Brazil announces preliminary anti-dumping duty on Chinese titanium dioxide

On October 10, Brazil announced the preliminary anti-dumping ruling on Chinese titanium dioxide, with the tax ranging from $578/ton to $1,772.69/ton. In view of the current overall production capacity, export structure and corporate profitability of China's titanium dioxide, Brazil's preliminary anti-dumping ruling may lead to a further increase in the concentration of China's titanium dioxide industry.

Brazil's dependence on China deepens

According to the preliminary ruling results announced by Brazil, the preliminary temporary anti-dumping duties are LB GROUP 578 US dollars/ton (about 25%), ANHUI GOLD STAR 654 US dollars/ton (under CNNC HUA YUAN, about 29%), other listed companies (including CITIC TITANIUM, HUIYUN TITANIUM, PANGANG GROUP, etc.) are 1420.83 US dollars/ton, and other unlisted companies are 1772.69 US dollars/ton.

It is reported that the company's defense stage will begin from the announcement of the preliminary ruling to April 2025, and the final ruling will be announced in April 2025.

Brazil is one of the important exporters of Chinese chemical products, and titanium dioxide is no exception. According to statistics from the China Institute of Chemicals and Plastics, from 2019 to 2023, Brazil's total imports of titanium dioxide from China were 69,500, 85,300, 85,400, 85,800 and 100,800 tons, accounting for 56%, 63%, 61%, 66% and 78% of Brazil's domestic imports, with an annual compound import growth rate of 9.76%. From the perspective of China's exports, Brazil's demand for Chinese products accounts for about 6%-7% of China's total titanium dioxide exports, which is relatively stable.

After entering 2024, Brazil's dependence on Chinese titanium dioxide has increased. From January to August, China's total exports to Brazil were 98,800 tons, accounting for 7.70% of China's total exports, with a year-on-year increase of 30.67%.

The cost of local raw materials is too high, and Brazil's operating rate is at a record low.

Brazil's anti-dumping investigation on Chinese titanium dioxide was initiated by Trono Brazil to the Brazilian Foreign Trade Secretariat (SECEX). At the beginning of 2020, Tronox believed that the price of rutile titanium dioxide exported from China to Brazil was US$2,354.58/ton from October 2022 to September 2023, while the normal selling price of the product in Brazil during the same period was US$3,916.46/ton. Based on this, it was concluded that the absolute dumping margin of Chinese products was US$1,561.88/ton, and the relative dumping margin was 66.3%. The Brazilian Foreign Trade Secretariat subsequently announced that it would conduct an anti-dumping investigation on rutile titanium dioxide from China from April 30. TRONOX uses sulfuric acid method to prepare titanium dioxide in Brazil, with a production capacity of 60,000 tons/year. Brazil's titanium dioxide imports have been growing in recent years, and the titanium dioxide production capacity in this region cannot meet local consumption. In July, the Brazilian Chemical Industry Association (Abiquim) released data showing that in May 2024, the operating rate of Brazilian chemical industry units was only 58%, the lowest level observed since the historical series of the study began in 1990. As an emergency solution, the Brazilian Chemical Industry Association filed a request in March 2024 to increase the Common External Tariff (TEC), applying to include 65 chemical products in the transitional price increase list to temporarily increase their entry tax into the EU.

The low plant operating rate of Brazil's chemical industry and the high penetration rate of imported products have led to a widening trade deficit in the chemical industry, which is largely caused by the lack of competitiveness of major raw materials. Take natural gas as an example. Although the price paid by domestic industry is about US$14.6/MMBTU (million British thermal units) (excluding tax), the same natural gas is sold in the United States for about US$2.82/MMBTU, almost 50% cheaper in Europe at US$10/MMBTU.

During the same period, in addition to titanium dioxide, Brazil conducted anti-dumping investigations on chemical and material products such as polyether polyols, phthalic anhydride, automobile tires, tin-plated chrome-plated plates imported from China, and subsequently issued preliminary anti-dumping rulings.

The concentration of China's titanium dioxide industry has increased again.

From the perspective of Brazil's initial tax amount, leading companies such as LB GROUP and CNNC HUA YUAN will benefit from the imposition of lower anti-dumping duties. Referring to the United States and the European Union, which have already implemented anti-dumping, according to Bloomberg, the prices of titanium dioxide in the United States and the European Union are US$3,140/ton and US$3,360/ton, respectively. At the same time, based on the past price ratio of titanium dioxide exported from Connors, Chemours and China to Brazil, and considering the ideal gross profit margins of Connors and Chemours, industry insiders believe that the price range of Brazilian titanium dioxide in the future may be between US$3,000 and US$3,400/ton. Considering that the import unit price of titanium dioxide imported from China by Brazil is US$2,425/ton, LB will be about US$3,000/ton after the anti-dumping duty of US$580/ton is imposed. Therefore, even if tariffs are imposed, LB and CNNC Titanium Dioxide still have price advantages brought by lower anti-dumping duties, but the export difficulty of other small and medium-sized enterprises may increase significantly.

After the EU issued an anti-dumping on Chinese titanium dioxide, LB Group said that the impact of the EU's preliminary ruling on the company's performance was relatively limited. In response to the possible loss of the EU market, LB is covering the possible reduction in EU demand through growth in other regions. According to the news, LB Group's internal titanium dioxide sales target for 2024 is set at 1.3 million tons, which is a 13% increase in actual sales in 2023. Judging from the overall situation of China's titanium dioxide at present, under the situation of insufficient demand caused by weak consumption in the downstream, the growth of titanium dioxide companies' sales can only be achieved by price cuts.

As the EU, the United States, India, Saudi Arabia and other countries' export restrictions on Chinese titanium dioxide become increasingly stringent, as the world's largest titanium dioxide country with the largest production capacity, the severe tests faced by China's titanium dioxide industry are also escalating. Faced with trade barriers, China's export business will inevitably be adversely affected, which will increase production and operating costs to a certain extent. This requires companies to take more active countermeasures, including:

1. Optimize product structure, strengthen the research and development and production of high-end differentiated products, and enhance the competitiveness of products in the international market.

2. Deepen the expansion and optimization of the global layout, establish production bases overseas to avoid the impact of trade barriers such as tariffs.

3. Increase cooperation with downstream customers, improve customer stickiness, and enhance the position in the industrial chain.

4. Actively participate in the legal procedures of international anti-dumping litigation and safeguard their legitimate rights and interests.

5. Promote the government to strengthen the response to trade frictions and reduce trade barriers through diplomatic negotiations, dispute settlement and other means.

In general, the trade protectionism challenges faced by Chinese titanium dioxide companies are multi-faceted, and companies and governments need to resolve risks through all-round response strategies to consolidate the position of Chinese titanium dioxide in the global market. Only in this way can we be invincible in the fierce international competition.