Titanium in Transition

September/October 1992

Titanium has suffered serious market setbacks in recent years, but industry experts predict growth for the metal in new applications.

BY KENT KISER

Kent Kiser is associate editor of Scrap Processing and Recycling.

Titanium, or "Ti" as industry insiders call it, is experiencing a mid-life crisis. It entered the U.S. commercial market around 1950, primarily serving as a wunderkind high-performance metal for the commercial and military aerospace industries. Through the years, Ti's aerospace-based existence has given it a history of peaks and valleys, with heady highs of incredible prices and strong demand crashing into periods of losses and overcapacity.

The latter has been the case in recent times. Since 1989, titanium sponge producers, ingot makers, and scrap processors have seen prices nosedive and demand evaporate. In addition, Ti's traditional markets have been shifting under its feet. As a result, the fortysomething-year-old metal is being forced to redefine itself as more than just a specialty metal for the aerospace industry and build its presence in industrial applications.

First, the Bad News

If U.S. titanium executives had one wish, they'd probably make 1991 disappear. Titanium mill-product shipments—the main indicator of the metal's health—showed their worst year-to-year drop from 1990 to 1991. According to the U.S. Bureau of Mines (Washington, D.C.) shipments fell from 53 million pounds in 1990 to 34 million pounds in 1991, a 36-percent plummet. Industry executives had cautiously hoped for improvement in 1992, but with first-quarter shipments reaching only 8 million pounds, even optimists don't expect year-end shipments to surpass 40 million pounds.

Other titanium market indicators have been equally grim. Ingot consumption dropped 32 percent between 1990 and 1991—from 78 million pounds to 53 million pounds—according to the Titanium Development Association (TDA) (Boulder, Colo.). Ingot production also dipped 32 percent in that same period, falling from 81 million pounds to 55 million pounds. "I don't think there's been a metal hit as hard as titanium in the last few years," says Michael Shulimson, president of North American Alloys (Santa Monica ,Calif.).

The recession undoubtedly played a major role in these losses by killing demand for commercial aerospace products, which represent titanium's largest use. Adding to 1991's market decline, some point out, were the policies of commercial aerospace consumers, who drew down their inventories of titanium rather than buying new supplies, narrowed their supplier base, and required more just-in-time deliveries. "Drawdowns have a negative ripple effect on the industry," notes John Monsees, TDA's executive director.

The metal also suffered from decreased defense spending following the breakup of the Soviet Union, which cut demand from the military aerospace sector, titanium's second largest consumer. Just how much has the defense market declined? While the military aerospace industry accounted for 38 percent—or 21 million pounds—of titanium mill-product demand in 1989, its market presence dissipated to 23 percent—or approximately 8 million pounds—in 1991, TDA reports. "Defense spending will never be back to where it was," Shulimson says. Or, in the words of one titanium producer, "To all intents and purposes, the military market has gone."

Titanium sponge producers have been particularly hurt by the recession, watching their production freefall 46 percent and consumption drop 41 percent from 1990 to 1991, according to the Bureau of Mines. As a result, the "big three" sponge producers—Oregon Metallurgical Corp. (Oremet) (Albany, Ore.), Titanium Metals Corp. (Timet) (Denver), and RMI Titanium Co. (Niles, Ohio)—reportedly posted losses of $63 million in 1991. RMI, in fact, closed its sponge plant in Ashtabula, Ohio, leaving Oremet and Timet as the only domestic sponge producers.

These losses have forced the sponge industry to address what industry insiders call its "long-standing bugaboo"—overcapacity. "While overcapacity was not the sole culprit for these losses, it no doubt played a large part," says a titanium consultant. In 1991, in fact, the big three operated at only 44 percent of their estimated capacity of 67 million pounds, TDA reports. Now that RMI has stopped producing sponge, idling 24 million pounds of capacity, however, the industry's supply-and-demand equation is expected to be more balanced.

The market reverberations have also touched other titanium players. International Light Metals Corp., a titanium mill in Torrance, Calif., has been closed by its parent company, Martin Marietta Corp. (Bethesda, Md.). Ladish Co. (Cudahy, Wis.) closed its titanium forgings plant on the West Coast between July and September. And Howmet Corp. suspended operations at its Reno, Nev., plant for six months beginning in June, citing "the depressed market for titanium alloy ingot." "Everybody that has anything to do with production of the metal is suffering," Monsees says.

All Quiet on the Scrap Front

The titanium scrap, or revert, market has inevitably followed the titanium ingot and mill-product sectors on their wild roller coaster ride down, down, down in the last few years. Scrap consumption in 1991—pegged at 25 million pounds—was off 24 percent from 1990's total of 33 million pounds and 36 percent from 1989's 39 million pounds, the Bureau of Mines reports. This precipitous decline has elicited a variety of responses from scrap processors, from "it's been really quiet" to "the industry's been close to death, with one foot in the grave." One titanium scrap executive notes, "I've never seen a fall-off in demand so sharp. Things came to a screeching halt." The only thing that prevented 1991 from being worse than the equally recessionary 1982, says the executive, was that interest rates were much lower than they were in the early 1980s.

Supplies of new-production titanium scrap, such as turnings and bulk weldables, began to dwindle as the recession reduced finished-product shipments. While some scrap firms reportedly have inventories of some grades, less new scrap is being generated, creating what one processor calls a "temporary tightness" in material. "There's certainly less scrap than there was two years ago," says the scrap executive, who points out that the upside of this trend is that it "has brought about some price improvement." This is welcome news, but recent prices for most titanium scrap grades were still a third to a half of 1989 prices. "The pricing structure just absolutely collapsed," Shulimson says.

