LOS ANGELES Allegheny
Technologies Inc. (ATI) is looking to benefit from higher
shipments of nonaerospace, industrial titanium this year, but
might nevertheless reduce its sponge output rate as it moves to
avoid surplus inventory.
Richard Harshman, chairman,
president and chief executive officer of the Pittsburgh-based
specialty metals producer, noted last week during a quarterly
investors conference call that ATIs Rowley, Utah,
sponge operation is at about 60 to 65 percent of its
However, with overall supply
adequate, ATI might lower that utilization rate "a little bit"
further so that "we dont just continue to build sponge,"
according to a transcript of the call. Because Rowleys
sponge can presently be used in the aerospace industry only for
"standard-grade applications and not for rotating material" for
engines, its inventory is being managed to prevent oversupply,
Shipments of flat-rolled
commercially pure (CP) titanium for Saudi Arabias Yanbu 3
desalination project will "favorably impact" ATIs second-
and third-quarter performance, Harshman noted. ATIs Moon
Township, Pa.-based Uniti LLC joint venture with Russias
VSMPO-Avisma Corp. will supply skelp for CP titanium tubing
used at Yanbu, its first major desalination job since it
supplied another large Saudi project in 2011.
Uniti has also received
additional tube skelp orders for other smaller projects and is
quoting for several other power plant projects, Harshman
However, the titanium industry
has installed substantial capacity in recent years to supply
the commercial aircraft market, and that is now "quite frankly
looking for uses," putting pressure on industrial titanium
prices, he added.
"So while the projects are good
and attractive and provide volume and margin expansion
opportunities, the pricing is aggressive," he said of
Rowley, which is producing
sponge for both the standard aerospace alloy and industrial
markets, continues to work toward achieving premium-quality
standing for the processes that would qualify its sponge for
rotor-grade components. This process should begin in the third
quarter of 2013 and typically takes 18 to 24 months, Harshman
ATIwhose Allvac Inc. unit
in Monroe, N.C., is one of the major U.S. producers of titanium
long products for jet engine rotating partshas been
melting and processing premium-quality sponge from outside
sources for years, he noted.
Chicago-based aircraft builder
Boeing Co. continues to buy "the minimum contract requirement"
of titanium from its suppliers, Harshman said.
ATI, along with Titanium Metals
Corp.s Portland, Ore.-based Precision Castparts Corp.
subsidiary and VSMPO, is one of three suppliers of titanium for
Boeings commercial aircraft operations under long-term
contract agreements, he said, emphasizing that while "only
Boeing" knows how much excess titanium inventory it is still
holding, each passing quarter brings it closer to achieving a
"level of stability."
Harshman also said there appears
to be "some level of a bottom forming" on titanium scrap, as
well as nickel and nickel scrap. If that bottom is reached in
the second quarter, this would "remove a headwind" for the
second half of the year, he added.