Special Alloys Stay Strong

Precious things come in small packages. In today’s specialty metals market, hefty profits are to be made with materials normally sold in smaller lots. Materials like titanium, molybdenum, tungsten and even zinc can turn a pretty profit for the dealer who is willing to change his or her marketing mindset from dealing in thousands of tons to dealing in thousands of pounds or less.

The military and defense industries are wild cards in the specialty metals business. A sudden upsurge in the number of defense contracts would be like a breath of fresh air to the business. Today, however, the defense industry across most of the United States has gone cold, taking with it much of the supply and demand for specialty materials. But an upsurge in new mill construction in the Asia-Pacific Rim promises to help pick up the slack.

The specialty metal most frequently seen in recycling operations is titanium, commonly used in coatings and as an alloy, especially in steel.

"Titanium is the one metal that seems to be surprising everyone by moving up," says Si Wakesberg, New York bureau chief and consultant to the Institute of Scrap Recycling Industries, Washington. "For two or three years it was so quiet. However, the RMI titanium price for 1996 has been raised, and that was the third announced increase this year. We are cautious because it usually is such a dull market, but it is moving up."

The boost in aircraft alloy sheet prices can only be seen as good news for all segments of titanium. Even better news would be an airline industry-wide move toward updating an aging fleet of commercial jets.

A potential kink in the titanium market was eliminated when titanium processor Timet, Denver, announced in early August it had reached an accord with its union over a dispute at its Toronto plant. Although the actual strike ended early in 1995, labor was working without a contract for many months and some observers were concerned that it could have a dampening effect on markets.

Michael Metz, director of marketing for Timet, agrees that the industry finally appears to be headed out of the deep slump in which it has been mired for the past four years. At the end of 1994, the firm forecasted 1995 U.S. producer shipments at 40.5 million pounds, up 6 million pounds over 1994 shipments. However, they recently revised that number upward to 42 million pounds.

"The global price of titanium sponge and scrap is a major determining factor in the financial performance of the U.S. titanium industry," he adds. "Prices for all forms of scrap are up dramatically from year-ago levels. Raw titanium machining chips have increased in price two to three times during the past 12 to 18 months.

"The overall improvement in the titanium industry can be attributed in part to the commercial aerospace market," continues Metz. Global unit deliveries are expected to increase 10 percent in 1997 compared to 1995. Allowing 12 to 18 months from time of mill product shipment to actual aircraft delivery places the increased titanium requirements in 1995 and 1996.

"Bulk weldables have seen similar price increases," says Metz. "Very strong demand from the ferro-titanium industry to feed the booming steel mill business, together with higher titanium recycling requirements, have driven these increases." He also points out that any decision by the U.S. Air Force to move forward on a significant acquisition of titanium-intensive aircraft, not funded at this time, would represent an upturn for the market. The C-17 airlift, F-22 fighter and B2 bomber fall in this area.

Planes use a lot of titanium. A Boeing 777, for instance, has more than 12 percent of its 285,000-pound finished weight in titanium. That makes it the most titanium-intensive commercial airplane ever designed – both on a percentage and an absolute weight basis.

Demand for high-temperature alloy is strong in the Southwest, as well. According to Barry Fleet, director of purchasing for Emco Recycling, Phoenix, the aircraft industry is the basis for supply of materials as well as for demand.

A recent large contract by McDonnel-Douglas for helicopters has kept demand up, flowing counter to what is seen in many areas of the country. "It’s a big boost in the arm," says Fleet. "Local demand has been strong during the past three months and it has been strong in the Northeast, as well."

"We’ve been seeing more in just the past six months than we’d seen in the past several years," agrees Jerry Turchin, president of California Metals, El Cajon, Calif. Part of the additional supply is turnings from specialty work, although locally the aircraft industry continues to be the leading user of titanium-based material.

"The price is holding firm on turnings, but not on the solids," continues Turchin. He credits some of the price difference to the eventual end-user: turnings can go into heat-treated steel products while the solids are not quite as easily absorbed.

"Until the aircraft industry picks up – once it gets hotter than a pistol – turnings will continue to do better here," he predicts.

In the South, however, it may take a while for the aircraft and defense industry to get hot again. Harold Mauldin, nonferrous purchasing agent for Atlanta-based Mindis Recycling, says titanium shipments are sporadic and he also sees little molybdenum movement.

Mauldin says the zinc market – mostly found in die-cast alloys – is off as well because of the situation with government contracts. "Any new zinc operations would be government contracts and there are no new contracts coming," he says. Listing several military bases in the vicinity of Florida, Alabama and Georgia, Mauldin notes that he does see some helicopter blade boxes, but not the blades. The strongest segment of the local industry appears to be high-temperature alloys, with about a dozen different alloys moving.

