DuPont Titanium Technologies, a subsidiary of EI DuPont de Nemours & Co. (DD), world’s second leading chemical company stated that demand for its titanium dioxide, a pigment, used in products such as tattoo inks, food dyes and sunscreen improved in the first half of 2009.
Wilmington, Delaware-based DuPont noted that demand for titanium dioxide usually moves in tandem with the economy. Titanium demand drops when recession intensifies and leads with economic recovery. DuPont added that the titanium dioxide industry operates on small margins, which is a significant entry barrier for new entrants. DuPont being a large-scale producer enjoys cost advantage.

During the first half of 2009, DuPont had reduced its working capital requirement by 28% and trimmed down fixed costs by 15% compared with the same period of 2008. The company was also able to cut its sales, marketing and administrative expenses by 17% year over year.

In addition, product innovation has helped 35% of the company’s revenue in the last five years. DuPont expects emerging markets like China and Russia to fuel 70% to 80% of the industry growth, going forward.

DuPont’s update came soon after the company’s rival Huntsman Corp. (HUN) acquired the titanium dioxide facilities from bankrupt rival Tronox Inc. for $415 million. The buyout makes Huntsman the world’s second-largest producer of titanium dioxide, behind DuPont.

DuPont announced recently that the proposed titanium dioxide facility in China, which was scheduled to open in 2010, has been delayed. The company said that the plant is still awaiting approval of the Chinese government. In 2005, DuPont announced plans to build a new titanium dioxide plant at Dongying in China. Construction of the plant, representing a total investment of about $1 billion, will begin once the Chinese government issues a business license. The plant with an annual capacity of 200,000 tons is expected to begin production three to four years from now.

Read the full analyst report on “DD”
Read the full analyst report on “HUN”
Zacks Investment Research