The geopolitics of white powder
Why has the Commission turned its nose up at an FSR call-in opportunity?
A few Brussels lobbyists I spoke to have recently developed a surprising fascination with white powder. Not the sort that generates late-night parliamentary inquiries or police press conferences. Something much more dangerous.
Industrial pigment.
Titanium dioxide - the substance that makes paint brilliantly white and toothpaste adverts glow with unnatural dental perfection - has quietly become a small part of the debate about European economic security.
The last time this substance was on the minds of bubble dwellers was when the EU banned it as a food additive, causing much wringing of hands in the AmCham Environment Committee, where I sat at the time. It was later classified as a carcinogen when inhaled under chemicals law, a designation which the Courts recently overturned.
This time, the European Union finds itself confronting a strategic question: who controls Europe’s supply of industrial-grade white powder?
When Brussels (re)discovered white powder
Titanium dioxide, often called “titanium white”, is one of those chemicals that nobody notices but everyone depends on. Although now banned in food it appears in paint, plastics, cosmetics, medicines, paper coatings and (oddly enough) sunscreen. If something looks very very white, titanium dioxide is probably involved.
And like many seemingly boring industrial inputs, its production is dominated by a small number of large companies.
One of those companies is LB Group, the world’s largest producer of titanium dioxide. The firm now proposes to acquire Venator Materials’ chloride-process titanium dioxide assets, including a major facility in the United Kingdom - which European Coatings magazine called the ‘jewel in the crown’ of Venator’s operations - and associated intellectual property.
The transfer IP to China is of particular concern, as insiders say it would open up a more discerning client base for LB - the kind looking for high-grade white stuff that looks so perfect you could ski on it. LB is a Chinese company based in Henan province and listed on the Shenzhen stock exchange. If the Chinese could produce the good stuff, its factories would almost certainly churn it out for less than their European counterparts.
Chinese industrial planning strategies have long directed investment into titanium dioxide production, encouraging capacity expansion and technological upgrading. In particular, Chinese policy has supported the development of chloride-process production, the advanced technology used to produce the highest-grade titanium dioxide pigments. They just don’t seem to have perfected it yet.
There is also evidence of direct state support. LB Group’s own public disclosures record substantial government grants: roughly $37 million between 2017 and 2019 and more than $50 million between 2021 and 2023. Which is precisely the sort of information that tends to make competition lawyers sit up, adjust their glasses and begin flipping through the Foreign Subsidies Regulation while quietly muttering the phrase “foreign financial contributions”.
The anti-dumping-circumvention-waltz
There’s another reason LB’s European competitors are getting nervous about the UK acquisition.
If white powder is sent directly from China to the EU, a €0.74/kg anti-dumping duty is charged. But if the same powder is sent from China to a third country - say the UK or Albania for example - and processed again before it ends up in the internal market, then the anti-dumping duty magically goes away. Titanium Dioxide duties are set at zero under the EU’s common external tariff.
Venator also has production facilities in Germany and Italy which would have given LB similar production capacity and access to IP. But it wasn’t interested in those, and cynics are saying that’s because it intends to send its powder to the UK, undertake as little processing there as possible, and then get it into the internal market as a British white powder, neatly circumventing the anti-dumping duties.
The same logic would not work with Venator’s assets in Germany or Italy. Any Chinese titanium dioxide shipped directly to those plants would cross the EU border first. At that moment the anti-dumping duty would already apply. Processing it afterward would not make the duty disappear, no matter how enthusiastically one stepped on or cut the industrial white powder.
A concentrated market gets…whiter
The titanium dioxide market is already fairly concentrated, so when the largest producer proposes to acquire another major supplier’s assets, competition authorities generally begin to pay attention. The UK’s Competition and Markets Authority already has, kicking off a phase one investigation.
So far, however, the European Commission has largely turned its nose up at the case. This is slightly surprising: partly because the transaction appears tailor-made for the Foreign Subsidies Regulation. The value of the deal doesn’t quite require it to be notified, but that’s what call-in powers are for. And yes, the assets are on Brexit Island, but that doesn’t stop it affecting the internal market, as the Commission’s decision to take the acquisition of a Brazilian mine to Phase 2 shows.
Indeed, the Polish regulator is also currently holding up the deal, which was notified there back in November. Poland is home to Grupa Azoty, a rival maker of the white stuff.
So what’s holding the Madou Tower back?
One theory going around is that it’s all bound up in the psychodrama of appointing a new Director General.
The current stand-in, Linsey McCallum, isn’t in the frame for the job and is therefore not all that keen in making a bigger splash than she needs to, according to this theory. The identity of her successor is the victim of the ever-deteriorating relationship between Competition Commissioner Teresa Ribera and Commission President Ursula von der Leyen. So difficult decisions on whether to use a new toy for the first time are being put on hold.
Maybe, although that argument is somewhat undercut by the ferocity with which the FSR team raided the EU headquarters of Chinese ultra-discounter Temu towards the end of last year. Maybe they don’t see this sitution as that big of a deal and are happy to let any anti-dumping investigations play out first.
The problem with that is, any resolution might come too late to save our white powder from being eclipsed by cheap Chinese imports. Anti-circumvention rules are cumbersome to enforce, with investigations taking at least a year. The European sector argues that it simply doesn’t have the luxury of that much time.
The European Union has spent the past several years emphasising the importance of de-risking supply chains and reducing strategic dependencies. Titanium sits inside a number of industrial value chains relevant to aerospace, defence and advanced manufacturing. Strategic industries are not always glamorous; sometimes they involve semiconductors, rockets or artificial intelligence. And sometimes they involve the chemical compound that makes paint white.
Or perhaps white powder just isn’t cool enough for forty-something Commission officials to be involved with any more.