"The low titanium mill product shipment rates of the past several years has decreased industry scrap inventories due to lower generation rates," says Timet’s Metz. "The current surge in demand has put the system temporarily out of balance. As the low level of scrap inventories are consumed very quickly, apparent shortages arise and prices increase sharply until the production and consumption rates are again in balance.

"Given what we can see today, the outlook is for continued growth of titanium mill product shipments into 1996, with the industry reaching a plateau in shipments around 45 million pounds per year," he says.

The nickel market has been pleasantly strong this year, as well. The market saw a run-up in prices through June, July and early August. The main question on many observers’ minds was whether the hot July market could be sustained through the end of the year.

"I think demand will stay strong," says Emco’s Fleet. "We’ve established a new floor under the market and it will not slip back any time soon."

In Los Angeles, Alpert & Alpert’s Terry Baumsten reports that demand is good for nickel-based and stainless material. While the supply side of the equation remains tight, there is good demand from the steel mills throughout the region. Like everyone else, he keeps a finger on the pulse of the aircraft industry. "Aircraft alloy scrap availability has been lower and tighter," he says. He attributes that to the exodus of aircraft manufacturers from California during the past several years.

"Some manufacturers left, some relocated. The bottom line is that the scrap is not being generated here," Baumsten says. "Today, it is seldom we see great quantities of materials. Now it’s a few boxes or drums at a time."

However, the stainless steel market remains strong. Markets in Europe, the U.S. and the Pacific Rim all are perking along well. "Most of the West Coast is locked into the Pacific Rim for stainless shipments," he notes. Since output is limited compared to other locations, the market moves mainly containerized scrap rather than the bulk or barge shipments that are more common along the East Coast and Gulf States.

"Nickel is our major material here," says Jerry Stewart, vice president of Steelmet in Pittsburgh. "For the moment, melting nickel for the mills is readily available. Producers can buy what they want." Premiums of 15 cents to 18 cents over London Metal Exchange prices are being paid on the East Coast. European merchants were getting 12 cents to 15 cents over LME.

"Demand is certainly strong," says Stewart. "Consumption is high. The order books look good. While in some areas of the U.S., nickel-bearing scrap is off, the markets are still quite good in the Midwest and Southeast."

"Although it is a different picture here, demand is good," Baumsten says. "There is a lot of capacity coming on line in Taiwan and Korea, so it is likely nickel demand will be staying strong and even increase. Competitors are getting involved in the market and the supply of stainless will remain tight."

Demand from the Pacific Rim is a real factor in boosting prices on the West Coast.

"People often respond to a rising market by holding back material or forcing consolidators to buy ahead of the market," says Baumsten.

Agreeing that the nickel market is "surprisingly good," Wakesberg notes that it tends to be an on-and-off market like copper. "However, it is on a definite up-trend," he says. "This means the stainless market will be good. Chrome, molybdenum and cobalt all depend on nickel."

He also notes the cobalt market is holding "steady to a bit lower."

"Molybdenum has been a disappointing market," says Wakesberg. "Back as recently as March the ‘moly’ market was booming. But since then, it has moved down."

Several more companies lowered their prices in July and prices sagged downward to $5.50 per pound of moly oxide. Some worried observers see moly prices dropping into the $4 range before too long.

"At the end of April, nobody thought moly would go under $7," Wakesberg notes. He credits the dropping market to an older supply of material and a lack of demand.

At Commercial Metals, Clark sees molybdenum as a slow, but steady product.

Supplies of molybdenum certainly are not the problem short-term.

"Right now the moly supply-demand equation simply is out of balance," says Stewart.

However, he notes, the moly-containing steel, 316 stainless and moly bearing business has remained relatively strong in recent months.

Additional softening has been noted in tool-steel production, which has been down for some time.

Stewart credits the low moly prices to the oversupply of material coming out of Russia. Much of the material was pure moly which came out of existing stockpiles. With those stockpiles dwindling, there is hope that the moly market will return to an even keel somewhere down the road.

Most of the tungsten moving in the market today is tungsten-carbide. The material seems easily marketable in all areas of the country.

Mindis’s Mauldin says that the supply in his area is more a problem than marketing tungsten that does come in. "We used to see a lot coming from the machine shops for cutting operations," he says. "However, today the machine shops are not running full-bore and the supply is off."

CMC's Clark says the demand has been getting stronger, with demand pull coming from the aircraft engine market.

Changes in the laws regarding use of solders have brought quite a bit of new material – mainly tin – into the California market.

"We are doing quite well with tin," California Metals’ Turchin says.

Clark says he expects the price to be going up somewhat, but notes that any movement will be predicated on the brass and titanium markets.

During the next several quarters, it appears, the flow in most specialty metals should be quite good. With material streaming steadily into the supply lines, and vigorous demand at the other end of the pipe, the market should remain bright into 1996.