The political relationship between China and Vietnam tends to be tense, which may affect the export of Vietnam's mineral resources. Among them, non-ferrous metal resources such as titanium may experience a tightening on the supply side. Titanium stocks rose sharply on May 19th. We paid the most timely attention to the incident and communicated with industry professionals. The main conclusions are as follows:

The short-term supply of high-grade titanium ore is shrinking. USGS data shows that the global supply of ilmenite in 2013 was 6.79 million tons, of which Vietnam was 500,000 tons, accounting for 7%. In 2013, 40% of China's titanium ore was imported, and Vietnam accounted for 26% of the imported titanium ore. Due to the high grade of titanium ore in Vietnam, it can be used in the production of sponge titanium and high-grade titanium dioxide. The low grade of domestic titanium ore cannot form an effective substitute for imported ore. Therefore, once Vietnam’s titanium ore cannot be exported normally, it may be affected in the short term. The domestic supply of high-grade titanium ore has brought a price rebound.

The strength of the price rebound of titanium ore depends on the supply of alternative resources. Substitution mainly comes from India. Among the source countries of China's titanium ore imports, Australia's ore grade is lower, and the quality of Indian ore can effectively replace Vietnamese ore in general. In addition, it should be noted that in the first quarter of 2013, China imported 100,000 tons of titanium ore from India, accounting for 19%, while the import in the first quarter of 2014 was only 32,000 tons, a decrease of 68%. We judge that imports fell without export restrictions. The core reason is insufficient demand. Therefore, once Vietnam's titanium ore exports are restricted, India's titanium ore can be effectively supplemented. But it cannot be ruled out that short-term supply shortages may be caused by traders' reluctance to sell.

Demand is a more important influencing factor in the medium and long term. In 2010, 42% of China’s imports of titanium ore came from Vietnam, while the ratio fell to 10% in the first quarter of 2014. This is due to weak downstream demand and due to Vietnam’s tax increase and other measures to impose restrictions on the export of ilmenite ore. limit. However, it can be seen from the price trend of titanium ore that although the supply of titanium ore in Vietnam has declined since 2012, the price of ore in Vietnam has continued to fall due to the impact of sluggish demand. From this we predict that in the medium and long term, the impact of demand on the price of titanium is more important.

The beneficiary targets are Baoti Co., Ltd., Western Materials, Jinpu Titanium Industry and Panzhihua Iron and Steel Vanadium Titanium.