Global Market Outlook on Iron Oxide Pigments

Iron Oxide – Production Process

  • Laux Process is one of the most feedstock efficient and eco-friendly process for the production of iron oxide prevalent in regions where stringent environment regulations are enforced.
  • Laux process is predominantly followed by LANXESS at its production facility in Europe; while adopting Penniman process in its facility in China. Only very few Chinese players are known to use LAUX production route and often refer to it as the “aniline route of production” where aniline refers to nitrobenzene; the major raw material for this process.
  • Chinese producers primarily have been using the Penniman Red Process for the production of synthetic iron oxide red. However, due to the environmental restrictions, have reduced the use of this process
  • Penniman Process is widely followed in China while precipitation process is followed widely in India

The Penniman process

  • By efficient process control, LANXESS was able to reduce NOx and N2O emissions significantly and also increasing efficiency. This is done through passing these gases through a multi-stage catalyst chamber to give out oxygen and , nitrogen gases along with water
  • In addition, Lanxess has patented this process and has termed it as the Ningbo process at its plant in Ningbo, China

Iron Oxide – Global Pigment Market Analysis

Around 325,000 MT of iron oxide pigments is expected to be added to current capacities by 2019, thereby making the market well supplied to cater to the growing iron oxide demand

Iron Oxide Global market Analysis (2016-2023F)

  • The combined global capacity of Natural and synthetic Iron oxide pigments is sufficient to cater to the demand growing at a CAGR of around 4% until 2023
  • The demand from the construction industry coupled with increasing urbanization are likely to be major drivers for the global iron oxide market.
  • Regulatory Government reforms are likely to impact global iron oxide pigment market significantly, especially in China, where, small and medium-scale companies have either exited the market or have been acquired by larger companies.
  • This was majorly due high costs involved in ensuring regulatory compliance and the same trend is expected to continue in the near futur

Iron Oxide – Industry Analysis

Buyer Power

  • The combined capacity of natural and synthetic iron oxide pigments is sufficient to cater to the demand. This has led to the buyers having a slightly more advantageous market control.
  • With expansions suntil in place, the buyer power is expected to continue to remain strong despite an expected competition amongst downstream players to secure supply of IOP on the back of anticipated growth in demand.

Barriers to New Entrants

  • With stringent regulatory measures and energy efficiency requisites, heavy investment is needed for sustenance of current suppliers of Iron oxide.
  • Financial inability to invest massively on upgradation of their iron oxide pigments plants has lead many suppliers to pull out of the market.
  • This process of market consolidation has made barrier to new entrants into this market very high.
  • Extensive investment in new plant, corresponding equipment, technological know-how are critical factors which is expected to make entry into the market very difficult.

Supplier Power

  • Most raw materials going into the manufacture of iron oxide pigments are actually waste by-products of other basic industries; thus neither supply nor price of key raw materials are often observed to fluctuate on a regular basis.
  • Supplier power is observed to be fairly low; with the upstream market having several players ready to sell scrap-iron or Iron sulphate.

Threat of Substitutes

  • Though there are no direct substitute's to synthetic iron oxide pigments; there are many low- medium level suppliers in the market who blend higher quality grades of IOP with low quality grades to deliver a reasonable quality but lower cost pigment to the buyers.
  • Hence the end-use buyer of IOP are expected to be wary in order to ensure that the IOP is not a blend of low quality.
  • Certain colors of IOP for e.g. black iron oxide pigments may be replaced with carbon black but this substitution is not observed as a threat to iron oxide industry; rather a preference of the buyer.

Intensity Of Rivalry

  • Though there are many manufacturers of iron oxide pigments, ongoing regulatory enforcements has raised the need for substantial investment; meaning small-medium level players unable to make this investment may require to shut down production.
  • Several small and medium scale players have either shutdown or have been acquired by larger companies, Thus intensity of rivalry has intensified further with the recent consolidation of the market.