Tronox shares fall after rival warns on sales

(Reuters) - Shares of pigment maker Tronox Inc (TROX.N) fell 17 percent after larger Australian rival Iluka Resources Ltd (ILU.AX) cut its full-year sales volume outlook for titanium dioxide, a key pigment used to make paints.

Iluka, which makes titanium dioxide and zircon, on Monday warned its sales volumes had slumped and were unlikely to pick up over the rest of this year.

Titanium dioxide producers such as Huntsman Corp (HUN.N) and DuPont Co (DD.N) have benefited from strong demand for the pigment, which enabled them to pass on higher costs to customers.

However, weakening demand for the pigment, which is used to make a range of white-tinted products such as paper and plastics, has curbed the ability of companies to raise prices in recent months.

Iluka said inventory began to build up in the second quarter on the back of lower European demand and weaker global export flows of the pigment.

"In North America, the 20 cents per pound price increase for third quarter appears to have been entirely defeated, the first time in three years," Jefferies & Co analysts wrote in a note to clients.

BWS Financial analyst Hamed Khorsand said titanium dioxide prices were likely to remain flat for the next quarter or so.

Tronox said last month it would slow production of the pigment due to higher ore costs and a fall in prices in Europe and the Asia-Pacific region.

"Given weak demand trends, we would expect producers in Europe to extend annual maintenance shutdowns during July and August," Jefferies analysts said.

Tronox shares fell as much as 17 percent to $105.68, making them one of the top percentage losers on the New York Stock Exchange.

(Reporting by Swetha Gopinath and Divya Lad in Bangalore; Editing by Sriraj Kalluvila And Saumyadeb Chakrabarty)