Viewpoint: EU FeTi market to tighten as scrap runs dry

Ferro-titanium supplies are expected to tighten early this year in Europe, as the volume of low-priced Russian material dwindles and titanium scrap availability dries up.

"There are no titanium raw materials coming. My last four containers from the US and eight from Asia are arriving in January. After that, the pipeline will be empty," said one eastern European scrap trader. "Scrap processors are shutting due to Covid-19 again now in Spain, France and other parts of Europe."

Alloy producers in Europe, particularly in the UK, face difficulty transporting scrap from the US owing to logistics problems and high costs, which has limited replacement options.

Titanium products producers in the US and Europe, in preparation for returning aerospace manufacturer demand, have started buying up higher quality titanium scrap globally, leaving ferro-titanium producers competing for turnings and lower grades.

Many market participants said they may be unable to produce at current capacities past the first quarter.

"I think aerospace has already recovered slightly in domestic markets. The fact that they're flying again will require maintenance and new parts," said one UK producer.

Margins squeezed

Ukrainian and Russian ferro-titanium producers said offers for turnings and scrap have risen in recent days, which have forced them to reconsider higher offer prices and shrinking profit margins.

One Ukrainian producer received offers for titanium turnings at $4.10-4.20/kg and scrap material at $4.25-4.40/kg. Producers in the UK and central Europe were offered as high as $4.50/kg.

Argus prices for turning were assessed up at $2.05-2.20/lb ddp UK on 9 December, up from $2-2.15/lb in the previous assessment on 7 December, their second-highest level since April.

"We had access to better quality scrap during the Covid crisis. Vacuum scrap was almost the same price as ferrous scrap. Producing ferro-titanium will become more challenging because of lower grade scraps in the market again," the UK producer said. In response, producers in Europe raised alloy prices.

"The problem we have going forward is that even at $7, we can't make a profit," said one UK producer. "We may have to look at production cuts of up to 20pc in January."

After months of subdued demand putting pressure on prices, alloy prices slowly started to rise in early December as supply of Russian material declined in the spot market. Russia exported just 394t of ferro-titanium in November, down from 802t in October and down sharply from 2,514t in September, according to trade data. The average monthly exports for the year to date was 2036t.

Prices for Russian grade alloy rose to $6.35-6.70/kg on 9 December, up from $6.25-6.50/kg the week before on 1 December. Western grade metal climbed slightly to $6.80-7.20/kg on 9 December before falling back slightly to $6.65-7.20/kg on 14 December.

Despite rising spot prices, recent tenders for the first quarter have not finished at encouraging levels for producers, who are increasingly squeezed between scrap merchants and their customers. And many European producers opted out of participating in these tenders because of the low bid prices.

One tender for 500t was concluded by a German steel mill at $6.79/kg for the first quarter, while 100t of Russian and European alloy was purchased by an Indian steel producer for the first quarter at $6.40/kg.

Although tender prices were lower, market participants expect low-priced Russian material to dry up early this year, tightening supply to Europe.

By Thomas Kavanagh