In a deal announced on Monday 26 February 2007, the National Titanium Dioxide Co of Saudi Arabia, usually known as Cristal, will acquire the Millennium Inorganic Chemicals TiO2 assets from US based Lyondell Chemical Co. The acquisition price is approximately US$1.2 billion, including a cash component of US$1.05 billion. It will result in estimated after-tax proceeds to Lyondell of US$975 million.
The move by Cristal takes it from a being a single-site pigment producer, controlling just 2% of global capacity, to being the world’s second largest producer, controlling 15% of global capacity spread across nine sites and five continents. The majority of the production capacity is based on the chloride process, which is the newer of two commonly-used pigment producing technologies. Compared to the older sulfate process, the chloride process tends to have lower operating costs, partly by virtue of its lower waste management burden.
Location Process 2006 Capacity (000s tonnes)
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Yanbu, Saudi Arabia Chloride 120
Stallingborough, UK Chloride 150
Ashtabula (1), US Chloride 113
Ashtabula (2), US Chloride 105
Kemerton, Australia Chloride 110
Baltimore, US Chloride 50
Le Havre, France Sulfate 65
Thann, France Sulfate 33
Bahai, Brazil Sulfate 60
TOTAL 806
Cristal is owned by the Saudi National Industrialization Company (NIC), also known as Tasnee. Tasnee holds 66% of the company, with the remaining 33% held by Kuwaiti based financial group Gulf Investment Corporation (GIC). Cristal entered the TiO2 pigment industry in 1991 when it commissioned a 54,000 tpa chloride route plant in Yanbu, Saudi Arabia, located on the Red Sea. The plant has steadily grown via brownfield expansions and it now has a rated capacity of 120,000 tpa, but the company is progressing with the commissioning of new equipment to bring the nameplate capacity closer to 180,000 tpa in 2007. While Cristal has long been an important supplier of pigment in the Middle East, the Millennium acquisition now makes it a global supplier second in importance only to long time industry leader, DuPont. According to TZMI, the combined group produced 722,000 tonnes of TiO2 in 2006.
Company 2006 Production (000s tonnes)
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DuPont 975
Millennium 612
Tronox 576
Huntsman Tioxide 529
Kronos 509
Ishihara Sangyo Kaisha 176
Kemira 120
Cristal 110
Chinese plants (various) 733
Others 596
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TOTAL PRODUCTION 4,936
The global TiO2 pigment industry comprises more than 100 plants, with production heavily concentrated in the regions of North America, Western Europe and Asia-Pacific. Global production for 2006 is estimated at 4.94 million metric tonnes (10.9 billion pounds) generating over US$9 billion in sales. Based on nameplate capacities, capacity utilisation was more than 90%.
Across the sector, financial returns have been comparatively low, a reflection of the increasing pressures facing the maturing industry. Pricing has declined in real terms since the late 1980s, squeezing pigment producers that have at the same time experienced rising costs. Cristal’s acquisition of Millennium may well herald a period of restructuring and repositioning among the major players. Global major, Tronox, recently announced the engagement of investment banking firm Robert W. Baird & Co to explore strategic options for, including a sale of, the company’s only sulfate process TiO2 plant, which is located at Uerdingen, Germany.
As for Cristal, TZMI believes that an initial focus should be Millennium’s underperforming chloride route plant at Stallingborough in the UK. This facility has had a particularly rough year, with several plant outages causing significant disruption to output in 2006. Cristal is also expected to continue to expand its Yanbu facility, which at present, according to TZMI’s Global Pigment Producers Comparative Cost Study, sits at sixth position on the global cost curve. The plans for Yanbu may result in it toppling DuPont’s plant in Altamira, Mexico for the lowest cost position.
ABOUT TZ MINERALS INTERNATIONAL
TZ Minerals International Pty Ltd (TZMI) is an independent consulting and publishing company, established in 1994. With over 80 years of accumulated experience, TZMI’s principals have been closely involved in the mineral sands and TiO2 pigment industries since the 1970s. TZMI specialises in confidential consulting services for the titanium minerals, zircon, titanium sponge and TiO2 pigment industries as well as publishing specialised market studies and reports based on its comprehensive database of production and market data. TZMI employs full-time professional research staff who collect and analyse data, which includes up-to-date supply/demand models, technical data and operating cost data for all major titanium feedstock and pigment producers. TZMI’s Publications and Data Services support its consulting activities, providing clients with a range of authoritative data and informed commentary on all aspects of the titanium minerals, zircon, titanium metal and TiO2 pigment industries. For more information on the company, its background and personnel, visit www.tzmi.com.
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Enquiries:
David McCoy
Director, TZ Minerals International Pty Ltd
Phone: +61 (0)8 9359 6000
Fax: +61 (0)8 9359 6050
Email: dmccoy@tzmi.com.au
Source: www.prurgent.com
