by Sylvain Gehler Specialty Metals Company

Transcription

1 by Sylvain Gehler Specialty Metals Company

2 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 2

3 Market Update IMPACT ON TITANIUM INDUSTRY Share of single aisle aircraft in the backlog is increasing (A320, B % of Titanium content per plane) and intake of new orders for long range aircraft (A350, B % 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 3

4 Aerospace market Airbus Orders Backlog 6th October 2016 Boeing Orders Backlog 30th September 2016 Aircraft Firm Order Backlog Aircraft Firm Order Backlog Single Aisle (A320, A320NEO) Long Range (A330, A350XWB) 5,627 1,117 Boeing 737 family 4,350 Boeing Boeing 767/777 family 553 Large Aircraft (A380) 125 Total 6,869 Boeing 787 family 694 Total 5,612 Source: Airbus Orders & deliveries Source: 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)

5 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. 5

6 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.

7 IMPACT ON TITANIUM SPONGE PRODUCTION 7

8 World Titanium Sponge Production per country and Total 250, , , , , , ,000 75,000 50,000 25, (e) CHINA JAPAN RUSSIA, NORTH AMERICA KAZAKHSTAN UKRAINE TOTAL Between 2012 and 2016 world sponge production has decreased by 73,551 mt 8

9 Titanium Sponge Production in CIS countries 100,000 75,000 50,000 25, (e) RUSSIA, KAZAKHSTAN UKRAINE TOTAL Drop of Titanium sponge production between 2012 and 2016 in CIS countries is 22,700 9

10 North America Titanium Sponge Production 25,000 22,500 20,000 17,500 15,000 12,500 10,000 7,500 5,000 2, (e) In spite of increase in 2014, US Titanium sponge production dropped by 8,000 mt between 2012 and

11 US Imports of Titanium Sponge from Kazakhstan, Japan, China, Russia and Ukraine 40,000 35,000 33,751 33,628 30,000 24,900 25,000 20,000 26,382 20,540 19,943 20,694 15,000 10,000 16,763 17,720 5, Kazakhstan Japan Ukraine China Russia Total Source: USGS Imports have been higher than actual requirements and have contributed to the build-up of large inventory in the US.

12 US Imports of Titanium Sponge from Kazakhstan, Japan, China, Russia and Ukraine 8 months of 2015 vs 8 months of ,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000-1,620 14,671 10,821 10,149 9,844 1, months of months of 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

13 Titanium Sponge Production in Asian countries 150, , ,000 75,000 50,000 25, (e) CHINA JAPAN TOTAL Decrease or production between 2012 and 2016 is substantial at 42,851 mt 13

14 100,000 90,000 88,000 80,000 70,000 60,000 61,200 50,000 46,500 40,000 30,000 26,000 20,000 10,000 12,000 12,600 - Ukraine Kazakhstan Russia USA Japan China capacity World Titanium sponge capacity decreased in 2016 (decrease of 46,000 mt against 2015) 14

15 100,000 90,000 88,000 80,000 70,000 60,000 61,200 60,000 50,000 40,000 46,500 37,500 42,000 30,000 26,000 20,000 10,000 12,000 6,500 9,000 12,600 10,000 - Ukraine Kazakhstan Russia USA Japan China capacity production Average rate of sponge capacity usage for production is 67% 15

16 US Titanium Sponge Stocks metric tons, end of year/quarter 35,000 30,000 25,000 20,000 25,200 22,900 25,000 28,900 27,600 15,000 18,100 10,000 10,800 5, end Q end Q Source: USGS

17 Titanium Sponge Stocks metric tons, end of year 50,000 45,000 40,000 EU & Asia, 15,000 EU & Asia, 20,000 35,000 30,000 25,000 US, 27,600 20,000 15,000 10,000 5,000 US, 10,800 US, 18,100 US, 25,200 US, 22,900 US, 25, end of Q Source: USGS for US inventory At the end of Q we estimate world sponge inventory (except Russia and China) to be 47,600 mt = 49% of annual sponge production of Kazakhstan, Ukraine and Japan

18 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. 18

19 THANK YOU FOR YOUR ATTENTION! 19