The European Commission has imposed anti-dumping duties on imports of TiO2 produced in China. The regulation, which recently came into force, is valid for six months. Titanium dioxide expert Reg Adams, Artikol, explains the impact of this step on paint and coatings manufacturers and what should happen next.
Reg Adams: On 11 July 2024, the EU began imposing anti-dumping duties on imports of TiO2 manufactured in China, with the enactment of Regulation 2024/1923. These are described as “provisional measures”, valid for six months. An official complaint about dumping was filed by a group of European TiO2 producers at the end of September 2023. That was the basis for the legal case AD696 and the European Commission began its investigation on 13 November. Written and oral evidence has been collected from EU TiO2 producers, customers and traders, as well as from many, but not all, of the Chinese producers and trade associations, such as the China Coating Industry Association. The evidence, conclusions and recommendations are contained in a 63-page report. Master Batch Formula
The provisional measures apply to TiO2 in all forms, whether as uncoated oxide or as a pigment, whether anatase-type or rutile-type and whether produced via a sulfate-route or a chloride-route process. The duty is applied at a percentage rate based on the import price, cif EU border, prior to normal Customs duty (currently 6.5 %). The anti-dumping rate is 39.7 % for the LB Group (formerly Lomon Billions), the world’s largest TiO2 producer, but only 14.4 % for Anhui Goldstar and its affiliates. It is 35 % for 23 other named companies which cooperated with the EU investigators. It is 39.7 % for all other Chinese suppliers. There are a few unusual features of this anti-dumping case.
Adams: Firstly, the complaint that triggered the investigation was filed by the European TiO2 Ad Hoc Coalition (ETDC), the membership of which has never been formally identified. It is described as a non-permanent coalition acting on behalf of producers representing more than 25% of total EU TiO2 production. There are six companies with TiO2 plants in the EU, namely: Cinkarna, Grupa Azoty, Kronos, Precheza, Tronox and Venator.
Secondly, when calculating the “fair value” of TiO2 produced at the 40-45 plants in China, the EU analysts disregarded data on Chinese domestic market prices and costs, reasoning that the data is affected by substantial Chinese Government intervention rather than being the pure result of free market forces. Instead, the EU analysts constructed “normal value” for Chinese TiO2 on the basis of assessed production costs for TiO2 in a “comparator country” (Brazil), using benchmark raw material cost data published by independent specialist consultants (TZMI and Fast Markets) and utility cost data provided by Brazilian Government agencies. Dumping margins for Chinese TiO2 shipments were calculated by subtracting the export prices (cif EU market) from the “normal value.”
Thirdly, the provisional duties apply to a very wide range of TiO2 products. Despite pleas from relevant customers that specific TiO2 products designed for use in food, ceramics, printing inks and décor paper should be excluded, the anti-dumping duties apply to all products defined by the EU’s own TARIC codes 2823.00010 (99.9 % pure TiO2, grain sizes within the range 0.7–2.1 microns) and 2823.000030 (all other products, with a TiO2 content of 80 % or above). So, although the path towards arriving at the anti-dumping verdict was quite unusual, the implementation should be fairly straightforward.
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Adams: Imposing anti-dumping duties will inevitably raise the price of Chinese TiO2 coming into EU markets by up to 40%. Chinese TiO2 that was previously offered at EUR 2.50 per kilo will now cost EUR 3.50 per kilo. At that price level, given currently prevailing costs for TiO2 feedstocks, chlorine, sulfuric acid, energy and other inputs, EU TiO2 producers should be able to compete effectively.
Between 2020 and 2023, Chinese suppliers increased their sales to the EU by 17 %, from 178,000 tonnes to 209,000 tonnes. Their combined share of the EU market rose from 15 % to 22 %. As a consequence of the anti-dumping measures, the Chinese suppliers’ market share is expected to be curtailed to 18-20 % during the second half of 2024.
Correspondingly, the EU suppliers should be able to regain market share. Higher sales volumes will require higher levels of output from EU producers, enabling them to run their plants at higher capacity utilisation rates and reduce unit fixed costs. Improved profitability is expected to ensure the survival of most, if not all, of the 11 TiO2 plants currently operating in the EU.
In order for this improvement to be sustained, the anti-dumping duties will need to remain in place for another five years onwards from the beginning of 2025.
Adams: The paint industry is by far the largest end-user of TiO2, accounting for about 60 % of total EU consumption of 0.9-1.1 million tonnes per year. As a percentage of total cash costs for a typical paint manufacturer, spending on TiO2 accounts for 25-30 % for architectural paints and 12-18% for industrial paints. A sudden rise of €1.00 per kilo in the price of Chinese TiO2 would therefore have a significant effect on a paint manufacturer relying mainly on Chinese suppliers for its TiO2 requirements. Certainly there will be some small and medium-size paint manufacturers faced with this situation. The majority of EU paint companies use both Chinese and non-Chinese TiO2 in their formulations, so their cost-base will be less affected by the anti-dumping duties. Overall, cash costs for EU paint manufacturers may rise by about 2-4% as a result of the imposition of ant-dumping duties on Chinese TiO2.
It is interesting to note that the EU investigators questionned AkzoNobel and Sherwin-Williams in this context. Both companies reported that spending on Chinese TiO2 represents a negligible or minor share of their respective paint production costs. In its 63-page report, the European Commission states: “Both users would be able to absorb the (provisional anti-dumping duty) measures, even if they would not be able to pass on such cost increases to their customers.”
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Adams: The main positive outcome of implementing anti-dumping duties would be helping most, if not all, of the 11 existing TiO2 plants in the EU to remain open. In a macroeconomic context, this would be of positive benefit in terms of local employment and in terms of continent-wide self-sufficiency.
The main negative outcome for the European paint industry would be slightly higher costs and the serious but intangible implications stemming from the erection of yet another barrier to free international trade in chemical raw materials.
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