Titanium supply will be tight through 2010; expansions won't help immediately
By Tom Stundza -- Purchasing, 10/18/2007 2:00:00 AM
Even though producers are dusting off expansion blueprints for titanium sponge and mill product capacity, buyers should worry about supply of titanium and its alloys through 2010, says Dawne Hickton, vice president and CEO of titanium producer RTI International Metals in Niles, Ohio.
In fact, a wide range of companies and the Pentagon's Defense Advanced Research Projects Agency, or DARPA, worry they won't be able to get enough for a commercial and military aerospace expansion that is just entering a 10- to 15-year expansion. Boeing Co., for example, recently finalized a joint venture with Russia's VSMPO-Avisma to build a titanium-forging factory by 2008 in Russia to ensure adequate supplies for its new 787 jetliner. The tough yet lightweight metal makes up about 15% of the 787 Dreamliner, contributing to the overall fuel efficiency that has made the plane a hot seller.
The largest sponge-making country is Japan, followed by Russia, Kazakhstan, China and the U.S. And there are expansions now planned here by Allegheny Technologies of Pittsburgh, Titanium metals of Denver and RTI International. Still, "buyers will have to blend long-term acquisition plans with risk management programs because supply still will be an issue for some time to some," says Hickton.
Both jetliner makers—Boeing and Airbus—already have a six-year backlog for new aircraft designs that call for three to four times as much titanium as older models. And there are new planes under development by smaller regional and corporate jets that are expected to add to demand.
Various buyer surveys by Purchasing have found concern about future availability of titanium—from sponge, the raw material, to final fabricated parts, which already take as long as 18 months for delivery these days. "Mill product tightness will continue through 2010," Hickton tells the Basic Industries Group's Aerospace Materials Cost Outlook and Forecast 2007 meeting in Philadelphia recently. "Final finished product tightness will continue as well."
Reason: One key factor is the time it takes to get new capacity on line. Hickton says 30–36 months are needed before a new sponge plant goes in operation and even longer for downstream capacity of mill products and finished fabricated parts—since production has to be certified to meet aerospace and medical industry quality requirements.
John Mothersole, an economist with Global Insight in Eddystone, Pa., told the conference that global sponge capacity will increase by 14% annually between 2006 and 2010 to 220,000 metric tons—based on expansions announced by RTI, Allegheny Technologies of Pittsburgh, Russian producer VSMPO-AVISMA, Kobe Steel of Japan and several Chinese firms. However, some of the Chinese expansions now are in doubt—yet world demand will surge by as much as 40% in the same timeframe, keeping pressure on supply and prices.
And there's also a chance that aerospace demand for high-grade titanium and titanium alloy mill products could grow by as much as 22% annually next decade—if and when the Boeing 787 and Airbus A350 and A380 programs really take off. These future-model planes will switch from traditional aluminum-lithium skins to composite materials to reduce weight and cut maintenance costs. These planes will require up to 20% of their weight to be titanium, as compared with 5% in previous generations.
Titanium Supply to be Tight
10/17/2007
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