What happened

Shares of specialty chemicals firm Chemours (CC -3.75%) gained 26.7% in January, according to data provided by S&P Global Market Intelligence, on investor sentiment that after a terrible 2018, the company is ready for a rebound.

So what

Chemours, the performance chemicals business that was spun off of the former DuPont (now DowDuPont) in 2015, lost nearly half its value in 2018 as investors reacted to soft global demand for titanium dioxide and the continued push by the Federal Trade Commission (FTC) to block a merger between two of North America's largest producers of that chemical. The industry had hoped the merger would help stabilize prices.

Titanium dioxide, a pigment used in coatings, is the largest business in the Chemours portfolio, which also includes refrigerants, polymer resins, and mining products like sulfuric acid and reactive metals.

Greyscale stock graphic

Image source: Getty Images.

Chemours also has company-specific worries -- lawsuits in North Carolina and elsewhere related to allegations that it allowed chemicals to leak into local drinking water supplies. The company, along with former parent DuPont, had to split a $671 million judgment in 2017 for similar claims in Ohio, and any further judgments against it could tax its balance sheet.

January's rally coincided with a couple of analyst upgrades on the stock, with Wall Street gaining hope that the titanium dioxide market has hit a bottom. Chemours' new Opteon refrigerant, a higher-margin replacement for Freon, is also steadily gaining adoption.

Check out the latest Chemours earnings call transcript.

Now what

It's possible that Chemours was oversold by the end of 2018, but the January rally has taken back much of that discount. And there are still significant headwinds that should give investors concerns. A recovery in the titanium dioxide market seems distant, and the FTC has made it clear the industry will have a hard time consolidating to affect a rebound.

Add in the macroeconomic concerns about a slowing global economy and the litigation risk in North Carolina, and a lot could still go wrong for Chemours.