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Titanium surcharges down sharply in 1st qtr.

Keywords: Tags  titanium, surcharge, ATI, Allvac, Frank Haflich

LOS ANGELES — A key raw material surcharge for titanium has taken its biggest tumble in nearly two years, dampening expectations for a quick first-quarter pickup in mill product spot pricing.

Monroe, N.C.-based Allvac Inc., a unit of Pittsburgh-based Allegheny Technologies Inc., has lowered its first-quarter raw material surcharge for benchmark aerospace alloy titanium 6 aluminum/4 vanadium bar and flat products to $5.64 per pound, down 15.4 percent from $6.67 in the fourth quarter of last year. It cut its first-quarter billet surcharge by 15.3 percent to $5.14 per pound.

The same surcharges and reductions were implemented on titanium 6/4 Eli, or extra-low interstitial, products.

The first-quarter drop is more than double the Allvac benchmark’s largest quarterly decline in 2012 and is the largest quarter-over-quarter drop since the second quarter of 2009.

"This was more than I expected," said one buyer, who anticipated at most a decline of 7 to 8 percent after it fell just 2.6 percent in the fourth quarter of 2012 (, Oct. 1).

But other observers said the sharp falloff probably reflects scrap price weakness in particular, and shouldn’t be a surprise. Scrap tags have fallen by at least a third over the course of the past year, according to some estimates, and Allvac’s latest surcharge revision probably reflects in large part recently negotiated mill product spot prices.

Allvac doesn’t disclose the specific elements of its surcharge, although they are assumed to include scrap—the largest component—sponge, master alloys and energy.

Steadily growing commercial aircraft production is seen as pushing the market "in the right direction" in terms of consumption, but it has yet to translate into growing spot market demand. Delivery lead times for bar remain stuck in a range of six to eight weeks, while plate is reported at 12 to 14 weeks.

"Frankly, I don’t see much of a change one way or another," a distributor said about the outlook for the first half of this year, while another service center executive said he expects activity to remain "flat, just bumping along," in the first part of the year.

The first-quarter surcharge for titanium 6 aluminum/2 tin/4 zirconium/2 molybdenum, popular for aircraft engines, is down 12.7 percent to $6.65 per pound for bar and flat products and $6.06 for billet, while the surcharge for titanium 3 aluminum/2.5 vanadium, widely used for tubing, has fallen about 10 percent to $5.68 per pound for bars and flats and $5.18 for billet.

The first-quarter surcharge for commercially pure Grade 2 titanium—used primarily for industrial nonaerospace applications, which fell 10.3 percent in the fourth quarter of 2012, one of the largest quarter-over-quarter declines among Allvac’s titanium products—is down 5.7 percent to $4.77 per pound for bar and flat products and $4.34 for billet.

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