IronOxidePigs

Plastic, ConstructionProds

Inks

Index, 2010q1 = 100

DataSource: USGovt-BLS, Mar 2017


Paint, 4720

Plastics, 2565

Paper, 705

Other sectors, 835

China, 3600

Europe + CIS, 1555

Other Asia/Pacfic, 1532

North America, 1220

ME + Africa, 318

THE WORLD IN 2025: TiO2 PIGMENT DEMANDby End-use & Region (‘000 tonnes, pigment)

Latin America, 600



Sulfate-route Processes,

3858

China, 3600

North & Latin America, 3023

Europe & CIS, 1681

Other Asia/Pacific, 1183

Middle East & Africa, 625

THE WORLD IN 2025: TiO2 PIGMENT CAPACITYby Process Type & Region (‘000 t.p.a., pigment)

Chloride-route Processes,

6065

Other Processes, 186

Total World = 10.1 mn t.p.a. Capacity utilisation = 87.3%


Pigments, Chloride,

2964

Pigments, Sulfate,

3355

Metal, 381

Welding-rods, 180

Other uses, 175

WORLD: TiO2 FEEDSTOCK DEMAND, 2015by End-use (‘000 tonnes, TiO2 units)



Pigments, Chloride,

5698

Pigments, Sulfate,

3630

Pigments, Other, 177

Metal, 877

Welding-rods, 568

Other uses, 645

THE WORLD IN 2025: TiO2 FEEDSTOCK DEMANDby End-use (‘000 tonnes, TiO2 units)



SUMMING-UP & LOOKING-AHEAD

As China’s economy become more focused on domestic consumption, less driven by capital investment & exports, its GDP growth will drop from >10% per annum (1983-2010), but will still be >5% per annum over the next 10 years. More mature economies (US, Canada, Japan, EU) will grow at 1.5-2.5% per annum. World GDP growth will be 3.0-3.5% per annum. By 2025, share of global GDP will rise from 24% to 31% for (China + India) and will fall from 33% to 25% for (North America + EU).

Global TiO2 pigment demand increased by 4.4% from 5.89 mn tonnes in 2015 to 6.15 mn tonnes in 2016. Long-term forecast growth at 4.0% per annum, bringing total to 8.825 mn tonnes by 2025, of which China 41%.

Paint will remain the dominant end-use sector for TiO2 pigment. Demand growth in plastics & decorative laminates sectors will be >4% per annum.

Titanium sponge metal demand will rise from 208,000 tonnes in 2015 to 478,000 tonnes in 2025.

TiO2 feedstock demand will reach 11.6 mn tonnes by 2025, of which at least 57% chlorinatable (49% for TiO2 pigments, 8% for titanium metal).



ROSKILL’S ‘TITANIUM MINERALS’ REPORT

34

E-mail:

Christine Duggan

christine @

roskill.com

Tel:

+44-20-8417-0067

Website:

http://www.

roskill.com

Other recently published

reports from Roskill’s cover

global industries & markets

for:

Titanium Metal

Zircon

Zirconia & Zr Chemicals

CaCO3 (GCC & PCC)

Talc

Kaolin

Petroleum Coke

Flame Retardants

With lots of data & analyses

sourced from Artikol

http://www/


MARKETING ALLIANCE FOR

INFORMATION ON CHINA’S TiO2 INDUSTRYArtikol is now marketing distributor worldwide (excluding Mainland China) for all publications covering TiO2 and allied industries published by:

Kcomber/CCM, headquartered in Guangzhou


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place orders (invoiced by

& payable to Artikol, via

credit-card or bank-to-

bank funds transfer to

Artikol’s London bank),

please contact:

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CHINA TiO2

MONTHLY

REPORT

32 pages

per issue

Published

during third

week of each

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month

mailto:[email protected]


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36

E-mail:

regadams @ artikol.com

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artikol.com

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