Optimism’s High for Ti
By Dan Markham, Senior Editor
Robust international demand for titanium has suppliers excited about the material’s prospects in 2011 and beyond.
Titanium producers and distributors expect a good year in 2011 as the economy improves and aerospace demand takes off.
The aerospace industry has long been titanium’s bread and butter market, and that is only expected to increase in the coming years. Historically, titanium has comprised 5 percent of the typical commercial aircraft. But with Boeing’s highly publicized and oft-delayed 787 Dreamliner jumbo jet creeping toward full production, the exotic alloy can be expected to grab a bigger share of the aerospace market. In addition to the 50 percent composite materials being used in the new airframe, Boeing’s 787 contains 15 percent titanium.
“Overall, the market is vastly improved. Boeing and Airbus are at all-time build rates, and that will continue through 2015,” says Jeff Wise, vice president of sales and marketing for Titanium Industries, Rockaway, N.J. “The 787 slowdown caused an inventory glut, but with the increased build rates, the market has substantially improved from 2009.”
Still, for titanium producers, the aerospace market held up better than most, says Michael Metz, president of VSMPO-Tirus, U.S., Highlands Ranch, Colo. “Commercial aerospace did a good job of keeping their build rates relatively stable and moving customers around in the delivery cycle. But production really declined on the smaller business jets.”
Outside the aerospace sector, most titanium end-markets suffered substantially through the downturn and are beginning the process of recovery. “On the industrial side, there is a lot of increased activity, with major projects pretty much across the board,” says Wise. “A lot of them are related to power generation, desalination and chemical plant expansion or development.”
Chemical processing, mining and energy are three of the hotter markets for titanium, says Jeff White, a vice president at Wixom, Mich.-based Tico Titanium. “In general, all of our industries were up, but those were the big three drivers. And we see continued growth, not rapid, but a steady improvement through the first half of the year. And it actually may get a little better in the second half of the year.”
One sector that defied the recession was the medical market, which held fairly firm through the downturn. Wise says the medical market tracks closely with the larger aerospace market; when the aerospace industry is perceived to be in an upward swing, the medical industry follows suit. Unlike most other industries, medical manufacturers are not overly concerned with the cost of holding high-priced inventory.
“The titanium parts that go into a human body, orthopedic implants for instance, are such a small percentage of the value of that implant to the medical OEMs that the cost is almost inconsequential,” Wise says. “The worst thing that can happen to them is for the aerospace industry to gobble up the titanium supply. Suddenly lead times that used to be 15 weeks are now 60. If they don’t have the material, that means a new product launch could die on the vine.”
The size and importance of the aerospace industry affects all players in the titanium supply chain, even those who don’t sell into that market. When aerospace picks up, it’s tough to get metal, says Bill Brownlee, materials manager at Titanium Fabrication Corp., Fairfield, N.J.
Lead times have stretched out for 15 to 24 weeks for some products, he says, twice as long as the 8 to 10 weeks last year.
“It doesn’t matter how hard you try, it’s very difficult to match supply and demand. Demand tends to come back a little faster than supply. It’s not a capacity issue,” says Metz, who serves as president of the International Titanium Association in addition to his work at VSMPO’s domestic operation.
Lengthening lead times provide evidence of a market on the rise, says Wise. “Very short lead times happen at the bottom of every market. On the way up and the way down, you’ll see the level we’re at now.”
Much of the demand for titanium is coming from international markets. While there aren’t many large-scale projects in the domestic pipeline, the same cannot be said about the rest of the world. Nowhere was that more evident than the December announcement from Uniti—a joint venture between Allegheny Technologies Inc. and Verkhnaya Salda Metallurical Production Association—that it would supply up to 6.0 million pounds of commercial pure titanium for the Ras Az Zawr desalination project in Saudi Arabia. Total titanium usage in desalination projects around the world could ultimately top 10 million pounds, according to industry estimates.
Recognizing the opportunities abroad, several U.S. firms have announced expansions overseas. In January, for example, Titanium Industries opened a facility in Shanghai to capitalize on the aerospace, medical and industrial growth there.
“Once a month, somebody is expanding in Ti. Somebody is starting something up in England or Singapore or Taiwan, all to support that international activity,” says Brownlee. Much of the U.S. supply chain is seeing some benefit from these international projects.
Another factor working in titanium’s favor is the price of the material. While prices have spiked for certain commodities, including nickel, copper and their alloys, the cost of titanium has held relatively stable. “Most competing materials today are relatively expensive,” says Metz. “Because its cycle is slightly different, titanium is coming up on the less expensive side.”
White believes the current pricing situation, plus titanium’s weight advantage, gives the material an opportunity to steal market share from other materials. “Technically, the product is probably superior in certain applications, but it has always been at a price disadvantage. If you can show for a specific project that titanium is competitive, you can probably gain some technical and operational advantage and lower the long-term cost of the project.”
Applications where titanium already has a presence and no new engineering is required offer the best opportunities for market share growth, he adds.
While titanium “hasn’t found its aluminum can yet,” Wise says, new uses may open up as producers find ways to make the material more cheaply. “There are several research projects going on around the world aimed at reducing the cost of producing titanium sponge.”
All of these factors lead to high hopes for 2011 and the years to follow. “Existing applications are growing, some new applications are coming on and projects are being started. Most of them are international, but there are some domestic ones coming around,” White says. “It’s a pretty optimistic outlook.” n