Slumping Titanium Dioxide Prices Amid Drained Terminal Demand Hit Chemours's Financials

Hamburg, Germany: During the first five months of this year, Germany saw a 27% decline in new building permits compared to the corresponding period in the previous year. The decline in construction activities has weakened the pricing dynamics of key input materials required, including Titanium Dioxide. These sluggish prices of Titanium Dioxide include a surge in interest rates, rising construction costs, and uncertainty among builders and buyers. Last month, manufacturing activity in the Eurozone experienced its sharpest contraction since the COVID pandemic took hold worldwide. Additionally, the decline in upstream Sulfuric Acid prices and lower TTF natural gas prices have further contributed to the downward trend of Titanium Dioxide prices.

On a FOB basis, the ChemAnalyst database has shown that the price of Titanium Dioxide plunged by USD 90 per ton in early Q3 amid the weak purchases made by the paint and coatings industries. As per the market participants, The global demand for Titanium Dioxide was weak in the second quarter, leading to a decrease in one of the prominent manufacturers of Titanium Dioxide, Chemours's overall sales. This, combined with the impact of inflation on costs and the shrink in fixed cost yield, directly triggered a significant decline in the profit margin of the Titanium Dioxide business.

In Q2 2023, Chemours reported $1.6 billion in net sales across its three major businesses: Titanium Technologies, Thermal & Special Solutions, and High-Performance Materials. However, there was a net loss of $167 million. Specifically, the Titanium Technologies business saw a significant 27% drop in net sales, reaching $707 million. Adjusted EBITDA decreased by 60% to $87 million, and the EBITDA profit margin declined by 10 percentage points, settling at 12% compared to the same period last year.

On the other hand, In Germany, Headline inflation is influenced by several base effects, such as Lower energy prices pushing it southwards, while the discontinuation of temporary government energy relief measures and affordable public transportation contribute to upward pressure. Germany's inflation data for July indicates continued acute price pressures in the Eurozone's largest economy. The Q2 GDP performance shows that Germany is still struggling. July's CPI inflation rose by 6.2% y/y, in line with market predictions but lower than the 6.4% seen in the previous month. Though inflation has decreased from its peak of 8.8% in October last year, the pace of easing remains slower compared to the US.

According to the pricing intelligence of ChemAnalyst, In the German market, the prices of Titanium Dioxide are expected to remain on the lower end in the wake of tepid demand fundamentals from the downstream paints and coatings sector. In addition, Based on the current market scenario, there is a possibility of one more rate hike by the end of this year, mirroring the stance of the U.S. Federal Reserve and will pressure the market fundamentals of Titanium Dioxide among the manufacturers.