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.
The plants 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 horizon.
Moreover, sponge 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 (global) market."
Dewhurst told 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 Saudi plant.
Roskill expected 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, industrial grades.
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 implemented layoffs.
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, Ill.
U.S. spokesmen for Cristal and Toho could not be reached for comment.