Materials

Report by Alembic Global Advisors

Sulfuric acid is becoming a binding constraint for TiO₂, with potential Chinese export curbs reinforcing an already tightening market. Acid prices have doubled y/y to ~$280/t, with recent moves of ~$140/t in 2026 alone, driving a ~$400/t increase in cash costs for sulfate-route producers - pushing marginal Chinese capacity into loss-making territory. With ~80-85% of China’s TiO₂ output reliant on sulfate processing, the system is highly exposed, meaning acid shortages translate directly into lost production rather than margin compression from the market’s key swing supplier. As acid is increasingly diverted towards fertilisers and battery materials, TiO₂ is pushed into a residual demand bucket - implying lower operating rates, periodic shutdowns and reduced export availability. With demand relatively inelastic in the near term, the setup is a classic supply shock, supporting sustained pricing upside and favouring chloride producers such as Chemours and Tronox.

Materials

Report by Alembic Global Advisors

The TiO₂ industry is emerging from a prolonged destocking cycle into the early stages of recovery, with demand normalising and lean downstream inventories - particularly in coatings - setting up a restocking-driven uplift through 2026. While share prices have already rebounded meaningfully YTD, Hassan Ahmed believes the magnitude of prior declines and improving fundamentals leave room for further upside as volumes recover and pricing firms. Pricing traction is building alongside tightening supply, with over 700kt of capacity closures since 2023 and mounting cost pressure in China supporting discipline. Additional upside could come from anti-dumping measures disrupting Chinese exports and shifting share to Western producers. Hassan highlights Tronox as his preferred name and raises his target price on Chemours.

Materials

Report by Alembic Global Advisors

Fears around demand destruction on the back of higher prices unfounded - Hassan Ahmed’s analysis suggests that a 50% boost in ore costs, all other costs remaining flat, could be offset by a 14% hike in TiO2 prices and a mere 4% hike in coatings prices. Current TiO2 prices are only slightly above their 17-year averages and 2008/2009 distress period-levels, while fundamentals remain healthy. Top pick is Tronox (benefits from higher TiO2 prices, but can also, via the firm's integration into feedstock ore, hold onto margin). Chemours and Venator also offer considerable upside.

Materials

Report by Alembic Global Advisors

Global economic stimulus, a weakening USD, rising vaccination rates and lean inventories are perfectly aligned for continued commodity chemical strength, with higher oil prices providing an additional tailwind. Multiple compression at Olin, Chemours, Huntsman and Tronox seems excessive, particularly when compared to earnings growth prospects. FCF yields at Venator, Braskem and Trinseo are very attractive. For 2022, Hassan Ahmed prefers companies that may benefit from activism/M&A-like catalysts (Braskem, Huntsman and Tronox), secular changes within their markets (Olin), or have underappreciated proforma earnings power (Trinseo and Westlake).

Materials

Report by Alembic Global Advisors

Current consensus expectations for the sector in Q3 still seem tepid, keeping in mind product margin gains and pricing strength. It is highly possible that companies under coverage will experience positive earnings revisions throughout 2021. Covestro AG, TP $73 (~25% upside); Chemours Company, TP $46 (~50% upside); Celanese Corp., TP $200 (~25% upside); Dow Inc, TP $85 (~45% upside)