Some scrap executives see titanium moving—albeit slowly—out of its period of horribly depressed ingot production and mill shipments. "Melting schedules have improved a bit," one says. "They're still lousy, but they're better than they were."

In contrast to the ever-so-slight positive stirrings in the ingot sector, the "sacrificial" sector—alloy consumption for producing materials such as ferrotitanium—has been "dead," a titanium scrap executive says. "Russian metal is clobbering this market."

In general, scrap executives have little hope for near-term market improvement. "The consensus is that we've bottomed out, but no one is expecting miraculous changes in the next year or two," Shulimson remarks. Peter S. Mason, vice president of Ireland Alloys Inc. (Houston), adds, "From all indications, there's no real light at the end of the tunnel, unless the government increases the defense budget or unless airlines order some serious airplanes. I think titanium's dead for the rest of this year and maybe all the next. That's why we diversify."

Ti Branches Out

Looking on the bright side, Ti's recent woes are at least not the result of losing market share to other metals, observes Monsees, who adds that "uses for titanium are increasing."

The commercial aerospace market continues to use more titanium in new planes, which could compensate for some of the losses in the military sector. The airframes of 777 jets being developed by Boeing Co. (Seattle), for instance, could each require 30,000 pounds of raw titanium—giving the planes a titanium content of 10 to 12 percent, compared with 5 to 6 percent for similar wide-bodied jets. In addition, as the commercial airline fleet ages, Monsees says, more planes will have to be retired and, thus, more new planes will have to be built, boosting titanium demand. "No other metal can take titanium's place in aerospace applications," he asserts, "so it will always have a strong market there." Even the waning military market is offering some new applications, such as use in armor for tanks, where it's substituting for steel, reportedly making the vehicles lighter and more mobile.

While aerospace uses continue to account for 78 percent of titanium demand, according to TDA, the industry is trying to find less-sophisticated industrial applications for the metal. "If producers don't look beyond aerospace applications and actively create other market niches, the industry may repeat the dismal market growth of the 1980s," according to a report by Charles River Associates Inc. (CRA) (Boston).

The metal's corrosion resistance and high strength-to-weight ratio already make it useful in the chemical, petrochemical, pulp and paper, and utility industries. "Its physical properties are excellent—you can't hurt it," Shulimson notes. In particular, market openings exist for lower grades of titanium to serve as substitutes for certain high-grade stainless steels and alloys, CRA says.

Growing or potential applications include use in piping systems in nuclear power plants, liners for flue-gas desulfurization units, steam-turbine blades, offshore oil platforms and other seawater uses, automotive valves and engine rods, architectural materials, sports equipment such as golf clubs and bicycles, roofing for residential and commercial buildings, medical equipment such as artificial limbs, and consumer products such as jewelry, eyeglass frames, and cameras. Mason also notes that the Clean Air Act could create significant demand for titanium in pollution-prevention products.

In addition, titanium producers are actively improving the metal's market options by developing higher-temperature, higher-strength alloys as well as alloys tailored to nonaerospace applications and lower-cost mill products. Furthermore, producers are offering near-net-shape forgings and castings and providing higher-grade plate using improved rolling technology, both of which could broaden titanium markets.

To make inroads into the industrial sector, however, the titanium industry must dispel some long-standing perceptions—and misperceptions—that engineers and designers have about Ti, namely that it is expensive, hard to get, and difficult to weld. "Nonaerospace titanium users generally don't need, nor want to pay for, the extraordinarily high level of quality that military or space technologies require," reports CRA. Producers should, therefore, focus on reducing Ti's production and fabrication, or value-added, costs to make it more competitive in industrial markets, the firm advises.

Another financial consideration, Shulimson points out, is that "some consumers have been scared of titanium due to its price fluctuations"—the result of erratic demand from the aerospace sector—and its relatively recent introduction. The industry can only achieve price stability if it reins in production overcapacity, expands titanium's industrial usage, and persuades aerospace consumers to better-forecast their long-range requirements. Despite these drawbacks, Monsees stresses that "titanium is affordable and cost-effective when you compare its performance and longevity with other high-alloy metals."

As for concerns about Ti's availability, Shulimson replies, "There's plenty of it." And doubts about the metal's "weldability" are either unfounded or exaggerated in most cases, producers claim, noting that titanium is no harder to weld than many other high-performance alloys, and new metallurgical developments are improving its workability all the time.

Titanium producers can further improve the metal's prospects with potential consumers, CRA says, by outlining its design-engineering data, operating costs, and benefits in new applications, as well as offering technical support such as design assistance and on-site training in fabrication and welding. "There's a lot of opportunity out there," Mason remarks. "The industry just has to move away from the aerospace market and jump onto the industrial bandwagon."

Onward ... and Upward?

While titanium has the potential to grow, some think the metal has already peaked in terms of demand and price. "The market will never be like it was in the past," Mason says. Still, Monsees asserts, "titanium is becoming fashionable in the industrial world. It is becoming more cost-effective, more well-known, and more understood, so the metal's future is very good."

Diversification will be titanium's buzzword as it works through its mid-life crisis, but the metal's popularity won't change overnight and especially not until the economy is resurrected. Some titanium executives emphasize—optimistically—that Ti's current growing pains will produce a leaner, more-competitive industry and give the metal a broader, more-secure market foundation in the future. Moreover, these executives point out, consumers will have to begin building up their depleted inventories again, which will boost titanium demand.

On the road to recovery and expansion, however, titanium will face many obstacles, such as competing with other specialty alloys, facing entrenched production processes geared toward other metals, and having to carve out new market niches for itself. Significant challenges? You bet. But Ti is hoping that, for it at least, life really begins after 40. •