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ATI shifts zirconium strategy as nuclear industry struggles

Keywords: Tags  ATI, zirconium, Richard Harshman, nuclear disaster, Japan disaster, Fukushima Daiichi, Frank Haflich

LOS ANGELES — The global zirconium market, battered by the fallout of Japan’s 2011 nuclear disaster, should hit bottom this year, with initial signs of recovery emerging in 2014, according to Allegheny Technologies Inc.’s (ATI’s) top executive.

The market continues to feel the impact of the earthquake and tsunami that destroyed the Fukushima Daiichi nuclear plant in March 2011, with only two of that country’s 50 nuclear energy plants currently in operation, chairman, president and chief executive officer Richard Harshman said during a quarterly earnings call. According to most reports, this has left Japan with a large nuclear fuel overhang that has only recently begun to diminish.

However, the specialty metals producer has taken "some pretty aggressive actions in trying to right-size" its zirconium flat-rolled products segment in particular, Harshman said, adding that "we’re not done" restructuring.

Pittsburgh-based ATI’s Wah Chang unit in Albany, Ore., is widely considered the only major U.S. producer of zirconium and related alloys. The nuclear industry is one of zirconium’s primary markets, as it is used as reactor fuel cladding in fuel rods that hold uranium pellets (, March 16, 2011).

While he described the commercial nuclear business as challenging due largely to "uncertainty" in Japan, he said ATI’s business with the U.S. Navy "provides some level of stability" following the renegotiation of a seven-year supply agreement for the Navy’s nuclear program at the end of 2012.

Moreover, he said, there are still refueling opportunities with such reactor builders as Mississauga, Ontario-based Candu Energy Inc. and Areva SA of France, as well as with Cranberry Township, Pa.-based Westinghouse Electric Co. LLC and customers in Russia.

Harshman agreed with a securities analyst that 2013 would mark a "trough" for zirconium, after which it could begin to recover.

While Harshman said zirconium capacity in China probably won’t be enough to support that country’s growing nuclear requirements, China’s chemical process industry—once a "growth market" for ATI—isn’t one today or "going forward," either.

However, he cited chemical processes outside China, including prospects in the United States due to the low cost of natural gas, which is a feedstock for chemical plants.

Over the next few years, ATI is looking to "structure" its zirconium business in line with opportunities it has identified. These measures should start to take effect "if not in 2013, then certainly in 2014," Harshman said.

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