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No titanium rebound seen until second half

Keywords: Tags  titanium, U.S. Geological Survey, titanium shipments, titanium scrap, titanium ingot, titanium mill products, IHS Global Insight, John Mothersole Frank Haflich

LOS ANGELES — U.S. titanium shipments unexpectedly fell 13 percent last year, and industry observers said a turnaround may not begin until the second half of 2013 at the earliest.

Mill product shipments totaled 39,600 tonnes (87.3 million pounds), down from a record 45,500 tonnes (100.3 million pounds) in 2011, according to U.S. Geological Survey (USGS) data.

"This was below my expectations," one industry analyst said. Like many others, the analyst had expected 2012 shipments to at least match, if not exceed, the previous year’s figure.

Some observers said that a sharp fall in nonaerospace industrial demand may have played a role in last year’s falloff, although that market typically accounts for a much smaller portion of U.S. demand than it does in other parts of the world. Commercial and military aerospace, which normally plays a dominant role in the U.S. market, accounted for approximately 68 percent of domestic mill product and castings shipments last year, according to the USGS.

Moreover, Chicago-based Boeing Co., which is generally assumed to represent the largest single consumer of U.S. titanium, "reset" its outside requirements downward last year. Some distributors who expected a pickup as the year progressed had laid in inventory and instead ended up with far more material in stock at the end of 2012 than they anticipated.

Some analysts don’t expect annual shipments to improve significantly until 2014, although they conceded that the second half of this year likely will be an improvement over the first six months.

Production data, which often gives a clue about shipments in succeeding quarters, wasn’t particularly strong in the fourth quarter. Ingot production slipped 3.9 percent from the third quarter to 17,100 tonnes (37.7 million pounds), while mill product output fell 17.3 percent to 8,850 tonnes (19.5 million pounds).

John Mothersole, senior principal analyst of Lexington, Mass.-based IHS Global Insight Inc.’s pricing and purchasing service, acknowledged that last year’s results were "a disappointment" and the first quarter of 2013 had been "weak," but he said this year looks likely to pick up somewhat in the second half. Shipments likely will reach 89.3 million pounds in 2013 and rise above the 100-million-pound mark next year, according to IHS.

IHS predicts that 2013 titanium ingot prices will decline 1 to 2 percent from 2012, with stability following first-quarter softness. It expects mill product prices to reach equilibrium this summer and experience a "slight lift" by the end of the year following the 10-percent drop they experienced in the first quarter. IHS expects titanium ingot prices to rise 6 to 7 percent and mill product prices to rise 8 to 10 percent in 2014.

Titanium scrap receipts totaled 48,800 tonnes (107.6 million pounds) last year, up 21 percent from 2011, according to the USGS.

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