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 isnt party
to the current TPP negotiations, which now include the United
States and 10 other nations, but it is expected to join talks
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 stressed that a
surge in imports from the former Soviet Unions 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
Japans 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 Americas
major titanium companies must address when they determine how
they will acquire their titanium sponge feedstock," he
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
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 markets reliance on foreign
Once a domestic
titanium sponge plant shuts down, he warned, it cant be
restarted overnight and it can take "years to gain the
certifications" necessary to supply defense needs.