Titanium: RTI delays expansion as 2009 demand outlook has softened
By Tom Stundza -- Purchasing, 12/11/2008 2:00:00 AM
RTI International Metals is delaying a major expansion project "in light of the current economic uncertainties and the overall short-term softening in demand for titanium." The suburban Pittsburgh-based firm initially had planned to open two new facilities, including a forging and rolling plant in Virginia and a sponge plant in Mississippi in 2010.
The company now expects its expansion projects to be operational in 2011 "to mirror current market demand." And, according to analyst Ronald Epstein at Merrill Lynch & Co. in New York, "the global economic meltdown has overwhelmed the commercial aviation market" upon which titanium shipments rely.
At a recent aerospace metals conference, Dawne Hickton, vice chairman and CEO, pointed out that the machinist union strike against Boeing's manufacturing operations had curtailed some shipments and, just as the strike was settled, "substantial deterioration in the global markets generally became apparent."
She now says in a statement that RTI expects mill product shipments for 2008 to range between 14 million and 15 million lbs, slightly lower than 2007 and not the 2.5% to 3% growth rate previously expected. (That matches with new Wall Street estimates that industrywide mill product purchasing will rise just 1% this year to 73.5 billion lbs.)
Hickton says that RTI anticipates that aviation/aerospace and non-aerospace demand improvement will occur in late 2009 and throughout 2010.
RTI's mill product shipments for the third quarter were 3.4 million lbs, at an average realized price of $23.04/lb. The average realized price was 14% lower vs. the same quarter in the prior year, primarily due to the change in the sales mix and increased sales related to long-term supply agreements. For the first nine months of 2008, titanium mill product shipments were 11.2 million lbs at an average realized price of $23.79/lb compared to mill product shipments of 11.4 million lb in 2007 at an average realized price of $26.32/lb.
Looking at the overall market, Global Insight analyst John Mothersole says shipments will fall 4% in 2009 so "prices are a clear sign that markets have changed." He notes that spot prices are mirroring the RTI experience as "they began to fall in the first quarter of 2007, seemed to stabilize this summer, but are now drifting lower again."
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