GUANGZHOU, China – The merger of Henan Billions Chemicals Co. Ltd. (Henan Billions) and Sichuan Lomon Titanium Co. Ltd. (Lomon), two of China's largest TiO2 manufacturers, was announced on the Shenzhen Stock Exchange on May 5. According to CCM, a market intelligence firm that focuses on titanium dioxide (TiO2) in China, the merger will make Henan Billions by far the largest TiO2 manufacturer in China with an estimated production capacity of 520,000t/a – more than double its nearest rival – and the fourth-largest producer worldwide after DuPont, Cristal Global and Kronos Worldwide.

CCM’s TiO2 market analyst, Dean Wu, predicts that the deal will precipitate a flood of M&A activity in China’s TiO2 industry. “Joining with Lomon will help Henan Billions improve its product quality and R&D, and also lower its production costs, so its domestic rivals will be under pressure to counter this merger with their own acquisitions. It’s the only way for them to remain competitive,” commented Wu.

“CCM has been predicting an increase in M&A activity among China’s TiO2 producers for several months due to the structural overcapacity, low profit margins and low concentration in the industry. We believe that this merger could open the floodgates for more deals over the coming months.”

TiO2 prices in China are also likely to be boosted in the short term as manufacturers use the merger as an excuse to raise prices. Rutile TiO2 prices have been rising slowly in line with seasonal demand since January and reached $2,143/t in April. CCM predicts that prices will rise further to $2,270/t by October before dropping off as demand slows during the winter.

Wu also predicts that we will begin to see more Chinese-manufactured TiO2 on the international market in the coming years as a result of the Henan Billions-Lomon deal. “The foundation of Henan Billions’ success during the last year and a half has been its focus on increasing exports. Its rutile TiO2 exports rose over 50% in 2014, which allowed it to record a 20% increase in revenue and a 170% leap in net profits while most of its domestic competitors struggled.

“Now, Henan Billions will benefit from increased brand recognition and will gain access to Lomon’s marketing channels, and its product quality should also improve thanks to Lomon’s superior sulfate process technology and R&D resources, so it is well placed to continue driving up exports further,” Wu concluded.