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Titanium price weakness surprises market

Keywords: Tags  Airbus, Boeing, titanium, titanium prices, Michael L. Warner, Oliver Dreier, Japan Airlines, International Titanium Association ITA


LAS VEGAS — Titanium spot prices continue to weaken despite growing commercial airliner build rates and bullish forecasts for the coming decades.

While commercial aircraft builders such as Chicago-based Boeing Co. and Toulouse, France-based Airbus SAS are enjoying record production and backlogs, market participants at the International Titanium Association (ITA) annual conference in Las Vegas said they expect prices to soften in the fourth quarter despite what many of them say is steady or increasing demand.

"We’re really cranking up (production) on all of our models," Boeing Commercial Airplanes director of market analysis Michael L. Warner said.

But there’s little evidence in the titanium market that day-to-day prices reflect ramped-up build rates.

"This is confusing," a service center executive said. "It’s the first time I recall that our volume keeps growing yet the price keeps going down."

Spot prices for standard aerospace 6-aluminum/4-vanadium ingot, which a month or so ago was widely reported at about $9.25 per pound, is now being offered at as low as $8.50 per pound, according to market sources (amm.com, Sept. 13).

"I’ve never seen so much material on the floor," said a buyer of bar products, which seem to be particularly abundant.

A few sources suggested it is just a temporary phenomenon, spurred by the fourth-quarter efforts of a few producers to meet their sales goals for the year.

Oliver Dreier, Airbus’ vice president of metallic materials forgings and castings procurement, told the ITA that the commercial aircraft builder’s titanium requirement will have more than doubled in 2010 through 2014 and by 2020 will have increased by 300 percent over the preceding decade. Airbus also projects the need for more than 29,000 new passenger and freighter aircraft over the next two decades.

Dreier said that Airbus is holding about 20 percent of its titanium requirement directly, while the remaining 80 percent is held by its supply chain. "There’s a lot at stake" for Airbus with this material, Dreier said in explaining the company’s effort to manage supply chain tonnage as part of its overall sourcing strategy for metals.

Airbus this past week landed a milestone order from Tokyo-based Japan Airlines Co. Ltd. for 31 of its A350 twin-aisle airliners due to enter service next year, landing a customer that previously had been seen as standardizing on Boeing aircraft but which reportedly was unhappy with delays and break-in problems with Boeing’s 787 Dreamliner.

Warner said that Boeing Commercial Airplanes, which has an eight-year backlog, expects to deliver 635 to 645 planes this year, and the monthly build rate on its top-selling 737 single-aisle airliner will be raised to 42 from 38 early next year.

Warner also said that plane builders aren’t "bringing too much capacity" into the market, as some observers have cautioned. He said the number of aircraft being delivered to carriers comprises a "normal" 6 percent of the overall airliner fleet, but "it’s a much bigger fleet" today than in years past. "There are no signs we are over-delivering in the industry," he added.


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