FOCUS: Ferro-titanium suppliers anticipate multi-year price highs on imbalanced supply-demand

European ferro-titanium prices could hit multi-year highs in the coming weeks against strengthening demand from steelmakers and increasingly tight supplies of scrap, alloy suppliers in Europe told Fastmarkets.

Delivered duty-paid prices in Europe will set a new annual peak if prices increase at all from the top end of the current range, and the market will equal a more than six-year high if prices reach $6.10 per kg in the near term, as some suppliers expect.

But one of two traders reckon the upward trajectory in the current rally may be limited given a seemingly cautious recovery in steel production that was slashed due to the impact of measures to tackle the spread of the Covid-19 pandemic.

Steady demand for prompt material from steel mills for the first quarter of next year pushed the ferro-titanium spot price to $5 per kg on the high end for the first time since May 20 in a 14-week bull run on Wednesday November 25. The ferro-titanium 70% Ti, max 4.5% Al, ddp Europe spot price reached $4.75-5 per kg on Wednesday, up 15 cents from a week before.

There are bigger steelmaker tenders for first-quarter shipments both in Europe and Asia coming, which suppliers expect to push up the spot price further toward $6 per kg in the next few weeks. The market hit annual highs of $5.50 per kg and $6.05 per kg in April 2019 and September 2018 respectively. The top end of the range reached $6.10 per kg in September 2014.

Scrap markets were also reported higher both in low and higher content tin grades, with solids also showing buying interest and prices as high as around $1.35 per lb. Fastmarkets assessed the titanium scrap turnings, unprocessed type 90/6/4, 0.5% Sn max, cif Europe price at $0.95-1.05 per lb on November 25, from an annual low of $0.60-0.65 per lb through July into early September.

Higher tin content titanium scrap turnings, unprocessed type 90/6/4, 0.5-2% Sn max, cif Europe rose to $0.85-0.90 per lb on the same day, from an annual low of $0.50-0.55 per lb in the same period.

“There are a lot of buyers [steel mills] on the market that want to make spot deals and there are traders looking for material, as well as ferro-titanium producers that do not have enough free parcels,” one European alloy producer said. “We could sell 30% more alloy than we currently can if we had the production capacity. The scrap side is also increasing, and already some suppliers are offering better feedstock quality, knowing the typical scrap turnings [0.5% Sn] are not really available.”

“We are just about sold out of prompt material until after Christmas, and we are refusing to accept any bids below $5.50 per kg for January delivery,” a UK-based producer said. “We cannot see an end in sight to the current price increases, and we have a current buying inquiry for 860 tonnes of alloy from a major Asian steelworks for the first quarter but we cannot hope to meet that demand at any price. There is no scrap available below $1 per lb and the scrap suppliers are looking for $1.05-1.10 per lb.”

Ferro-titanium producers say scrap suppliers are struggling to offer enough material for demand through the first quarter of 2021, so they expect the price rally to last for the next few months.

But some traders had their doubts: “In essence there is less demand from the specialty steel sector in general due to Covid-19 and national lockdowns, however there is also less supply, again due to lockdowns and the aerospace industry not generating titanium scrap,” one trader said. “It seems that the lack of scrap is more important than the relatively slow demand from the steel sector.”

Steelmakers, aerospace
For their part, steelmakers were mixed in their views about near-term steel production, with one steel mill telling Fastmarkets that it expected first-quarter smelting schedules to match the rate of the same quarter of 2020 before the impact of the pandemic in Europe. Another steel mill in Germany said it was being more cautious and extending its reduced rate of production, with a break in output every three weeks, between January and March next year.

The scrap shortage has been mostly due to aircraft builders cutting production amid the Covid-19 pandemic, although ferro-titanium producers may use premium grade solids if turnings are unavailable. Still, smaller ferro-titanium producers in Western Europe that have smaller furnaces prefer to use turnings instead of solids to cut energy costs and quicker smelting schedules.

Even though some airlines, such as British Airways, Qantas and Delta Airlines, have announced plans to scrap some of their fleet, such as the bigger Boeing 747s, it is likely to take a long time for that scrappage to reach the market. Generally aircraft are dismantled one or two planes at a time, but not in bigger numbers, according to industry sources.

Last month, sales director at online sales platform Global AVX Stephen Kelly said there would be a glut of metal when aircraft come off lease. A total of 1,300 commercial passenger planes are coming off lease in 2021, and by the end of this year 2,000 planes will never fly again, up from 680 in 2019, he said.
“For the first time ever, the majority of them do not have an onward home to go to,” he said.

Any recovery in demand for aircraft is expected to be slow, with a full return to demand not expected for at least a few years, depending on a full, successful implementation of vaccines against Covid-19, Fastmarkets understands. But it will also need fully restored passenger confidence in air travel and considerable government support for the airline industry, both of which are uncertain at present.

A week ago the International Air Transport Association (IATA) and the International Transport Workers’ Federation issued a joint statement calling for urgent government intervention in funding, as well as the urgent implementation of testing regimes to speed up the recovery in air travel.

The impact of travel restrictions and quarantine measures have effectively shut down the aviation industry, grounding planes, and leaving infrastructure and aircraft manufacturing capacity idle, the statement said.