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TPP could hurt US titanium firms: Seiner

Keywords: Tags  titanium, Timet, Titanium Metals, sponge, titanium sponge, Japanese titanium, International Trade Commission, ITC Allegheny Technologies

LOS ANGELES — A proposed trade agreement that would eliminate the current 15-percent tariff on titanium imports could have a "severe and adverse" impact on both domestic titanium producers and national security, an executive from Titanium Metals Corp. (Timet) testified this week.

Elimination of the tariff from the Trans-Pacific Partnership (TPP) trade agreement would allow an "overbuilt Japanese titanium sponge industry to immediately inundate the United States market," discouraging future investment by the domestic industry, Timet vice president of business strategy and logistics Henry Seiner told the U.S. International Trade Commission (ITC) this week during an ITC hearing on the potential impact of the TPP.

Japan isn’t party to the current TPP negotiations, which now include the United States and 10 other nations, but it is expected to join talks in July.

The nation was the largest sponge supplier to the United States in 2012, accounting for 18,900 tonnes (about 41.7 million pounds), or 56 percent of all arrivals, according to the U.S. Geological Survey. The value of U.S. sponge imports from Japan reached $241 million last year, up more than sevenfold from $33 million in 2002, Seiner said.

There are only two significant U.S. sponge producers: Timet, an Exton, Pa.-based subsidiary of Portland, Ore.-based Precision Castparts Corp.; and Pittsburgh-based Allegheny Technologies Inc. While the third major domestic producer of mill products, Pittsburgh-based RTI International Metals Inc., has no in-house capacity and buys all of its sponge from external sources, all three producers are considered buyers of imported sponge.

Timet, which operates a sponge plant in Henderson, Nev., over the past five years has bought more than 35 percent of its sponge from Japan and other countries, reaching a peak annualized rate of 60 percent, Seiner said.

Seiner stressed that a surge in imports from the former Soviet Union’s newly privatized titanium producers "devastated" the U.S. market in the 1990s, causing domestic plant closures on a scale not seen since the 1950s. Timet was left as the only U.S. sponge producer, and even then it operated at only 40 percent of capacity, he said.

Since 2004, global sponge capacity has increased more than 163 percent to 174,500 tonnes, he told the ITC.

In light of Japan’s competition in the global market with sponge producers in Russia, Kazakhstan and China, removal of the import tariff would sway Japan to concentrate even more on the U.S. market and "further exacerbate" pressure on U.S. producers, Seiner said. It might also discourage them from installing additional capacity of their own.

"This pressure will be felt in the make-or-buy decisions that all of America’s major titanium companies must address when they determine how they will acquire their titanium sponge feedstock," he said.

Eliminating the tariff on Japanese sponge would "reshape" these decisions in a way that would "threaten the commercial viability of domestic titanium sponge production," he said, adding that the removal of tariffs on Japanese mill products would also threaten the U.S. industry.

Moreover, given that U.S. producers are required by law to give priority to defense needs during national emergencies, Seiner said the elimination of the tariffs would "compromise" titanium supply security by boosting the nondefense market’s reliance on foreign producers.

Once a domestic titanium sponge plant shuts down, he warned, it can’t be restarted overnight and it can take "years to gain the certifications" necessary to supply defense needs.

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