EU FeTi producers switch to premium scrap feedstock

European ferro-titanium producers are increasingly switching to use higher quality vacuum scrap as feedstock, after rising prices for titanium turnings — their preferred input material — reached parity with vacuum scrap, lessening the product's competitive advantage.

Tight supply — brought on by reduced aerospace manufacturing activity, particularly in North America — pushed prices for titanium turnings to a high of $2.25-2.50/lb ddp UK on 6 April, up by 97pc from $1.15-1.25/lb on 1 December. They have since fallen to $2.10-2.30/lb ddp on 13 April as some producers opt to buy more vacuum scrap but remain far higher than historic norms.

Titanium turnings and vacuum scrap are being offered in Europe at similar levels this week. One trader received an offer for vacuum scrap from eastern Europe at $4.50/kg. Another booked 50t from southern Europe at $4.65/kg. A number of buyers received offers for turnings at above $5/kg but did not purchase.

There are limits to the role that vacuum scrap can play as a substitute for titanium turnings in alloy production, and as a result it is not seen as a long-term solution to the turnings shortage. While turnings melt quickly in furnaces, vacuum scrap is bulky and takes longer, adding extra gases such as nitrogen. In addition, some ferro-titanium producers need to send it to scrap processors to break down further before adding to the furnace, and market participants note long delays at scrap processors in the UK as well as shipping delays from US scrap suppliers.

Scrap processors prefer to handle other, more profitable and higher-volume scrap materials such as nickel-bearing stainless steel, and are very busy as manufacturing industries try to bounce back from Covid-19 lockdowns. This is delaying ferro-titanium production schedules and removing any elasticity on the supply side. "If one big tender comes into the market, from South Korea or Germany, they might not find enough, like in December," a UK producer said.

Another producer raised concerns about the eventual return of downstream commercial aerospace manufacturers to the market, as they will start consuming vacuum scrap, leaving ferro-titanium producers with very limited feedstock options once again.

Ferro-titanium producers are able to shoulder higher feedstock costs that would previously have been unprofitable thanks to a steep rise in alloy prices since 1 December with western grade alloy up by 46pc at $7.30-7.90/kg and Russian grade up by 39pc at $6.50-7.20/kg. But there are limits to how far they can go. "[Commercial aerospace manufacturers] will always outbid us on the vacuum scrap, they have deeper pockets," an alloy producer said.

The severity of the overall feedstock squeeze will in part depend on the speed with which commercial aerospace production ramps back up, with a more gradual return to pre-pandemic demand levels likely to reduce the risk of a more severe crunch.

By Thomas Kavanagh