On May 16, it was learned that Venator Materials, the world's third largest titanium dioxide giant, suspended trading at 03:58:10 Eastern time on May 15, because "the stock was delisted by NASDAQ/unified quotation service; There is information not disclosed, trading is suspended until the news is released." Trading resumed at 11:26 on May 15.

Chemical producer Venator Materials has filed for bankruptcy protection in the United States, the company said in a court filing, according to media reports. According to documents filed with the U.S. Bankruptcy Court for the Southern District of Texas, Panrio estimated its assets and liabilities at between $1 billion and $10 billion.

1. Performance declines

The company's 2022 revenue was $2.173 billion, down 2% from the previous year. The net loss was $181 million, compared with a loss of $74 million a year earlier. Adjusted EBITDA was $53 million, compared to $180 million in the prior-year period. Among them, the revenue of titanium dioxide segment was $1.597 billion, down 4% year-on-year; Performance Additives segment revenue was $576 million, up 5% year-over-year. 23% of the company's titanium dioxide products, 14% of high performance additives for the architectural coatings industry, 14% of titanium dioxide products, 13% of high performance additives for the industrial coatings industry.

The company stated that the decrease in revenue in the titanium dioxide segment was mainly due to a 19% decrease in sales volume and an unfavorable impact of 7% on foreign currency translation, mainly due to the weakening of the euro against the US dollar. This was partially offset by a 22% increase in average local currency selling prices, which we implemented to recover higher energy, raw material and transportation costs. Adjusted EBITDA for the titanium dioxide segment was $43 million, down 74% year-over-year, primarily due to higher raw material, energy, transportation and maintenance costs and lower sales volumes.

The Performance Additives segment revenue increase was the result of a 26% increase in average selling prices, which we implemented to recover higher energy, raw materials and transportation costs, partially offset by a 13% decrease in sales volume, primarily due to a 5% adverse impact on foreign currency translation due to the weakening of the euro against the US dollar, and a 1% decrease in blends and other. In addition, the 2% decrease was due to revenue loss from our water treatment business, which we sold in the second quarter of 2021 and which generated revenue of approximately $10 million in 2021. Adjusted EBITDA for the Performance Additives segment was $53 million, down 18% year-over-year, primarily related to higher raw material, transportation and energy costs and lower sales volumes.

In recent years, our titanium dioxide and High Performance Additives segments have evolved through the closure of certain plants, reduction of operating costs, introduction of new products and selective divestment of certain businesses. We are well positioned in every industry in which we operate. However, recent circumstances and events have raised significant doubts about our ability to continue as a going concern. In response to these circumstances and events, we are taking a number of actions designed to mitigate these circumstances and events, but we have concluded that our plans do not alleviate material doubts about our ability to continue as a going concern.

2. The environment is getting worse

In recent years, Panenergy has closed a number of titanium dioxide plants in Europe, including titanium processing plants in Duisburg, Germany, Calais, France, and Pori, Finland. The main reason for the closure was that the plant could not produce under the stringent environmental protection regulations of the European Union. Solid waste from titanium dioxide production mainly pollutes local soil and water sources. Although China's environmental protection policies are increasingly strict, there is still a certain gap with developed countries in Europe and the United States. It's hard to say whether it's an advantage or a disadvantage.

Panenergy has also been troubled by the problem of disposing of titanium gypsum, a by-product of titanium dioxide production. Its titanium plant in Scarino, Italy produces titanium plaster by product. The titanium plaster is used in a local quarry backfill project. Due to the tightening of environmental protection policies and regulations, this process has been suspended and can only be resumed after re-approval.

As well as the European energy crisis that we have repeatedly mentioned, it has also really affected the production of titanium dioxide enterprises, including Panenergy. Panenergy's titanium processing plant in Pori, Finland, was called in arrears by the Finnish gas company Gasum LNG. Due to high natural gas prices, PanRio was unable to continue paying Gasum LNG under its long-term supply agreement. Panenergy has clearly felt the impact of the European energy crisis on its titanium dioxide production costs. Throughout 2022, Panenergy is reducing the production of titanium plants in Europe, less production equals less losses, but some orders are long-term supply agreements, which must be delivered.

3. domestic coating enterprises should be alert to the risks caused by price increases

Titanium dioxide prices have risen, in addition to the downstream market warming, cost pressure also brought support. However, based on the supply and demand of titanium dioxide, the overall oversupply is in excess of demand, and the price trend of titanium dioxide this year may rise first and then fall back. This product price adjustment is expected to have a positive impact on the company's performance.

Last year, most titanium dioxide production enterprises are basically in a state of loss, after the price increase, the enterprise has just returned to the break-even line, in fact, the overall profit space is limited. Global economic pressure, the recovery of market demand is still weak, titanium dioxide domestic sales are expected to be poor, enterprise export pressure is greater, in the market new production capacity continues to release, the market oversupply is more obvious, is expected in the second quarter of this year titanium dioxide market or weak downward, with the third quarter market demand or have a rebound, the third quarter prices or will be able to rebound.

Upstream prices rise, downstream pressure. No matter what the crux, paint companies are the biggest "victim" of titanium dioxide price rises. The data show that among the annual sales of titanium dioxide in China, more than 60% are used in the paint industry, accounting for the highest proportion.

Therefore, the price of titanium dioxide has risen, which means that coating enterprises are facing a new round of pressure. Especially in the three years since the epidemic, the raw materials of coatings have always been in the rising channel, which has eroded the profits of coating enterprises at the same time, but also made the stocking mechanism based on the conventional fluctuation effect of prices lose its role, so the pressure of this round is more severe than in previous years. In the first quarter of this year, the price of titanium dioxide was once a phenomenon of three consecutive rises, and many coating companies were quite passive.

Titanium dioxide is mainly used in the coating industry, China's titanium dioxide is mainly based on sulfuric acid method, and the proportion of chloride titanium dioxide production is low. China as the world's largest exporter of titanium dioxide, but the export of titanium dioxide is mainly sold to the Middle East, India and other developing countries and regions, these regions of titanium dioxide quality requirements are not high, sold to developed countries and regions of titanium dioxide is also mainly used in the industry and field of titanium dioxide quality requirements are low. At present, the main competitive advantage of China's titanium dioxide export is that the price is relatively low compared with the international chlorination process titanium dioxide price, and in the current increasingly focused on quality improvement, low-cost competition will gradually not have the advantage.

In addition, in addition to some domestic titanium dioxide leading enterprises, most of the titanium dioxide small enterprises lack their own brands, lack of high-quality products based on the market, and the product homogeneity between enterprises is serious and lack of competitiveness. In addition, in terms of exports, China's titanium dioxide exports mostly use foreign traders or agents for distribution, do not directly contact customers, can not effectively understand customer needs, provide after-sales service.

2023 really into the post-epidemic era, a variety of policies have come one after another, and continue to inject a boost to the market, the economic trend this year is definitely better than last year, the demand for chemical and building materials gradually reversed after the festival, and raw materials are expected to rise.

In the face of the current situation, coating enterprises should do a good job of planning, and constantly improve the company's own hard power at the same time, control costs, constantly optimize the supply chain, and ensure that production capacity to reduce costs and increase efficiency, in order to freely respond to market changes.

Article source: painting, industry space, painting business situation