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Crude/TiO2-linked input costs
What it is
Titanium dioxide is the white pigment that provides opacity in paint, and along with solvents, resins and monomers it makes paint cost largely crude and mineral linked. Raw materials are typically 55-60% of paint revenue
TiO2 is imported and subject to trade actions
Impact on industries
- Margins swing with crude and TiO2 independent of demand, so a strong sales year can still produce weak profit
- Falling input prices flow to margin quickly because retail paint prices are sticky downward, which is why paint earnings improve in crude downcycles
- Anti-dumping duties on TiO2 raise input costs for paint makers while protecting a small domestic pigment industry - protection upstream, cost downstream
- Formulation changes and pigment substitution offer limited relief, since opacity requirements set a floor on TiO2 content