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RTI sees possible price pressure ahead

Keywords: Tags  RTI, Dawne Hickton, Precision Castparts, titanium metals Corp., sponge, Frank Haflich

LOS ANGELES — RTI International Metals Inc. is looking toward further improvement in raw material costs but also sees possible pressure on its own future pricing due to consolidation in the titanium supply chain.

Vice chairwoman, president and chief executive officer Dawne S. Hickton said this past week that it was too early to forecast the company’s 2014 raw material costs, since negotiations for next year’s titanium sponge will stretch into the fourth quarter and the results won’t be disclosed until early next year.

However, Hickton acknowledged that "the availability of the material is certainly there" in the marketplace compared with titanium sponge issues two years ago. She also said that the Pittsburgh-based titanium producer, distributor and fabricator expects these costs "will continue to improve."

RTI doesn’t produce its own titanium sponge. It buys its virgin raw material primarily from Japanese producers, whose feedstock costs have declined since early 2012 as earlier worries about escalating rutile prices have faded. Moreover, scrap prices are reported at low levels.

But Hickton also cited "major consolidation that has just taken place" in the titanium industry, apparently referring to Portland, Ore.-based Precision Castparts Corp.’s acquisition of producer Titanium Metals Corp. in January. PCC is one of the largest suppliers of titanium castings, forgings and fasteners to the aerospace industry, and has expanded recently into aerostructures.

This and other consolidation moves has led to the anticipation of intensified competition for aerospace business among companies that are not only titanium producers but also suppliers of downstream products.

Hickton stressed that RTI’s "focus is going to be on continuing operational performance improvements and cost reduction."

Second-quarter operating earnings by RTI’s titanium business segment, which includes production facilities in Niles and Canton, Ohio, and Martinsville, Va., as well as its distribution outlets, almost doubled to $17.3 million from $8.8 million in the same period last year on sales that increased 15.7 percent to $110.5 million from $95.5 million.

RTI’s engineered products and services segment, which includes its manufacturing and fabrication units, posted second-quarter operating earnings of $3 million, up 20 percent from $2.5 million a year earlier, on a 50.6-percent increase in sales to $130.7 million from $86.8 million.

RTI’s estimated backlog at the end of the second quarter was $560 million, down 1.6 percent from $569 million three months earlier.

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