Longbow research predicts: Titanium market demand is in "sweet spot"

Author: Michael C. Gabriele

The  global titanium market is entering the “sweet spot” of demand in  mid-2018, driving the recovery of factory pricing leverage. Industrial production growth has returned to its highest level since 2011. Industrial  growth in titanium will increase by 8% to 10% in 2019 (compared to  2018), thanks to more favorable industrial and energy activities and  stronger aerospace demand.

These  are the main findings in the outlook report, "The Titanium market is  updated in the middle of the year, highlighting the 2018 trend and the  five-year outlook," said Chris Olin, senior vice president of research  at Cleveland Longbow Research. Longbow  expects total demand in the Western world titanium market to reach 240  million to 245 million pounds in 2018, an increase of 6-7% over 2017.  The global outlook (including China and Russia) is 375 million to 380  million pounds, up 6% year-on-year. More than a year.

Olin  wrote in the report: "Assuming aerospace OEMs achieve long-term  delivery goals and the macro environment remains relatively healthy, we  do not see peaks before 2021-2022 (global industrial titanium  industry)." "Titanium sponge and melting The  body operating rate should start to rise. Based on the latest modeling  assumptions, we are increasing our pricing prospects for two to three  years."

The Longbow report shows that industrial demand should rise based on four key assumptions. It is expected that the shipbuilding market will see good growth, which will help Russia's demand. The oil and gas market will have 25-30% upside, accounting for 8-10% of industrial consumption. By  2020, no major desalination projects will affect the global market  (then desalination will increase industrial demand by 3 million pounds).  Finally, consumer price index (CPI) demand growth is expected to be 1%, which may lead to an increase in industrial demand. The  consumer price index is usually defined as an indicator of the weighted  average of the price of consumer goods and services, usually used to  track inflation.

Olin  said that the consensus outlook for titanium growth in 2018 is 7-8%  higher than in 2017 and is expected to grow by more than 8% in 2019. In contrast, the nickel-based alloy group is expected to grow 5-6% from 2017 in 2017. However,  Olin pointed out that this market is seen as having a 7-8% increase  during the 2019 period, subject to new jet engines and oil and gas  demand. The outlook for the aviation aluminum sector has grown by 2-3% this year, with similar growth levels in 2019. Olin cautioned that the "channel" may still have too much inventory due to the lingering 777 hangover and A330 cuts. Despite the suspension of customer activity in the first quarter of 2018, “Channel Power” is still accelerating.

As  for its definition of “channels” research, Changgang explained that  every quarter, its analysts communicate with several global steel mills,  distributors and counterfeiters who have been exposed to titanium,  nickel-based alloys, special alloys and Aluminum sheet products - including buyers and sellers. Longbow  believes that the collected data and analysis charts provide a “solid  agent for special material coverage groups”, revealing the general  meaning of demand and pricing relative strengths/weaknesses.

According  to Longbow, channel research and analysis of individual end markets can  indirectly browse key channels such as aerospace, power generation, oil  and gas. “We  usually ask senior management about current demand, full-year  expectations, inventory holding intent, and price visibility/foreground.  Our data can be compared to trends in the first two cycles.  Historically, our surveys are clear The  inflection point is the leading indicator of coverage. There is usually  a three- to six-month lead time between order fluctuations at the  distribution/forging level and top-line performance of publicly traded  companies. This “delay” is mainly related to extended production time,  lag Pricing effects are related to inventory management."

Based  on this channel research, Changbook saw the re-acceleration of global  demand growth, and Titanium as the strongest specialty materials product  group tracked by the outlook report. Olin  said, “The second quarter of our proprietary survey data shows that  recent order activity is even better, distributed across all specialty  material categories. Supply is tight until the second half of 2018.  Since the beginning of 2018, the manufacturer’s delivery The  time has increased by one to two weeks, and the titanium index is  currently at 33 weeks (including 50-60 weeks of sheet and 20 weeks of  ingot).

“For dealers, short-term inventory intent can still be described as 'positive',” Olin continued. “46%  of net downstream companies said they plan to build internal warehouses  in the next three months, up from 29% in the previous quarter. This is  the most optimistic recent for our survey in the past four to five  years. Readings.  (Yes) Better pricing data points are available across most materials  and product forms. Both upstream and value-added spot pricing updates  provided by the contacts are consistent with improvements in global  demand/supply prospects."

As  a speaker at the TITANIUM 2017 conference and exhibition in Hollywood,  Florida, Olin, under the auspices and organization of the International  Titanium Association, previewed many of the predictions in the current  outlook report and declared that the longbow is "optimistic" about  titanium. “The macro background is strong and people’s confidence in the US economy is growing,” he said at the 2017 conference. “Industry-related  markets are becoming more and more difficult to ignore. Aerospace has  become a growing demand. The growth of single-channel jet production and  the introduction of next-generation aircraft designs have finally  offset last year’s (Boeing) 777 production cuts. The  most consistent feedback we get is “the counterfeiters are very busy.”  The stocks are more balanced and distribution is more likely to  “overweight” in the coming months.

According to the Longbow report, as always, any short-term business prospects need to consider risks and uncertainties. For  example, recent discussions about global trade and the lingering  tariffs of the Trump administration may slow demand and break market  sentiment. Fuel surcharges are now increasing to ticket prices, which may lead to a slowdown in passenger traffic. The US market is fully employed, but can aerospace find enough high-end labor to meet production plans? What happens if one of the main counterfeiters breaks? Is there enough nickel-based alloy demand to meet the further needs of jet engines?

According  to the report, as for the procurement of preferred materials, 73% of  companies related to titanium said they have difficulty finding various  alloy grades. In  contrast, 40% to 45% of companies associated with nickel-based alloys  say they have procurement problems and 20% use stainless steel.

Longbow  Research provides quarterly updates for a variety of metals and  aerospace markets, including specialty materials, through proprietary  investigations and independent industry analysis. Longbow  uses industry contact networks to participate in rapid surveys and  convert reviews/data into analytical charts every quarter. Once  the study is completed, Longbow will generate a report highlighting  demand dynamics, end market strengths/disadvantages, inventory status,  and lead time/pricing trends.