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Japanese sponge prices may hit wall after rise

Keywords: Tags  titanium, titanium sponge, imports, USGS, rutile, feedstock, Frank Haflich

LOS ANGELES — The value of benchmark Japanese titanium sponge shipped to the United States rose in the fourth quarter compared with the same period a year earlier, but the market pressures contributing to the increase might now be in reverse.

The value of Japanese sponge arriving during the final three months of 2012 averaged $14.846 per kilogram ($6.73 per pound), up 14.6 percent from $12.959 per kg ($5.88 per pound) a year earlier, according to U.S. Commerce Department data compiled by the U.S. Geological Survey (USGS).

Japan is by far the leading source of outside sponge for U.S. producers, accounting for 14,400 tonnes (31.75 million pounds) during the first three quarters of 2012, or 53.7 percent of total imports of 26,800 tonnes (59.08 million pounds). Kazakhstan supplied 24.7 percent of U.S. imports of the material during the same period, according to USGS estimates.

The 2012 price increase was generally attributed to the higher cost of the feedstock ore that contains the titanium dioxide used to produce sponge. The price of high-grade sponge feedstock has been on a roller coaster since 2009, with rutile prices rising to as high as $2,500 per tonne last year from an estimated $500 to $600, helping to send sponge prices higher.

But rutile has retreated to about $1,300 to $1,400 per tonne in the first quarter of this year, according to industry sources.

Moreover, sponge demand reportedly is off as titanium scrap prices continued to decline through last year and into 2013, raising the consumption of competitive revert material, industry sources pointed out.

In large part, the decline in rutile prices reflects a drop in worldwide demand for pigment, by far the largest consumer of titanium dioxide at 90 to 95 percent of worldwide usage compared with just 5 percent for the titanium metal that is produced from sponge.

China has been the major influence on pigment demand over the past few years as its requirements surged in 2011, triggering fears of a shortage and what one observer called an "unprecedented" inventory buildup. That later turned into massive destocking, according to observers. But while most of that inventory might have been worked down, restocking has yet to start.

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