Aerospace slowdown could limit titanium availability

A slowdown in aerospace manufacturing is expected to cause a shortage of titanium turnings and TG-Tv grade sponge in the second half of this year.

Market participants expressed concern this week about the availability of titanium turnings in Europe in the third quarter. Turnings are created from shavings made during aerospace manufacturing processes.

The sharp fall in manufacturing during the past few months means much of that scrap supply is expected to dry up in the third quarter, leaving small-scale ferro-titanium producers without a key feedstock.

Although some ferro-titanium producers have reacted to the sharp fall in demand by reducing output, there is a growing concern that they will be unable to continue operating if supplies of turnings run out. Two small producers in the UK have reduced output to around 50-60pc.

"We may have to look in the US, but we would have to buy some now to get it delivered in July and keep a conveyor belt after that. It is difficult, because storing turnings is a fire hazard, so we cannot just stock up," one UK ferro-titanium producer said.

The availability of scrap in the US market is better because defence production is ring-fenced by the government and does not slow down, even during tough economic conditions.

Aerospace manufacturing firms Boeing, Airbus, Rolls-Royce and BAE Systems and a range of their suppliers have either scaled back operations or shut plants completely during the second quarter.

In an indication of just how sharp the downturn has been, Boeing and Airbus, the world's two largest aerospace suppliers, delivered four and 24 commercial jets, respectively, in May 2020. Boeing and Airbus delivered a respective 30 and 81 commercial jets in May 2019. And the current weakness in spot demand across the sector has weighed on prices. Argus assessed titanium turnings prices in Europe at 72-80c/lb on 26 June, the lowest range since March 2017.

TG-Tv sponge supply at risk

The sharp fall in aerospace demand could also impact supplies of TG-Tv grade titanium sponge, usually used in steel.

TG-Tv is created as a by-product of smelting TG100 sponge, which is used in aerospace applications. During the process, some titanium is fused with the side of the furnace and gains impurities, which makes it useless for aerospace, but it can be used in steel production.

Producers of TG100 have reduced output in response to falling aerospace demand, cutting back output of TG-Tv. The largest producer of TG100 in the world, Russian VSPMO-AVISMA, reduced its 2020 output guidance to 26,500t, down from 39,000t planned earlier in the year. It was said to be closing completely by September, but a source familiar with the company said there are no plans to shut entirely.

While aerospace demand is expected to take a long time to recover, the steel industry could make a quicker comeback.

If steel production was to recover in the third and fourth quarters, there would be a shortage of TG-Tv supply, with no incentive for producers to ramp up production of aerospace grade TG100 as aerospace demand is likely to remain limited.

By Thomas Kavanagh