LOS ANGELES A key raw
material surcharge in titanium has further declined for the
fourth quarter, and some buyers are growing nervous about the
implications of falling lead times.
Monroe, N.C.-based Allvac Inc.,
a unit of Pittsburgh-based Allegheny Technologies Inc., has
reduced the raw material surcharge on benchmark aerospace alloy
titanium 6 aluminum/4 vanadium bar and flat products to $6.67
per pound, down 2.6 percent from $6.85 per pound. Its
fourth-quarter billet surcharge is $6.07, down 2.7 percent.
The same surcharges and
reductions were implemented on titanium 6/4 Eli, or extra-low
"Quite frankly, Im
surprised it isnt down even more," one distributor
saida remark that was echoed by other titanium buyers.
While the fourth-quarter surcharge drop on titanium 6/4 is less
than the 7.6-percent posted for the third quarter, and
Allvacs surcharge has fallen 12 percent since the end of
2011, the distributor estimated his own orders have dropped 20
to 30 percent over the course of the year.
Allvac doesnt disclose the
specific elements of its surcharge, although they are assumed
to include scrap, sponge, master alloys and energy. Scrap,
which has also been falling this year, is believed to be the
Moreover, distributors appear
just as worried about short mill delivery times on some
commodity products as they are about the shrinking surcharge,
which forces them to reduce the value of their inventories.
They noted that quoted lead times are now about as short as
they can getsix to eight weeks at certain mills in the
case of spot orders of titanium 6/4 bar. In comparison, lead
times were an estimated 12 to 14 weeks in late 2011 and early
With lead times so short, some
service centers worry that their customers might go "straight
to the mill" rather than going through the normal distributor
supply chain. They also stress that the reduction reflects a
growing overall pessimism about the next few months.
"Were not putting a lot of metal in inventory," one mill
source said of the industry as a whole. "I dont see that
changing anytime soon."
Meanwhile, surcharges on other
major alloys and products have also shown declines. The charge
for titanium 6 aluminum/2 tin/4 zirconium/2 molybdenum, popular
for aircraft engines, fell 3.2 percent on both bar and flat
products, to $7.62 per pound.
The biggest fall was on
commercially pure Grade 2 titanium, used primarily for
industrial nonaerospace applications, which was off 10.3
percent to $5.06 per pound on bar and flat products and down
10.5 percent to $4.60 per pound on billet.