Extinction agents are set to raise prices again in May, accelerating restructuring and M&A activity across the industry chain.
2019-05-08
On May 7, Baililian announced that, effective immediately, it would raise the sales price of matting agents by RMB 300 per ton over the previous level. Shandong Dongjia and Panzhihua Tianlun Chemical also issued price‑increase notices on the same day, with hikes ranging from RMB 300 to RMB 500 per ton. Yang Xun, a matting‑agent analyst at Business Society, noted that, with demand still far from fully recovering, manufacturers are primarily using price increases to consolidate earlier adjustments, bolster bullish market sentiment, boost confidence in the outlook, stimulate demand, accelerate receivables collection, and simultaneously expedite restructuring and M&A activity within the industry chain.
Price expectations are optimistic.
The May price hike marks the second round of increases in 2015. Sichuan Longmang Titanium Industry announced, in the first week of May, a RMB 300 per ton price increase across its entire titanium dioxide product line; following this adjustment, market prices for all its products have approached approximately RMB 13,000 per ton. In regions including East China, Central China, and Southwest China, nearly ten producers have also followed suit, raising prices by RMB 300–500 per ton, further reinforcing the industry’s bullish sentiment.
Yang Xun explained that although leading companies have taken the lead in raising prices, prompting their peers to follow suit, many distributors remain skeptical about this round of price hikes given current market demand and sales trends. The price increase is largely intended to create a bullish sentiment; in practice, transactions are still negotiated on a case-by-case basis, with pricing, volume, and payment terms assessed individually.
However, Cinda Securities remains optimistic about future titanium dioxide prices. From a supply-and-demand perspective, China’s demand for titanium dioxide is expected to maintain an annual growth rate of around 8% in 2015, with demand increasing by nearly 150,000 tons. Exports are likely to continue expanding at a robust pace, and net exports are projected to rise by more than 100,000 tons. Assuming current capacity utilization rates remain unchanged, the additional domestic production capacity added in 2015 is unlikely to exceed 190,000 tons. Meanwhile, titanium dioxide prices are currently at historic lows, suggesting that prices could still climb during the peak season in the second quarter of 2015. Furthermore, the pace of mergers and restructurings within the titanium dioxide industry is expected to accelerate in 2015, which should help support further price increases.
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