US Commerce Department launches Section 232 probe vs titanium sponge

The United States Commerce Department launched a Section 232 investigation into titanium sponge imports on Monday March 4 after domestic producer Titanium Metals Corp (Timet) filed a petition in September.

“US Secretary of Commerce Wilbur Ross accepted the Section 232 petition filed on September 27, 2018… and launched an investigation into whether the quantity or circumstances of titanium sponge imports into the United States threaten to impair the national security,” Commerce said on March 4.

While this marks the first petition filed by Exton, Pennsylvania-based Timet on Section 232 grounds, the company has previously claimed harm from overseas titanium sponge suppliers.

Timet had filed a petition against such imports with the International Trade Commission (ITC) in August 2017, which prompted the agency to launch an investigation during the same month.

Commerce subsequently initiated its own anti-dumping and countervailing duty probe into imports of the product from Japan and Kazakhstan in September 2017. But the ITC voted to end its investigation in October 2017, finding that product shipped by suppliers from the two countries did not harm the US industry. Commerce consequently halted its investigation.

Section 232 of the Trade Expansion Act of 1962 grants the US executive branch the ability to conduct investigations on certain imports that threaten US national security. Commerce must deliver a report of the findings of its investigation within 270 days of its launch. The president then has 90 days to determine whether to levy tariffs.

The main applications for titanium metal are in commercial and defense aircraft production.

“Titanium sponge has uses in a wide range of defense applications, from helicopter blades and tank armor to fighter jet airframes and engines,” Ross noted.

Timet is the only remaining domestic producer of titanium sponge, after Allegheny Technologies Inc (ATI) idled its titanium sponge production facility in Rowley, Utah, in 2016.

“Japan and Kazakhstan remain the only overseas sources for aerospace-quality sponge and are currently the significant to sole source of supply to ATI, Arconic and Perryman. Moreover, we believe the US is unable to satisfy demand [the US can produce 13,000 tonnes, excluding Rowley, versus 35,000 tonnes of consumption]. Oddly enough, we also believe Timet even buys a modest amount of imported titanium sponge,” KeyBanc Capital Markets analysts said in a March 4 research note.

Indeed, Japan and Kazakhstan accounted for 99.4% of titanium sponge imports in November, the latest month for which import data is available. That’s up from 97.5% in January 2018, US Geological Survey data show.

If tariffs are eventually levied on titanium sponge imports, higher feedstock costs would boost costs along the aerospace supply chain, from melters to forgers to original equipment manufacturers, and those costs would likely be passed down to aircraft producers like Boeing and Airbus, industry sources told Fastmarkets.

Timet revealed to Fastmarkets in October 2017 that the company had been supplementing some of its own titanium sponge capacity with imports from Japan.
Timet and Airbus did not immediately respond to requests for comment, and Boeing declined to comment.