Titanium dioxide demand will grow steadily

China Nuclear Titanium Dioxide successfully completed its bankruptcy reorganization in 2012. How will China Nuclear Titanium Dioxide develop after the reorganization? How does the company view the development of titanium dioxide industry? Li Jianfeng, Chairman of CNNC Titanium Dioxide, stated in an interview with China Securities News that the company will strive to complete its production plan and achieve sales revenue of 2 billion yuan in 2013. In the case of fluctuations in the price of raw materials, the price of titanium dioxide is expected to remain between US $2300 and US $2400/ton.

Li Jianfeng said that although there has always been a saying of overcapacity in China, the demand for titanium dioxide will grow steadily in 2013 and even in the next few years. At present, there are 70 or 80 domestic titanium dioxide enterprises, and merger and reorganization will be an important direction of future development. The company will focus on the titanium dioxide industry, and will adopt the sulfuric acid process, so it will not cost a lot of money to invest in the chlorination process.

Mergers and restructuring are the trend

China Securities News: Currently, the company has completed the restructuring of CNNC Titanium Dioxide. What is the company's development plan for this year?

Li Jianfeng: In 2013, the company plans to produce 145000 tons of titanium dioxide finished products and sell 145000 tons of titanium dioxide finished products to achieve the annual production and sales balance. In 2013, the expected operating revenue of the company is 2082.8712 million yuan, the expected operating cost is 1628.7767 million yuan, and the expected net profit is 68.4916 million yuan.

In the future, four titanium dioxide companies under its umbrella will complete the 2 billion yuan plan for 2013. For CNNC Titanium Dioxide, a unified sales platform and company were first established in Shanghai, leveraging Shanghai's advantages to build a nationwide sales network; Secondly, a raw material procurement platform has been established in Wuxi, fully utilizing the positive effects brought by economies of scale.

China Securities News: As an expert who has been involved in the titanium dioxide industry for many years, titanium dioxide industry is talking about overcapacity. How do you view the domestic titanium dioxide consumption market? How to judge the merger and reorganization of titanium dioxide industry?

Li Jianfeng: titanium dioxide is widely used. From the perspective of domestic titanium dioxide consumption, the consumption of titanium dioxide is growing every year. Although the international and domestic environment is not very good, the sales of titanium dioxide in China are still growing. In 2001, the production capacity of titanium dioxide in China was about 180000 tons. At that time, we were talking about overcapacity. At that time, there were about 70 or 80 manufacturers. At present, there are still 70 or 80 manufacturers. The old ones have stopped more than 10, and the new ones have risen more than 10. Nowadays, large enterprises produce nearly 200000 tons per year, while small enterprises also produce thousands of tons per year. If there were overcapacity, small businesses would have closed long ago.

According to industry judgment, by 2020, China's demand for titanium dioxide is expected to reach 3.5 million tons, an increase of about 50% on the current demand level. At present, there are 70 or 80 titanium dioxide enterprises, and about 20-30 will be shut down within one to two years. Small scale enterprises will be difficult to survive. There are also dozens of enterprises that may have to relocate with the process of urbanization. After relocation, these enterprises may give up doing titanium dioxide industry because of higher and higher requirements. There are still dozens of companies with the possibility of technological transformation and expansion, and currently there are less than 10 companies with a scale of over 100000 tons. These enterprises will generate several large enterprise groups, which is an inevitable direction for future development. At present, each factory in Europe is at a level of approximately 100000 to 200000 tons, and Chinese titanium dioxide enterprises will also develop towards this direction, taking the path of mergers and acquisitions. By 2020, there may be 8 to 10 titanium dioxide enterprise groups in China, each with 5 to 10 production factories.

Prices tend to be rational

China Securities News: At present, the price of titanium dioxide is between 2300 dollars and 2400 dollars/ton. How do you judge the current price of titanium dioxide? What is the trend of raw material prices under this pricing system?

Li Jianfeng: The false high price of titanium dioxide in the first two years may be related to the financial crisis in 2008. Originally, the pricing power of the entire industry was in DuPont's hands, with less than 6 million tons globally and DuPont's production reaching 1.1 million tons. After the financial crisis, DuPont and its mining supplier Rio Tinto signed an agreement every five years. But after the 2008 financial crisis, DuPont broke the contract, and Rio Tinto began to consider that a five-year contract would also be more detrimental to itself, ultimately becoming a one-year contract. Since 2010, it has become quarterly pricing, which has pushed up the whole price. The whole titanium dioxide industry market is not as good as originally expected.

Now the price of titanium dioxide has basically fallen back to the level before the financial crisis, and is becoming more rational. But ten years ago, raw materials were cheap, and now they are both expensive. Both labor and energy are on the rise, and only expansion can solve this problem. The scale of titanium dioxide is ten times larger than that of ten years ago. After the scale expansion, the labor cost per ton of titanium dioxide is reduced, and now it is basically maintained at the level of 1000 yuan/ton.

Sulfuric acid process first

China Securities News: At present, there are two processes for titanium dioxide: chlorination process and sulfuric acid process. More sulfuric acid process is used in China. Will the company invest in chlorination process in the future?

Li Jianfeng: Everyone has a misconception, why do we need to make titanium dioxide chloride? As long as it is a chemical enterprise, there are environmental and safety issues. Chlorination method titanium dioxide mainly has high safety pressure, while sulfuric acid method titanium dioxide mainly has high environmental pressure. For Chinese enterprises, the chlorination process of titanium dioxide poses significant challenges in terms of safety production and management. The chlorination process mainly produces high-end products. The chlorination process is a gas reaction, so the titanium dioxide produced is of high purity, good performance and high cost. In foreign countries, it is mainly used in aerospace, military industry, etc., but this amount is relatively small. DuPont Company had already produced it during the Cold War, and foreign countries generally imposed a technical blockade when China did not produce it. When China could produce it, foreign countries began to sell it to us. Therefore, currently it can be solved through imports, and it is a conventional product with low prices.

The difference in purity between sulfuric acid method and chlorination method is not particularly significant, and the key is to see where it is used, such as the difference in decoration and decoration. Therefore, 90% of titanium dioxide is a civilian product, and titanium dioxide produced by sulfuric acid process can fully meet the above requirements. Internationally, 50% of the production capacity comes from titanium dioxide sulfate and 50% comes from titanium dioxide chloride. Why does 50% sulfuric acid based titanium dioxide have the ability to survive? Mainly because its cost is relatively low. Sulfuric acid titanium dioxide is used to fix the price of titanium dioxide, which has the right to set the price. The profitability of enterprises producing titanium dioxide through chlorination will be crucial.

From the above perspective, our company will not engage in the production of titanium dioxide chloride, and we do not see any profit prospects.