The titanium scrap market could remain at a deficit until late 2021 as the aerospace industry struggles to recover from the Covid-19 pandemic, potentially continuing to support prices for ferro-titanium, CP grade ingot and slab, and Tg-Tv grade sponge.
European prices for western grade ferro-titanium rose to $3.95-4.30/kg yesterday, up from $3.40-3.55/kg at the start of September, as producers and traders held back material amid concerns about a lack of scrap feedstock.
One UK ferro-titanium producer warned that "a generation of scrap" has been lost to collapsing aerospace production, echoing similar worries voiced by other market participants. Meanwhile, a sponge producer in central Asia warned that no one can forecast how 2021 fundamentals will play out because there is so much uncertainty about travel restrictions. Titanium scrap is produced across the aerospace supply chain, in super-alloy production and aircraft and defense manufacturing.
Prices for titanium turnings, one of the main feedstocks for a range of titanium products, rose to 85-95c/lb on October 1st, up from 74-81c/lb on September 2nd. Prices for CP grade 2 ingots and slabs and Tg-Tv grade titanium sponge have also risen this month. Market participants warned about the lack of scrap being produced in June after several aerospace manufacturers scaled down their commercial aircraft production, but supply chain lags meant the price impact was delayed until this month.
Slow manufacturing recovery inevitable
Any return to pre-pandemic levels for commercial aerospace manufacturing could take several years because of travel restrictions and the sharpness of this year's initial downturn.
US specialty alloys producer ATI Metals suffered a 48% year-on-year drop to $158mn in second-quarter revenue in its jet engine segment, and a 31% drop to $117mn in its airframes segment, due to a sharp decline in manufacturing activity by Boeing and Airbus. Aircraft frames comprise roughly 15% titanium, while engine production uses various specialty alloys which use titanium and other high-temperature metals.
The "outlook remains challenged; pandemic resurgence adds to uncertainty," the company warned in its second-quarter results presentation.
ATI noted that Boeing 737 Max production restarted in the second quarter, but said it was at a reduced level and there are high inventories at the world's largest aircraft manufacturers.
Boeing plans to consolidate its 787 Max production in South Carolina, close its manufacturing operation in Washington state, and reduce its workforce by around 10% or 9,000 employees.
Embattled British engine producer Rolls-Royce warned in August that a recovery to pre-pandemic levels of demand for some of its products could take until 2022. The company was forced to seek an extra $5bn in funding this week from a combination of the UK government and private investors. It expects to cut around 9,000 jobs because of the pandemic. Timet, a titanium producer and supplier of Rolls-Royce, wound down its titanium sponge production in Nevada, idling the last factory producing sponge in the US.
"This crisis is not only devastating our aviation sector, its shockwaves are reverberating across the defense sector because of our shared supply chain," said Eric Fanning, Chief Executive of the Aerospace Industries Association. Titanium is listed as a critical raw material in both the US and the EU, so any breakdown of the supply chain is likely to attract government attention.
Written by: Thomas Kavanagh, Author, for Argus.