September/October 1989
Higher quality demands by ingot makers during the past decade and growing technological savvy by titanium scrap processors have dramatically increased titanium scrap’s share in ingot fabrication.
By Si Wakesberg
Si Wakesberg is a New York City-based consultant for the Institute of Scrap Recycling Industries, Washington, D.C.
The resourcefulness and increasing technological orientation of titanium scrap processors are paying off nicely: in the past 10 years, consumption of titanium scrap by ingot makers has risen by a staggering 63 percent. It is now apparent that scrap has filled some of the gaps left open by the decreased shipments of Japanese sponge and has competed effectively with the prices of other raw materials. “When this decade began,” says one titanium executive, “the percentage of scrap used in the fabrication of titanium ingots was somewhere between 32 and 35 percent. Today, about 50 percent of the titanium ingot produced is made from scrap.”
Titanium scrap and sponge are used by the ingot making sector of the industry. But scrap is also required by the stainless, aluminum alloy, and steel industries. Material may be shipped directly to such consumers by scrap processors or it may first pass through the ferrotitanium industry for production of ferrotitanium. Material for ingot makers is in the form of “uncontaminated” scrap and is said to be of higher quality, generally bring higher prices. Terms such as “bulk weldables” and “feedstock” indicate the type of scrap shipped to ingot makers. The material moving to the steelmaking and aluminum industries, on the other hand, is known as “sacrificial” scrap since titanium units are lost in the utilization process.
Important technological advances made by the scrap processing industry in the past decade have helped bolster acceptance of scrap within the titanium industry. Ingot makers demand high-quality material and are rigid in their specifications. Many scrap companies have laboratories to test their scrap and have invested in high-powered equipment to assure the tests are accurate. More time is being devoted to research and development. “It is important that the scrap we ship be of the highest quality,” said one processor, “because we are dealing with consumers who demand specification material.”
In 1988, around 39.8 million pounds of titanium scrap were consumed by U.S. ingot makers, according to statistics released by the Titanium Development Association. This was 9 percent more than the preceding year and the most in 10 years. (The low point during the period was 1982, when only 17 million pounds were consumed.) Because of the pressing demand for scrap last year, imports of titanium scrap doubled from 1987 to 9.3 million pounds. Exports rose slightly to 13.2 million pounds. In the first quarter of 1989, according to the U.S. Bureau of Mines, scrap consumption, at 4,793 metric tons, increased 18 percent.
A Tight Scrap Supply Situation
There’s been great pressure for titanium scrap this year and the supply situation remains tight, according to many industry members. One industry official says the strong demand has come from both ingot makers and from the steelmaking industry. Observers indicate that prices for titanium scrap have risen commensurate with price increases for titanium ingots and mill products. But, as one executive points out, “this has been no runaway market” compared with the hectic quotations in other nonferrous metal markets earlier this year.
Despite some oft-repeated rumors of supply crises in sponge, industry representatives insist that supplies are available and that there have been no interruptions in delivery schedules. “Sometimes it may be difficult to get spot material,” comments one official; in general, though, there is agreement that no shortage situation exists. Some scrap processors, in fact, note that ingot makers are averse to granting higher prices to obtain the scrap. Looking to the third quarter of 1989, some industry members foresee a slowdown in demand from steelmakers and aluminum alloy consumers as a result of the market downturn in these industries.
It has been reported abroad that European consumers who had counted on receiving Soviet titanium and scrap this year have been subjected to shipment delays of two to three months. Some of these consumers are expected to come into the market for scrap when they begin negotiating third- and fourth-quarter orders.
The Soaring Demand for Titanium
To understand titanium scrap's significant role in the titanium industry, it helps to take a brief look at the titanium ingot and product sector. The soaring demand for metal from the commercial aircraft industry has given titanium a needed shot in the arm after a number of lean years. The scale of orders has been described as "enormous" and comes as the commercial aircraft industry replaces its old fleets and seeks to restructure and reorganize for the 1990s. To give you an idea of the scope of these orders, a June 13 New York Times report indicated that in one day, orders and options for 60 new MD-80 twin-jets from McDonnell-Douglas were announced—just a small fraction of the total orders from the commercial aircraft industry.
Last year, titanium ingot consumption reached 78.4 million pounds, the highest level in three years. Some analysts believe that 1989 may show an even higher figure. In the first quarter of this year, according to the U.S. Bureau of Mines, domestic titanium sponge consumption increased 19 percent to 6,458 metric tons. Ingot consumption was up 10 percent, to 7,796 metric tons. About 80 percent of all the titanium used last year went into the aircraft industry and, although military cutbacks may shave some of that demand, the commercial end of the business appears strong enough to keep titanium moving. In addition, the growing needs of the chemical processing and the pulp and paper industries, as well as the opening of the export market for U.S. shipments of titanium as a result of the lower dollar (this is, of course, changing), all served to boost the lagging titanium business and put it back on the road to profitability. "Mill product producers are sold out," says one titanium executive, adding, "integrated producers feel that their 1989 and 1990 business is assured." Some even project good business well into 1991.
Expanding Sponge Output
Although there is little indication of a tightness in titanium sponge supply, there has been some talk that such a condition exists. A number of producers are taking steps to expand sponge output and assure themselves of sufficient supplies for the next few years. RMI Company, Niles, Ohio, has announced that it will increase productive capacity from 21 million to 24 million pounds annually; Oremet, Albany, Oregon, also has indicated that it is expanding its production levels. All this is taking place at a time when Japanese sponge imports, a major feature of the titanium market at the beginning of the decade, have started to decline dramatically as a result of the weakened dollar and dumping charges.
The price of titanium sponge is reported to be in a range of $4.50 to $4.75 a pound, on contract, delivered to the U.S. Spot sponge can bring $5.00 to $5.50 a pound, merchants say. But they indicate that the price would have to be substantially higher before Japan, the largest sponge producer, would again ship sponge here. Japan delivered a quantity of material early in June, according to industry sources, at around $6.00 a pound, duty-paid. But even with a stronger dollar, they say, the yen-dollar exchange rate still is not good enough to permit shipments.
Looking Ahead to Titanium's Trend
Some titanium scrap executives are cautious in assessing the market trend. "High sponge-making capacity will bring out more titanium in the months ahead," says one official. (ingot production in the first quarter of 1989 increased 11 percent to 10,769 metric tons and was higher than in any quarter of 1988, according to the Bureau of Mines.)
More sponge is also coming out, which may have a dampening effect on the market, observers note. As for scrap itself, the consensus is that demand for good quality scrap will continue to be under upward pressure, but that scrap moving to the steel and aluminum industries (or for ferrotitanium) may have to wait for a market upturn in those industries before active demand once again rules the market. Says one scrap processor: "With scrap currently providing more than half of the raw material used in making titanium ingots, I think we've come a long way and our market is assured."•
Higher quality demands by ingot makers during the past decade and growing technological savvy by titanium scrap processors have dramatically increased titanium scrap’s share in ingot fabrication.