How has Russia’s invasion of Ukraine impacted the global supply of titanium and what are the long-term geopolitical implications for future trade with the region?
In this exclusive interview, Thomas Kavanagh, Associate Editor, Argus speaks with Ukrainian titanium producer, Velta. Andrey Brodsky, CEO discuss their vertically integrated titanium-production system and long-term strategy for navigating this unprecedented and challenging environment with translation courtesy of Olena Lesnyak, Deputy CEO
Tom Kavanagh: Hello and welcome to the "Argus Metal Movers podcast." I'm your host Tom Kavanagh, Associate Editor at Argus Metals International. Today we're focusing on a Ukrainian titanium producer Velta, which is working through some huge challenges to get their new titanium production technology to the market. I sat with CEO Andrey Brodsky, to discuss their titanium plant, operating during wartime, and how to fill the titanium supply gap left by the conflict. So, I think to start with, could you explain a little bit about Velta? What your guys' mission is and, you know, how you came to be?
Andrey Brodsky: [ foreign language 00:00:42 ] I will speak about our mission a bit later, but first of all I want to say that Velta is a big industrial company and this is rather unique experience for the Ukraine, because we built our mining and processing complex from scratch. We didn't privatize anything, and we have been operating for more than 10 years, already taking like 2% of the world's titanium feedstock market. We never wanted to stay as the resource company, and we always were considering any possible way for the vertical integration of the company. And first of all, the idea was to build up the pigment plant, which is widely spread in our industry. But in the end, me and the top management of the company, we took the decision to get concentrated our efforts in the metal direction. For this purpose in 2017, we started our R&D center which grew up into very significant structure, and it brought its fruit. When two years ago, the team has invented and developed their innovative technology of production of titanium metal which is different from the traditional Kroll method, which is much more energy-saving, environmentally friendly, and less costly than the existing technology today.
Tom: I wonder if you can explain a little bit more about the new process?
Andrey: So, if we speak about the technology in details, that might take a lot of time, and you can also find a lot of details in the patterns which are available today. But if we speak in general, I would stress that first of all the technology is...in our technology, we use less steps because in the traditional Kroll technology, there're quite significant number of steps and quite significant time for every stage. This is very much reduced in the technology which was developed by [ inaudible 00:03:02 ]. We also use different temperatures compared to Kroll methods, and we use much less energy which implies the energy-saving concept for the technology. And also we don't have any waste at all, no liquid, no solid, no gas emissions. And everything that is waste, by this technology is transformed into the saleable byproduct, such as fertilizers or colorful pigment.
Tom: And with this technology and, you know, we've now come to a point in the market where there's a significant gap in the needs for titanium products especially in the west and the supply because of the way Russia was ingrained in this supply chain, which is now being cut out, I mean, how does the market try and fill the gap in titanium products left by Russia's invasion?
Andrey: Let's say directly, Russia is sent away from this market. And I probably would be very straightforward in my messages, but I would say that Boeing and Airbus...such companies, Boeing and Airbus were making huge mistake allowing Russia to take such significant positions in the market and increasing its share day after day, that was very big mistake. So now Russia is being sent away and of course not today, but in the several months time, we'll see how their supply chains are being destroyed and the airspace industry companies, military and defense companies will start to feel the extreme deficit of the titanium as feedstock, as the titanium sponge and also the titanium finished good.
Tom: In terms of the finished goods, I mean, what does Velta provide to the market? Is it a sponge product or will you be providing ingot slabs and parts?
Andrey: So if we speak for now, Velta is the producer of the titanium feedstock, high-quality titanium feedstock. This is the material which Velta is providing for the market today. But the innovative technology which I described to you, allowed us to diversify our activity. And last year we started designing an engineering works for construction of the first full-scale manufacturing unit. But unfortunately because of the war, because the war started, we were not able to finish this project. But in the very near term, we have the plans to start this construction of such a plant production manufacturing unit for the production of finished titanium goods. I cannot announce the country today, but unfortunately finalities will be not in Ukraine. And the final product of this manufacturing unit of this plant will be either for the medical industry or for the aerospace industry, for the planes or for the defense and military industry, for all of them actually but definitely not the slabs, not the titanium sponge or not the ingots.
