China’s TiO2 giant Lomon Billions has announced to purchase 100% stocks of
titanium concentrate processor and trader Panzhihua Ruierxin. This move
shall ensure sufficient supply for raw materials like ilmenite and further
improve production output and costs. Ilmenite is facing tight supply mainly
because of production suspensions due to stricter environmental policies.
Source: Pixabay
The
announcement by Lomon Billions to purchase 100% stocks of Chinese
TiO2 manufacturer Panzhihua took place in March 2017. The acquisition will be
paid in cash with an amount of about USD27.62 million. The Chinese company will
become a wholly-owned subsidiary of Lomon Billions after the process
is done.
The
main purpose behind the acquisition lays in the insurance for sufficient raw
materials like ilmenite, which is facing a tight supply currently. The concept
is written down in the Titanium Ore Purchase Agreement of both companies, which
regulates the purchase of 480,000 tonnes of ilmenite by Lomon Billions
in the next three years. In addition to this agreement, Panzhihua Ruierxin will
also guarantee the best monthly price for Lomon Billions, orientated
on the price for the other customers.
China
has undergone a reorganisation of its TiO2 and titanium ore industry in recent
years. As a result, many mines and concentration plants have been shut down,
which has shortened the supply for ilmenite to some extent. The short supply,
together with a resulted price rise, is one of the main concerns of TiO2
manufacturers. To ensure the future ilmenite supply is one of the main purposes
of the acquisition.
Furthermore,
the purchase also has another positive side-effect for Lomon Billions,
according to market intelligence firm CCM. The company hopes to increase the
beneficiation of its products with the purchase. For example, the subsidiary
Sichuan Lomon Titanium Industry is currently selling raw materials, unable to
process them into more valuable products because of less capacity.
The
purchase will without any doubt has positive effects on Lomon Billion’s
production rate and costs. According to CCM’s research, the current ilmenite
self-sufficiency is 60%. After the acquisition of Panzhihua Ruierxin, this
rate is likely to increase to over 70%. Moreover, in the agreement between the
two companies, the monthly most favourable price is guaranteed for Lomon Billions.
Hence, the production costs are likely to decrease by some degree.
Finally,
also the bargaining power of both companies regarding sulfuric acid, Sulphur,
and coal will get improved in the new situation. This will stabilise the supply
of raw materials once more, which is crucial in times of stricter environmental
policies by China’s government. Especially affected by production reductions
and shutdowns of manufacturers is the Sichuan province in China, which also
happens to be the area of Lomon Billion’s main TiO2 plants.
Panzhihua Ruierxin
The
Chinese company is dealing with processing and trade of minerals and chemicals.
Especially the processing and selling of titanium concentrate belongs to the
core proficiencies of the company. Looking at the financial figures, the
revenue in 2016 was stated by USD24.13 million and the net profit in that year
reached USD4.07 million.
About CCM
CCM
is the leading market intelligence provider for China’s agriculture, chemicals,
food & ingredients and life science markets.
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