Tronox Inc. (TROX)

[titaniuminvestor]

Tracker, the Chinese and Ukranians are still out there in the market in force. However, the quality of their grades can only be employed in lower end market segments. Examples would be low-end decorative coatings and low-end powder coatings, etc.

The Chinese continue to bring on significant capacity, however, with China's economy being so strong now, much of this is being consumed in China and not being exported. The goverment stimulus in China mostly went into fixed infrastructure and housing, putting huge demand on coatings, and therefore, TiO2.

Exports of TiO2 out of China still are not back up to their peak levels of 2006. Also, much (more than half) of the capacity in China is Anatase on not rutile grade TiO2.

Even though the capacity in China is coming on quickly, the markets are absorbing this since they can put it into low-end formulations and save costs. Chinese grades sell at hundreds of dollars a tonne discount to premium chloride grades like those produced by Tronox. But even the Chinese are moving prices up now and are struggling to meet their supply commitments.

Also, the high end market segments, such as industrial coil and high end marine coatins, can coatings, auto coatings, etc. all require high performing TiO2 grades. The demand for these segments is increasing along with the low-end segment demand.

Here is the big difference: The Chinese are expanding, the high-end chloride producers are not because the profitability of the industry has been so poor for past years. In fact, much capacity has been taken off-line in the past 18 months, mostly the higher cost plants.

Now, we have a supply crisis for the high quality grades, and therefore prices are rocketing to levels not seen in many years.....if you can find the supply.