Tom: Okay. You said that, obviously, the war impacted the original project, I mean, are you gonna continue some operations in Ukraine? And if so, what's the situation including, like, logistics, staffing challenges, equipment, that kind of thing?
Andrey: Of course you are right, and the war impacts greatly the activity of the company today. When we speak about the mining company, about Velta, we still continue our operations, we manage to perform all the contracts and all of our obligations are being performed until now. Although that's extremely difficult in the current conditions and every day we are overcoming many obstacles. And these are the obstacles, and these are the difficulties with the supplies of almost everything, of the details, of the maintenance parts, of the diesel, and one of the biggest problems which... All of them are big, but one of the very important one is the logistic, of course, because for now we don't have access for sea at all. So we can't make any shipments by sea like we used to do.
Tom: And in terms of recovering after this, it seems as if the Russians have been pushed back and the area that you're based, I assume, is free from Russian occupation now, right?
Andrey: If there were Russians we wouldn't work there for sure, that's...
Tom: So in terms of now recovering those operations, I mean, what do you need to do in order to continue business and then grow going forward?
Andrey: We need investment, we need finance, we need peace, and we need stability.
Tom: Let's hope that that happens sooner rather than later, for sure.
Andrey: I hope it to happen as soon as possible because every day our people are dying. Maybe in addition, I want to say a couple of words about the topic which we touched but I want to develop it a little bit more, that it's the Russia presence at this market. So I have my worries that when the war is over, some of the European customers, I will not name them right now but they will continue their cooperation with the Russian producer of titanium metal that is VSMPO-AVISMA. First of all, I see the danger in cooperation with Russia, in that fact that Russia has already proven itself as not reliable supplier in many different sectors, that is using the customers just to manipulate them from the political and economical point of views. I believe that NATO countries should adopt some policy of trying to avoid dependence on Russia and to gain independence, not only on the gas and oil markets, but also on the titanium markets.
For today, all the military industry is heavily dependent on titanium. So the aircraft, the fighter jets, like, modern fighter planes consist of...40, 50% of their weight from the titanium. And at the territory of the European Union and Europe, there is today, not any single plant, not any single manufacturer who is producing either titanium sponge or...that's early to say like that, but titanium parts by some alternative method. So if after the war, the supplies from Russia resume, and unfortunately for now, they haven't been stopped yet. And Russian companies still keep on buying titanium. European Union companies still are buying titanium from Russia, but if it stops, we do hope that it will be finally equal to the bloody diamonds, and the supply would stop. If by any case, after the war, Europe keeps on buying titanium from Russia, that would be a giant and huge mistake, first of all in terms of the national security of Europe. I believe that such a program should be adopted by the European countries that would provide the guarantee and secure the independence of the European countries from not friendly countries such Russia is on titanium.
Tom: Last question. Do you believe that buying Russian titanium directly funds and aids the war effort in the Kremlin?
Andrey: The answer is evident of course. The main producer of titanium in Russia is VSMPO-AVISMA, which belongs to Rosoboronexport, which is the company which unites all the military producers in Russia. And traditionally, half of their titanium products go for export and half is used to produce arms and weapons in Russia. So exactly this titanium is used in the bombs and rockets which are falling these days, day after day in the Ukrainian cities and which are killing our people. These are bloody mining without any doubt. And if speaking already, even more directly, I would say that their announcement and the message of Airbus that they are...when they buy titanium from Russia, it doesn't influence anything, it's extremely cynical and its very much offensive for those people who die and who are dying day after day, every day in this tragical world.
Tom: Well with that, I mean, I think we just covered most subjects that needed to be covered. And I also think that it's important for our readers and listeners to hear that message. So, yeah. Thank you so much for agreeing to the interview.
Andrey: Thank you very much.
Tom: That's all we have time for on today's show. I've been your host, Tom Kavanagh, and thanks again for joining us on "Metal Movers." See you next time.