Raw material costs are likely to drive US ferro-titanium prices in 2022 rather than demand fluctuations, market participants say.
Aerospace scrap consumers have resumed buying scrap for the first time in months to get ahead of the expected aerospace rebound; in response, ferro-titanium producers have attempted to push down input costs following a prolonged decline in contract demand throughout 2021 and an illiquid spot market. Renewed demand from titanium alloy producers has supported aero-grade titanium scrap prices lately.
North American ferro-titanium producers typically rely on a combination of titanium sponge and scrap to produce alloy.
By the beginning of 2021, because of inactivity in the aerospace market, domestic generation rates for titanium scrap had declined. This meant that a significant portion of higher-priced scrap flowed to ferro-titanium producers, the only active buyers at the time.
As a result, mixed titanium turnings commanded similar prices to typically premium aero-grade 6-4 turnings.
As the year unfolded, semiconductor shortages hampered steel demand from the automotive sector, which uses ferro-titanium in melts to produce sheet steel, and alloy prices softened in recent months. Argus assessed US ferro-titanium (Ti 70pc) prices at $3.40-3.60/lb on 16 December, unchanged since 25 September.
Even with long-term contract demand slipping in recent months, alloy prices are still around multi-year highs because of subdued scrap generation rates.
As a result, ferro-titanium producers have attempted to push down input costs following the prolonged wavering of alloy demand under long-term contracts and amid an illiquid spot market. Conversely, titanium alloy producers have begun ramping up production amid a recovery in the aerospace market, despite an unusually limited supply of aero-grade quality scrap.
The competitive pressures to secure aero-grade scrap have reverted the aero-to-mixed scrap spread to more historically normal levels.As of 16 December, the spread between the two forms of scrap totaled 55¢/lb, nearing the 10-year average of 58¢/lb.
As a result, the use of aero-grade 6-4 turnings as a viable alternative to ferro-titanium scrap may become more challenging as processors and dealers begin to shift aero-grade scrap back to titanium alloy producers for a premium.
In times of low buying interest, selling aero-grade 6-4 turnings to ferro-titanium producers in North America and Europe came with less stringent specification requirements and less risk of returned shipments or retroactively discounted purchase orders.
This was at a time when titanium alloy producers were paying the same prices for aero-grade 6-4 turnings as ferro-titanium producers werepaying for ferro-titanium turnings. Now that aero-grade scrap is commanding a premium again, market participants do not expect this to remain the case.
Long-term contract demand for ferro-titanium has increased in November and December and is expected to continue rising slowly into 2022 as supply chain bottlenecks ease.
At the same time, some sources were more skeptical about the degree to which demand will rise. With lingering semiconductor shortages, US automotive production is predicted to be curtailed again next year.
Others have questioned whether enough mixed turnings, not suitable for aerospace usage, have been getting generated lately. This could squeeze supplies enough to force ferro-titanium producers to look elsewhere, including to the primary alternative, sponge.
