Boeing 777 landing Photo: travellight at Suttlestock
Market participants across the titanium value chain are weighing the potential for certification and penetration of Chinese titanium sponge into aerospace and defence market applications, as they consider lower Chinese cost structures and tight global supply against strict qualification processes and geopolitical risk.
Supply of aerospace-approved titanium sponge is forecast to enter a deficit in the next four years, as Japanese, Saudi Arabian and Kazakh producers are operating at or near to full capacity utilisation, while ingot melters in the US and France are expanding capacity.
Ingot requirements for Airbus and Boeing’s build rates are due to outpace growth in vacuum-quality scrap generation next year, according to US titanium scrap processor Goldman Titanium, leaving a widening raw material gap that must be filled with sponge.
The turning point from surplus to deficit will depend on when Airbus and other original equipment manufacturers (OEMs) decouple their supply lines from Russia, and on the status of capacity expansions by Toho Titanium and Osaka Titanium in Japan.
China is well placed to swiftly grow exports because its domestic market is significantly oversupplied with sponge versus ingot capacity, and domestic sponge prices are consequently low, CCMA’s vice-president of special metals John Porter said at the International Titanium Association (ITA) conference in Austin, Texas in October.
China’s nine major producers produced 218,000t in 2023, up by 25% from 175,000t in 2022, the ninth consecutive year-on-year increase since 2015, China Nonferrous Metals Industry Association data show. China’s current titanium sponge production capacity stands at nearly 300,000 t/yr, according to industry estimates, and is expected to rise further in the coming three to five years.
“OEMs and raw material suppliers are actively seeking alternative solutions to stabilise and secure the sponge supply,” US specialty metals producer ATI’s vice-president of global commercial strategy, Marty Pike, said at the ITA.
“China is a significant producer of sponge, but when you think about the commercial aero engine market, it’s complicated. There are long qualification timelines to get certified, it takes a very long time and it’s going to be a while before China is qualified in the commercial aero-engine market.”
Aside from specification differences, titanium sponge quality is divided between standard quality (SQ) and premium quality (PQ), with the latter requiring additional inspections for oxygen and nitrogen contamination.
The aerospace qualification process for SQ sponge is in a range of 1-3 years, while PQ approvals can take upward of five years at minimum, industry sources said. SQ sponge is used for structural applications, while PQ is required for critical engine parts such as disks and blades, hence the longer qualification process.
Defence approvals tend to be more streamlined. Other end-markets such as the industrial and medical sectors still require product quality testing but could adopt Chinese-origin material sooner, if not already employed.
Most market participants are unsure whether Chinese sponge will penetrate critical aerospace applications irrespective of the process length, but expect it to penetrate standard quality uses in the next year or two. This would indirectly free up supplies of PQ sponge from approved sources — Toho and Osaka in Japan, and Ust-Kamenogorsk Titanium and Magnesium Plant (UKTMP) in Kazakhstan. Argus understands that certain Atlantic consumers of aerospace-grade sponge are currently testing Chinese material.
Airbus’ vice-president of metallic material procurement, Olivier Maillard, gave the green light to consider Chinese titanium at the ITA conference. “We have no objection on the principle on looking at Chinese sponge as a way to mitigate possible capacity shortages, so this is an option,” he said. But Maillard pointed out that Airbus itself is not directly certifying the raw material — that would fall to the melter and engine manufacturer.
Geopolitical risk adds another layer to considerations, heightened by efforts in the US and EU to reduce critical mineral dependency.
Industry eyes US imports
US imports of Chinese titanium sponge are rising despite high tariffs on the material (see chart).
© Argus Media, 2024
Titanium sponge price chart FAO MMTAThe US imported 815t of titanium sponge (HS code 8108200010) from China in January-August. Although still marginal against 17,950t imported from Japan in the same period, and 5,743t from Saudi Arabia, it is a clear increase from only 154t imported in 2023, and limited imports since China was last a net exporter in 2010-15.
The average reported customs price on imports from China was $7.81/kg cif US, or $10.93/kg duty paid, compared with imports from Japan at $11.75/kg cif US, or $13.51/kg duty paid, demonstrating a clear raw material cost saving for ingot melters.
Argus’ Chinese 99.7pc titanium sponge assessment was assessed on 17 October at an eight-year low of Yn43,000-44,000/t ($6.07-6.21/kg) ex-works China, down by 13pc year-to-date.
Argus’ TG100 long-term contract assessment by contrast currently stands at $11-12.50/kg du Rotterdam (see chart). Aside from freight and logistics adjustments, Argus’ 99.7 ex-works China assessment is lower than prices for shipment to the US because domestic Chinese consumption is structurally weighted toward industrial applications.
© Argus Media, 2024
All unwrought titanium imports into the US are subject to a 15pc tariff, and Chinese units are subject to an additional 25pc. In March, US senators introduced the Securing America’s Titanium Act, which would remove the catch-all 15pc duty on sponge, but leave the additional 25pc tariff on China.
The legislation would also require the president to monitor Chinese entry into the US supply chain and provides executive authority to reapply the tariff if necessary.
The bill has since been referred to the US Senate Committee on Finance, introduced in the House of Representatives and referred to the House Committee on Ways and Means. Further advancements will depend on the outcome of the US presidential and congressional elections on 5 November.
Europe’s import situation is more opaque owing to fewer granular data reported. EU imports of titanium sponge are not subject to import duties, because of autonomous tariff suspensions in place.
By Samuel Wood and Alex Nicoll
