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Titanium markets to fly strong in 2012, beyond

Keywords: Tags  titanium market, boeing 787, RTI International Metals, IHS Global Insight, John Mothersole, Allegheny Technologies, Dawne S. Hickton,

Demand for titanium is expected to be strong this year and even stronger in the following years, based on a variety of industries that will rely increasingly on production of the metal.

The ramp-up of the Boeing 787 and, by some estimates, overall build rates on commercial transports will by 2013 and 2014 have significantly surpassed the rates seen in 2010, industry players said. Outside of aerospace, newly emerged economies such as China, India and Brazil could remain strong markets for non-aerospace industrial titanium despite economic sluggishness in the United States and Europe.

“Regardless of what’s happening on Wall Street with the stock market, and the political turmoil that we’re seeing in the headlines, we are still seeing strong demand with our existing orders,” said Dawne S. Hickton, vice chairwoman, president and chief executive officer of Pittsburgh-based titanium producer RTI International Metals Inc.

As uncertainty over the global economic picture clouds the outlook for steel and other commodities, the future for aerospace titanium—buoyed by expanding airliner production schedules—looks bright. “In the metals industry, titanium stands out,” said John Mothersole, principal of IHS Global Insight Inc.’s pricing and purchasing service in Washington.

Mothersole noted that construction in North America is “a disaster” and that metals demand from the automotive industry, while not slumping, nevertheless probably won’t reach its “demographic potential” in sales until 2013. “But when you get to aerospace, it looks great,” he said, noting that despite the overall recession sentiment, the possibility of future falling oil prices could increase revenue passenger miles, creating a “positive” for air travel.

“The industry still looks very healthy,” Mothersole said, pointing out that while the emergence of composites in airliner construction might generally be considered a problem for metals, titanium “mates well” with these non-metallic materials, helping to expand its role.

Mothersole estimated that domestic mill product shipments—which jumped 38.3 percent to 84.4 million pounds in 2010, according to the U.S. Geological Survey—totaled a record 89.5 million pounds last year and might even top the 90-million-pound mark when final, official figures are in.

Hickton acknowledged that the possibility of further economic turbulence can’t be ignored. But she still expects continuing growth in aerospace titanium over the next several years, supported by previously announced long-term production increases and pent-up demand among customers of both of the world’s two major aircraft manufacturers, Chicago-based Boeing Co. and Europe’s Airbus SAS.

“We have a strong order book and we’re not seeing any cancellations,” she said. “In fact, our major customers are continuing to focus on making sure the supply chain will be able to support the ramp-up over the long term.”

RTI estimated that U.S. mill product shipments might have reached 95 million to 100 million pounds last year, easily topping the 84.4-million-pound record in 2010. Excluding China, the company sees global commercial aerospace shipments increasing 20 to 25 percent in 2012, military titanium shipments remaining flat at about 24 million pounds and industrial and non-aerospace titanium shipments—including medical and emerging applications—growing 17 percent.

Mothersole believes that whatever might undercut a strong outlook for commercial transports doesn’t necessarily lie inside the aerospace industry, but rather in the global economy, particularly the danger of a “disorderly” resolution of the eurozone financial crisis.

Still, barring any economic reversal that results in wholesale order cancellations, the prevalent view of industry watchers such as Mothersole, as well as those within the industry, is that commercial aviation is on the threshold of a few years of steadily growing production. For titanium, this growth was temporarily sidetracked by more than three years of delays on the Boeing 787 Dreamliner, the largest aerospace titanium consumer with a buy weight estimated at 225,000 to 250,000 pounds per plane, but the first of more than 820 planes on order was finally delivered in September.

Despite the 2009 slump brought on by the global economic crisis, industrial titanium demand hasn’t gone away, according to Kevin Cain, president of Uniti LLC, a Moon City Township, Pa.-based producer of commercially pure (CP) titanium for non-aerospace markets.

Cain, whose company is a joint venture of Pittsburgh-based Allegheny Technologies Inc. and Russia’s VSMPO-Avisma Corp., emphasized that infrastructure, which includes desalination, power generation and metallurgical plants, offers strong prospects. The Middle East, for example, is attempting to establish itself as a manufacturing center, which means a requirement for fresh water and power. Uniti won a job in 2010 to provide 5.5 million to 6 million pounds of narrow CP strip for the production of tubing for a seawater desalination project in Ras Az Zawr, Saudi Arabia, and Cain sees more of this type of work ahead. “There are desalination projects being bid right now for production this year and the year after,” he said.

Michael Metz, president of VSMPO Tirus US, Highlands Ranch, Colo., the U.S. arm of Russian producer VSMPO-Avisma, told attendees of the International Titanium Association (ITA) conference last year that he expected 2011 to be “the best year for aircraft build rates in the last 15 years.” Metz, who is also ITA’s president, noted that Boeing had forecast continued improvement, with deliveries of 33,500 new aircraft over the next 20 years.

“That should mean a healthy demand for titanium,” he said, pointing out that Boeing’s single-aisle 737 airliner, whose build rate is due to increase to 42 per month from 31 by the first half of 2014, would at that point represent some 10,000 tonnes (22.05 million pounds) of annual consumption. The larger, twin-aisle 787 is slated to reach a build rate of 10 per month by late 2013 after the initial assembly line in Everett, Wash., is joined by a new line in North Charleston, S.C., also consuming some 10,000 tonnes per year.

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