Will 2010 be the year that titanium stages a comeback? The
jury is still out, but there's little argument that commercial
aerospace will play the key role.
If a sharp rebound isn't in the works for 2010, the industry
is at least looking for the stage to be set for what it hopes
might be a solid upturn the following year after a downturn
that hasn't been as disruptive as past slumps.
While industrial and other non-aerospace markets typically
account for about half of global titanium demand, it's a far
different story in the United States. More than 70 percent of
the more than 14,400 tonnes (31.75 million pounds) of titanium
mill products shipped in the United States in the first half of
2009down 5.5 percent from 15,240 tonnes (33.6 million
pounds) in the same period a year earlierwent to
aerospace, according to the U.S. Geological Survey, with the
majority for commercial transports.
From a mill perspective, 2010 is likely to continue as "a
challenging year" for producers, according to William A.
Pallante, senior vice president of commercial at
Pittsburgh-based RTI International Metals Inc.
Taken together, the amount of titanium mill products shipped
by the nation's three major producersRTI, Allegheny
Technologies Inc. (ATI), also based in Pittsburgh, and
Dallas-based Titanium Metals Inc. (Timet)dropped to 35
million pounds in the first nine months of 2009, down 26
percent from 46.7 million pounds a year earlier. (ATI's figures
include shipments from its High Performance Metals group, which
accounts for most of its aerospace titanium.)
In 2009, the market continued to dig itself out of an
inventory overhang resulting from a buying and expansion surge
that peaked in mid-2006 as the industry braced for the impact
of Boeing Co.'s 787 Dreamliner, whose order book of 850 planes
requiring an estimated 250,000 pounds of titanium buy weight
per copy promised unprecedented demand. But delays on the 787
adding up to more than two years have helped create a surplus
in the supply chain that's estimated at 30 million to 35
million pounds, although some of the material in ingot form
could be shifted to other programs besides the Dreamliner.
Destocking continues, Pallante said, adding that the amount
being moved out of excess warehouse stocks could "reduce or
dampen demand" at the mill level in 2010.
Build rates on existing airliners aren't expected to
increase in 2010 as selected cutbacks on programs such as the
Boeing 777 will be implemented. And as airline flight hours
continue at low levels, that could mean the 2010 engine spares
market might not be much better than it was in 2009.
However, if build rates on single-aisle aircraft don't
otherwise fall, and if inventory destocking levels off, that
could argue against a further decline in 2010. "That might lead
to a little more of an improvement, but I don't think it will
be significant," said an executive of VSMPO-Avisma Corp., based
in Verkhnyaya Salda, Russia. On the other hand, compared with
past titanium down cycles the current decline hasn't been as
bad as it might have been, he said, attributing much of that to
support from the commercial transport sector.
Indeed, Boeing, which has long-term titanium supply
agreements on its commercial aircraft programs with
VSMPOalong with ATI and Timethas said previously
that despite the 787 delays it would continue to honor
provisions of its long-term deals and accept shipments from
mills. While this probably helped contribute to the supply
chain surplus, it likely also was a factor in U.S. mill product
shipments reaching a historical high of 76.6 million pounds in
2008. But at least one new long-term agreementwith
Timetwas negotiated recently, although the details of
Boeing's obligations to take material under the new agreement
Frank Perryman, president and chief executive officer of
Perryman Co., a Houston, Pa.-based producer of titanium bar,
rod and fastener stock, sees indications of a "flat to slight
increase" in 2010, reflecting a normal order pattern in
contrast to the sporadic conditions that characterized the
industry during the past 18 months or so.
Perryman said that in contrast to some earlier
characterizations there's no longer any reason to describe
titanium prices as in a free-fall, usually a symptom that
inventory is being dumped. "We're not seeing that now," he said
at the end of November, citing a rebound in scrap prices, a
sign in his view that the market might be on the "verge" of a
If 2010 won't be the year titanium takes off again, one
major service center thinks it's at least likely to set the
stage for a comeback. "My hope is that 2010 is going to be like
2004," said Jerry St. Clair, president of Vulcanium Metals
Inc., Northbrook, Ill., referring to the first year after the
last titanium market cycle hit its low point. He described a
period when prices were stabilizing and shipments were picking
up but few people were inclined to see the recovery under way
because they were still looking over their shoulders at the
post-Sept. 11, 2001, recession.
St. Clair sees 2010 marked by the continued work-off of
surplus inventories and stabilization in order rates, and
agrees with Perryman's assessment that the free-fall in prices
has already been stemmed.
Spot prices for standard 6 aluminum/4 vanadium aerospace
ingot declined to an estimated $8.25 to $9.25 per pound in the
third quarter of 2009 from a high of nearly $30 per pound in
mid-2006, according to AMM data.
Jeff Wise, vice president of sales and marketing for
Rockaway, N.J.-based distributor Titanium Industries Inc.,
holds the relatively optimistic view that volume will begin to
increase sometime in 2010 and gain momentum toward year-end. He
believes production capacity has already been reduced to such a
low level that any uptick in volume is likely to help support a
price hike, especially with distributor inventories now
"commensurate with market demand."
Wise pointed out that while prices reached historical peaks
during the now-ended boom, mills have actually done a good job
"ratcheting them down" without letting prices "fall off a
cliff," which had been the pattern during past slumps.