LOS ANGELES After nearly doubling during the past three years and climbing nearly 17 percent in 2012, global output of titanium sponge is expected to fall 9.3 percent this year, with Japanese producers bearing the brunt of the cutback, according to UST Kamenovgorsk Titanium & Magnesium Plant (UKTMP).
Heavy inventories and stiff competition from abundant supplies of low-priced scrap are among the leading reasons for the years expected decline, Sylvain Gehler, chairman of the Kazakh producer, said at the International Titanium Associations recent Titanium Europe conference in Hamburg, Germany, and in a telephone interview with AMM this week.
Overall worldwide output is expected to fall to 213,700 tonnes (about 471.1 million pounds) from an estimated 235,600 tonnes (about 519.4 million pounds) in 2012.
Gehler, who also is managing director of Brussels-based Specialty Metals Co., said that fears of a shortage in titanium feedstock and slag were partially responsible for heavy sponge purchases by consumers last year, when titanium raw material prices shot up due to strong demand from the pigment industry, the largest consumer of titanium dioxide. At the same time, however, melters took advantage of low scrap prices, leaving "expensive sponge still in stock at the end of 2012."
He pointed out that, following a 31.3-percent drop to 124,675 tonnes in 2009, global sponge output shot up 89 percent in the following three years.
While most of the worlds major sponge plants will be forced to "adjust" production this year, most pressure to reduce output will fall on producers in Japan, where Gehler expects the decline to be among the worlds largest to about 50,000 tonnes (110.2 million pounds) from an estimated 63,400 tonnes (139.8 million pounds) in 2012.
In contrast, Chinese and Russian sponge production is likely to remain level with last years estimated output of 79,000 tonnes (174.2 million pounds) and 44,200 tonnes (97.4 million pounds), respectively.
Meanwhile, industry observers in this country said that Gehlers outlook for a decline in sponge output could be conservative.
"I would be surprised if its not more than 9 percent," said a U.S. industry source about this years sponge production outlook, reflecting the view of some other domestic observers. He noted in particular that at the end of last yeara time when many sponge buyers begin to order for the coming yearthe business outlook was especially subdued.
A continuing erosion in scrap prices, along with lagging demand from global nonaerospace, industrial markets, were cited by U.S. sources as the main reason for the decline in sponge demand.