by Sylvain Gehler Specialty Metals Company€¦ · Kazakhstan Japan Ukraine China Russia Total...
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by Sylvain Gehler Specialty Metals Company
Transcript of by Sylvain Gehler Specialty Metals Company€¦ · Kazakhstan Japan Ukraine China Russia Total...
by Sylvain Gehler
Specialty Metals Company
Market Update
• Sluggish demand for Titanium due to drop of oil price
• Decreased interest for fuel-efficient long range aircraft
• New desalination plant projects suspended
• 300 bln USD decrease of investments in oil and gas industries
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Market Update
IMPACT ON TITANIUM INDUSTRY
• Share of single aisle aircraft in the backlog is increasing (A320, B737 – 5-7% of Titanium content per plane) and intake of new orders for long range aircraft (A350, B787 – 14-15% of Titanium content per plane) is slowing down
• Usage of Titanium in the industrial market already decreased by 30%
• Substitution of Titanium by cheaper metals
• Increase of inventory at Titanium producers
• Upstream Titanium production slowdown
• More competitive environment which is forcing pricing down to level seen 5 years ago
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Airbus Orders Backlog6th October 2016
Aircraft Firm Order Backlog
Single Aisle (A320, A320NEO)
5,627
Long Range (A330, A350XWB)
1,117
Large Aircraft (A380) 125
Total 6,869
Source: Airbus Orders & deliveries
Aircraft Firm Order Backlog
Boeing 737 family 4,350
Boeing 747-800 15
Boeing 767/777 family 553
Boeing 787 family 694
Total 5,612
Boeing Orders Backlog30th September 2016
Source: www.boeing.com
The backlog of Airbus and Boeing is still strong.The proportion of single aisle in the backlog has increased dramatically:Boeing: 77% of the total backlog (B737 family)Airbus: 82% of the total backlog (A320 family)
Aerospace market
Aerospace market
• Demand for Titanium against forecast given 3 years ago by the OEMs has decreased by 20% to 30% depending on the aircraft manufacturer.
• Production of single aisle aircrafts is planned to reach 60 per month by 2018, subcontractors have already warned OEMs of potential supply chain problems.
• Decrease of production of Titanium-intensive Airbus A350 because of supply chain problems.
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Industrial Market
• Shipbuilding activity almost stopped.
• Orders for desalination plants have collapsed.
• No investments planned in the oil and gas industry.
• As a result, decrease of Titanium mill product prices for the industrial market.
IMPACT ON TITANIUM SPONGE PRODUCTION
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World Titanium Sponge Production per country and Total
8
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
225,000
250,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (e)
CHINA JAPAN RUSSIA, NORTH AMERICA KAZAKHSTAN UKRAINE TOTAL
Between 2012 and 2016 world sponge production has decreased by 73,551 mt
Titanium Sponge Production in CIS countries
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0
25,000
50,000
75,000
100,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (e)
RUSSIA, KAZAKHSTAN UKRAINE TOTAL
Drop of Titanium sponge production between 2012 and 2016 in CIS countries is 22,700
North America Titanium Sponge Production
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0
2,500
5,000
7,500
10,000
12,500
15,000
17,500
20,000
22,500
25,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (e)
In spite of increase in 2014, US Titanium sponge production dropped by 8,000 mtbetween 2012 and 2016.
US Imports of Titanium Spongefrom Kazakhstan, Japan, China, Russia and Ukraine
26,382
24,900
16,763
20,540
33,751 33,628
19,943
17,720
20,694
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2007 2008 2009 2010 2011 2012 2013 2014 2015
Kazakhstan Japan Ukraine China Russia Total
Source: USGSImports have been higher than actual requirements and have contributed to the build-up of large inventory in the US.
US Imports of Titanium Spongefrom Kazakhstan, Japan, China, Russia and Ukraine
8 months of 2015 vs 8 months of 2016
1,620
45
10,821
9,844
1,100
44 871
49 229
164
14,671
10,149
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
8 months of 2015 8 months of 2016
Kazakhstan Japan Ukraine China Russia Total
Source: USGS
US imports have started to decrease,from 1/01 to 31/08/2016 imports decreased by 4,522 mt as compared to the same period of 2015
Titanium Sponge Production in Asian countries
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0
25,000
50,000
75,000
100,000
125,000
150,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (e)
CHINA JAPAN TOTAL
Decrease or production between 2012 and 2016 is substantial at 42,851 mt
12,000
26,000
46,500
12,600
61,200
88,000
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
Ukraine Kazakhstan Russia USA Japan China
capacity
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World Titanium sponge capacity decreased in 2016 (decrease of 46,000 mt against 2015)
12,000
26,000
46,500
12,600
61,200
88,000
6,500 9,000
37,500
10,000
42,000
60,000
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
Ukraine Kazakhstan Russia USA Japan China
capacity production
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Average rate of sponge capacity usage for production is 67%
US Titanium Sponge Stocksmetric tons, end of year/quarter
10,800
18,100
25,200
22,900
25,000
28,900 27,600
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2011 2012 2013 2014 2015 end Q1 2016 end Q2 2016
Source: USGS
Titanium Sponge Stocksmetric tons, end of year
US, 10,800
US, 18,100
US, 25,200
US, 22,900
US, 25,000
US, 27,600
EU & Asia, 15,000
EU & Asia, 20,000
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2011 2012 2013 2014 2015 end of Q2 2016
Source: USGS for US inventory
At the end of Q2 2016 we estimate world sponge inventory (except Russia and China) to be 47,600 mt = 49% of annual sponge production of Kazakhstan, Ukraine and Japan
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CONCLUSION
Titanium demand for the aerospace industry will remain strong but not at the level expected by the industry 5 years ago. As a result there is today an overcapacity in Titanium sponge capacity and production. The industry has to adjust their capacity to the actual demand.
Because of lower prices of nickel and copper some substitution is going on mainly in tubing for the industrial market. This is an additional challenge to the Titanium industry in this weak market.
The high level of inventory of Titanium sponge is hurting the industry at large and sponge producers must understand that excess inventory will remain for a few years
Sponge producers will need to adopt a new strategy to stabilize sponge supply taking into account these new factors.
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THANK YOU FOR YOUR ATTENTION!
