Global supply of titanium is forecast to increase

Global supply of titanium is forecast to increase by 20% in 2010 to around 150,000t following a break in the strong growth cycle from 2005 to 2008 when titanium sponge production increased from 104,000t to 176,000t. The growth from 2005, which saw large volumes of new and rehabilitated sponge production come on stream, was partly driven by a surge in demand from the aerospace sector, but also by growing demand for titanium in chemical plant in China. Chinese output of titanium sponge increased fivefold between 2005 and 2008.

In late 2008, the global economic slowdown and delays in the production of high-titanium content aircraft such as the A380 and B787 caused a sharp decline in titanium demand. At the same time, new sponge plants in the USA and Japan, initiated in the earlier boom years, were coming on stream. In both 2009 and 2010, titanium sponge capacity was surplus to demand and producers delayed further expansions, idled plants and (in China) closed smaller uneconomic plants. In 2010, China has been the main engine for growth and production in that country is again growing strongly with several new large-scale sponge plants under construction.

The easing of world supply of titanium sponge has resulted in sponge prices dropping steadily since 2006 and the market is likely to be overhung with surplus sponge capacity until at least 2012 or 2013.

In 2009, production of titanium sponge was confined to six countries, in order of output, China, Japan, Russia, Kazakhstan, USA and Ukraine. Many of the larger sponge producers have downstream operations producing titanium ingot and mill products, but others have played an important role as merchant supplies of sponge. In 2010, UTMK in Kazakhstan, one of the leading merchant suppliers of sponge, started melting ingot on a trial basis and has entered into an agreement with Posco to set up a titanium slab plant in eastern Kazakhstan. This could have a significant impact on the dynamics of global sponge supply.

There are now 18 companies producing titanium sponge, of which nine are in China, compared with just two plants a decade ago. Many companies have announced further expansion plans, although some are now on hold. If all expansions come on stream capacity could reach 400,000tpy by 2015. The four new projects in China, together with expansions in Japan and Russia, could add 85,000tpy to the total.

In 2010, titanium ingot melting capacity is nominally 340,000t, 85% of which is located in Russia, USA, Japan and China. Melting capacity is at least twice that of sponge output, due in part to the practice of double and triple melting, and in part to the use of scrap in the melt feedstock. The USA dominates the production of mill products for the aerospace industry while producers in Japan and China focus on industrial and consumer applications for titanium.

The global market for titanium mill products in 2009 was about 100kt compared with 130kt in 2008. On a global basis, demand for mill products is divided between aerospace (39%), industrial (48%) and consumer (13%) uses, but there are significant regional variations. In the USA the aerospace industry accounts for more than 70% of demand while in China industrial applications dominate. The rapid growth of industrial markets for titanium in China has shifted the balance away from aerospace, but demand for the higher grades of sponge and ingot is still heavily influenced by the cyclical nature of the aerospace industry.

Demand is forecast to grow at 6%py to 2015, resulting in a market for 140,000t of mill products requiring up to 200,000t of sponge. Industrial markets outside the USA and North America will grow at about 9%py and the commercial aerospace market in North America and Europe will grow at around 8%py, albeit from a low base in 2009, provided that the delayed development of the A380, B787 and A350 gathers momentum and the build rates of the B737 rise. The growth in demand from the aerospace sector will come partly from increased aircraft production, but the main driver is the increased buy-in weight of titanium per aircraft. The greater use of composites, more compatible with titanium than aluminium, has resulted in significant increases in the use of titanium in landing gear, ducting, wing carry through structures and weight-critical forgings.

The main industrial applications for titanium are in chemical/petrochemical plant and in heat exchangers; this sector has exhibited very strong growth over the last five years, almost entirely due to the rapid expansion in construction of chemical and power plants in China.

The market for sponge, unwrought metal and mill products is characterised by long-term supply agreements between major producers and consumers, without the involvement of traders. However, the shortage of sponge in 2006 led to more activity on the spot market and prices for sponge, which had historically hovered around US$7/kg, rose to US$30 by the end of that year. As more sponge capacity came on stream the market started to weaken and by 2010 sponge prices were generally below US$10/kg. Prices of ingot and mill products were also well below the peaks reached in 2006/7. Scrap prices, on the other hand, strengthened in 2010 as supplies had dwindled in 2009 as manufacturing declined. Prices for sponge are not likely to move significantly above US10/kg until 2014 when the surplus capacity should be absorbed.

Titanium Metal: Market Outlook to 2015 (5th edition, 2010) is available at £4200 / US$7000 / €5600 from Roskill Information Services Ltd, 27a Leopold Road, London SW19 7BB, England. Tel: +44 20 8944 0066. Fax +44 20 8947 9568 Email: info@roskill.co.uk Web: www.roskill.com/titanium-metal