LOS ANGELES A
planned $420-million joint-venture sponge plant in Saudi Arabia
could add to an existing global surplus in the industrial
titanium market while also giving a possible clue to the choice
of future production sites by Japanese producers, the major
source of imported sponge for U.S. mill products.
Toho Titanium Co. Ltd.
and two Saudi companiesNational Industrialization Co.
(Tasnee) and National Titanium Dioxide Co. Ltd.
(Cristal)have signed an agreement to build a sponge plant
in Yanbu Industrial City.
The plant, which
outsiders view as the first in the Middle East, will have a
capacity of 15,600 tonnes (about 34.4 million pounds) per year,
Toho said in a statement. Construction is expected to start in
January 2015 and is scheduled to be completed by the fourth
quarter of 2016.
output will be "first allocated" to fill industrial demand in
the Gulf Cooperation Council, a union of six Arab states
bordering the Persian Gulf, for markets such as desalination,
power and chemical plants. After that, production "will be
allocated to fulfill demand by Toho," according to the
statement. Japanese producers, which include Toho and Osaka
Titanium Technologies Co. Ltd., accounted for 80 percent of all
U.S. sponge imports in the third quarter of 2013, according to
data from the U.S. Geological Survey.
Saudi Arabia has been
one of the top markets outside China for nonaerospace
industrial titanium during the past three to four years,
including nearly 12,000 tonnes (26.46 million pounds) of
commercially pure titanium strip for welded tubing produced for
two desalination projects (
amm.com, Oct. 23). However, market sources said
theyre not aware of any projects on that scale on the
globally remains in surplus, according to London-based
consulting firm Roskill Information Services Ltd., which last
year published a study of worldwide supply. Philip Dewhurst, an
analyst with Roskill who acknowledged he wasnt familiar
with the details of the proposed new plant, nevertheless
described the Toho-Saudi announcement as "an interesting
development in what appears to be an already oversupplied
AMM there "doesnt appear to be a need on a world
scale for a new sponge plant," but he speculated that growing
"captive" markets in the Middle East, along with the potential
sponge production cost savings available in energy-rich Saudi
Arabia vs. Japan, could be among the reasons for the joint
venture. Roskill lists no current sponge capacity of
significance in the Middle East.
"It would be less
expensive than producing sponge in Japan, thats for
sure," one source in the U.S. titanium industry said about a
global sponge production of 241,000 tonnes in 2012 to decline
to 230,000 tonnes last year, based on "growing inventories and
slowing demand growth," compared with estimated global capacity
of 330,000 tonnes, with 40 percent of the capacity represented
by Chinese facilities producing largely nonaerospace,
Meanwhile, sources in
the U.S. titanium industry said Tohowhich Roskill
estimated accounted for 11 percent of global sponge output in
2012has been investigating lower-cost production sites
outside Japan in the energy-restricted era following the
Fukushima earthquake/tsunami disaster in 2011.
Toho reduced sponge
output at its Chigasaki and Wakamatsu plants by 40 percent in
the second quarter of 2013 and by 50 percent in the following
three months for what it called "seasonal energy saving,"
according to a company report, although industry observers
believe declining demand also played a significant role. It
subsequently absorbed additional cutbacks, and said it reduced
managers and executives compensation and
The new Saudi sponge
plant will be built adjacent to Cristals titanium dioxide
plant, "leveraging the integrated synergies" and providing a
"stable supply" of titanium tetrachloride, one of sponges
raw materials, Toho said in its statement.
Toho will own 35
percent of the joint venture, which has not been named, with
Tasnee and Cristal each holding a 32.5-percent stake. Cristal
also owns Woodridge, Ill.-based Cristal Metals Inc., which
operates a pilot plant producing titanium powder in Ottawa,
U.S. spokesmen for
Cristal and Toho could not be reached for comment.