Huntsman's acquisition of Rockwood's TiO2 business likely to make the global TiO2 industry more concentrated among fewer enterprises

The disappointing market conditions in the global TiO2 industry has lasted for more than one year since mid-2012, and is likely continue into the future. This will force producers to reconsider whether to persevere with businesses that have low future growth expectations, or to divest from them, according to Titanium China Monthly Report issued by CCM in October.

Rockwood Holdings Inc. (Rockwood) selected the latter course of action and divested from its TiO2 business. On Sept. 17, 2013, Rockwood announced that it has reached a definitive agreement with Huntsman Corporation (Huntsman) to sell its TiO2 business. After several months' search for suitable buyers and concessions, Rockwood finally divested from its TiO2 business. The TiO2 business is valued at USD1.33 billion, including the assumption of USD225 million in pension obligations and subject to other customary adjustments. The final transaction value was much lower than Rockwood's expectation of USD2.00 billion as most investors were cautionary amidst the current sluggish market conditions. The transaction is expected to close during the first half of 2014, following regulatory approvals.

As the sluggish market conditions make the competition more intensive, some enterprises have been forced out of the industry. The industry is predicted to become more concentrated among a smaller number of enterprises, and the pricing power of international giants is likely to be strengthened. According to the public data of Rockwood, it had a TiO2 production capacity of about 340 thousand tonnes in 2012, ranking sixth worldwide. Huntsman is ranked fourth worldwide, taking about 9% of the global market share and producing about 460 thousand tonnes of TiO2 in 2012.

By acquiring Rockwood's TiO2 business, Huntsman will become the second largest TiO2 producer worldwide with approximately 14% of the global market share. DuPont is the largest TiO2 producer in the world, with a global market share of 20% in 2012.

Whether the mergers & acquisitions trend in the global TiO2 industry will catch on in China is uncertain. First of all, China's economy is not a totally free market economy, and most domestic mergers & acquisitions are led by local government. The involvement of governments makes mergers and acquisitions more complex. Secondly, 80% of domestic producers have a production capacity that is less than 100,000t/a, which makes mergers and acquisitions less attractive for potential buyers. In addition to this, the risk of failing to develop a synergy between the two companies means that the big producers would prefer to increase their production capacity rather than merging with or acquiring another producer. Thirdly, the punishment implemented by the environmental protection departments is lenient. Usually, companies that cause heavy pollution are given a fine of only USD30–USD40 thousand. Thus, many small producers would simply pay the fine and continue operating rather than stop or quit production.

Table of Contents of TiO2 China Monthly Report 1310:

Import volume declined by 9.42% while export volume kept growing in Aug.

Total titanium feedstock supply volume increased by 17.81% in Aug.

Domestic TiO2 price slightly increased from mid-Sept. to mid-Oct. demand turned warmer

Domestic TiO2 price may increase as DuPont and Huntsman lead the fourth wave of price increases in 2013

Huntsman's acquisition of Rockwood's TiO2 business likely to make the global TiO2 industry more concentrated among fewer enterprises

Changzheng Electric to enter into the upstream TiO2 industry through asset replacement Letong Chemical announces the withdrawal of its application to raise capital for a 30,000t/a ink project

Abnormal weather and upgrading of existing waterproofing construction generate bright prospects for domestic waterproofing coatings producers

Titanium Dioxide China Monthly Report, issued by CCM on 25^th, is mainly comprised of five columns of news and reports related to TiO2 market, including “Supply & Demand”, “Company Dynamics”, “Upstream”, “Downstream” and “Price Update”. You can find out more business opportunities through the latest and helpful information provided in the report.

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