Titanium Industrial Base, Price Trends, and Technology Initiatives

by Seong, Somi; Younossi, Obaid; Goldsmith, Benjamin W.; Lang, Thomas; Neumann, Michael J.

• ISBN13: 9780833045751
• ISBN10: 083304575X
• Format: Paperback
• Copyright: 2009-04-15
• Publisher: RAND Corporation

Summary

Titanium accounts for a significant portion of the structural weight of many aircraft. Its high strength-to-weight ratio, great strength at high temperatures, corrosion resistance, and thermal stability make it ideal for airframe structures. However, in recent years a combination of multiple factors has caused a major spike in titanium prices that is expected to significantly influence the acquisition costs of future aircraft. This monograph examines the titanium industrial base, titanium production technology, and the factors underlying price fluctuations in the titanium market to assess their implications for the production cost of future airframes. The authors also suggest how the Department of Defense might mitigate the economic risks involved in the titanium market and reduce the cost of raw materials used in military airframes. In contrast with existing studies, which mainly focus on aircraft demand cycles in analyzing titanium price fluctuations, the monograph highlights the role of supply-side drivers, China's impact on the titanium market through a cross-market substitution effect, the significance of industrial demand, and the increase in spot market transactions. Book jacket.

Table of Contents

Preface	p. iii
Figures	p. ix
Tables	p. xi
Summary	p. xiii
Acknowledgments	p. xxiii
Abbreviations	p. xxv
Introduction	p. 1
Background	p. 1
Study Objective	p. 4
Approach	p. 5
Outline of the Monograph	p. 6
Titanium Processing	p. 7
Titanium and Its Properties	p. 7
Titanium Metal Products	p. 8
Ores and Concentrates	p. 8
Sponge	p. 8
Ingot	p. 9
Mill Products	p. 9
Production Processes	p. 9
Extracting Titanium Metal from Ore	p. 10
Producing Ingot from Sponge	p. 10
Primary Fabrication: Processing Ingot to Mill Products	p. 13
Secondary Fabrication: Fabrication Parts from Mill Products	p. 14
Scrap	p. 14
Ferrotitanium	p. 15
Production Cost Structure	p. 16
Refining Cost	p. 17
Fabrication Cost	p. 17
Buy-to-Fly Ratio	p. 18
Cost-Saving Technical Changes	p. 18
Summary	p. 19
The Titanium Industrial Base and Other Market Characteristics	p. 21
Geographic Distribution	p. 21
Major Producers	p. 22
Major Buyers	p. 24
Substitutes and Complements	p. 28
Market Price	p. 29
Oligopolistic Price	p. 29
Market Size and Market Risks	p. 29
Spot Market Versus Long-Term Contracts	p. 30
Import Tariffs	p. 31
Summary	p. 32
Supply-Side Drivers of Titanium Price Fluctuations	p. 35
Availability and Price Trends of Raw Material	p. 35
Sponge and Scrap Shortage	p. 36
Depletion of U.S. Titanium Sponge Stockpile	p. 38
Responsiveness of Production Capacity to Demand	p. 39
Excess Production Capacity of Titanium Sponge Until 2004	p. 40
Titanium Sponge Production Capacity Expansion After 2004	p. 41
Other Supply-Side Factors	p. 42
Entry and Exit	p. 42
U.S. Titanium Metal Production Capacity Trends	p. 44
Berry Amendment	p. 45
China's Impact on Titanium Prices	p. 48
Summary	p. 49
Demand-Side Drivers of Titanium Price Fluctuations	p. 51
Three Primary Demand Drivers of the Commercial Aircraft Manufacturing Industry	p. 52
Commercial Aircraft Orders Skyrocketed	p. 52
Titanium Content per Aircraft Increased	p. 53
Increased Demand from Military Aircraft Manufacturers	p. 53
Increased Demand from the Industrial Sector	p. 55
Increased Spot Market Transactions	p. 57
Interaction of Demand- and Supply-Side Drivers to Bring Out the Recent Turmoil in the Titanium Market	p. 59
Relationship Between Titanium Price Trends and Demand Shocks from the Aircraft Manufacturing Industry	p. 59
Titanium Demand from the Commercial Aircraft Industry and Titanium Price Trends	p. 60
Titanium Mill Product Price Elasticity Before 2004	p. 64
Price Elasticity of Titanium Demand Since 2004	p. 68
Summary	p. 69
Market Prospects and Emerging Technologies	p. 73
Market Prospects	p. 73
Prospects of the World Titanium Sponge Supply	p. 73
The Impact of China on the Titanium Supply	p. 76
Future Demand for Titanium	p. 77
Summary: Future Titanium Market Balance	p. 81
Developments in Titanium Production Technology	p. 82
Emerging Production Techniques	p. 83
Improved Titanium Extraction and Refinement	p. 84
Titanium Powder Metallurgy	p. 87
Single-Melt Processing	p. 88
Solid Freeform Fabrication	p. 90
Improvements in Machining	p. 91
Cost-Saving Potential of Emerging Technologies	p. 92
Summary: Developments in Titanium Production Technology	p. 93
Conclusions and Policy Implications	p. 95
What Triggered the Recent Titanium Price Surge?	p. 95
China's Impact on Titanium Prices	p. 97
Market Prospects and Emerging Technologies	p. 97
The Titanium Market in the Near Future	p. 97
Titanium Production Cost Drivers	p. 98
Emerging Technologies	p. 99
Policy Implications	p. 101
Long-Term Contracts Are Needed to Mitigate Market Volatility	p. 102
Monitoring Market Trends to Improve Forecasting Power	p. 103
Reducing BTF Ratio and Optimizing Scrap Recycling	p. 105
Searching for New Technological Opportunities	p. 106
Appendixes
Aircraft Included in the Titanium Demand Calculation and Data Sources	p. 109
Questionnaire to Industry Experts	p. 111
Supply- and Demand-Side Conditions Resulting in the Recent Titanium Market Turmoil	p. 119
Bibliography	p. 123
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