Oct. 26 (Bloomberg) -- Osaka Titanium Technologies Co., the world’s second-largest producer, plans to raise contract prices for the first time in three years because of higher costs and a recovery in aviation demand, including in China.
The company is close to settling a “mid-single” digit percentage point increase with most of its overseas customers for calendar 2011, Shozo Nishizawa, president of the Amagasaki-based company, said in an interview. The company produces titanium sponge, a semi-processed material that is refined to make the lightweight and corrosion-resistant metal used in power plants and by aircraft makers such as Boeing Co.
“The move illustrates that titanium and other material users are ready to accept price increases amid strong demand in emerging markets,” said Yasuhiro Matsumoto, a senior analyst at Shinsei Securities Co. in Tokyo.
Air China Ltd. the world’s largest carrier by market value, said last month it will buy four Boeing 777-300ER planes for $1.15 billion as passenger numbers gain. Nishizawa, who took office last year, plans to hire more than 100 temporary workers by December to meet the faster-than-expected rebound in demand.
Osaka Titanium rose as much as 2.3 percent and closed 1.3 percent higher at 3,925 yen at 3 p.m. in Tokyo trading, reversing a decline of as much as 2.5 percent. The shares have risen 54 percent this year.
Airbus SAS, the world’s largest planemaker, said last month it may win orders from Chinese carriers in coming months as the economic recovery spurs demand for travel. Passenger numbers in China have jumped 18 percent this year amid domestic growth and an international recovery in business and leisure travel.
Osaka Titanium will reach full production in the second half of the year ending March 31 and expand capacity in the next fiscal year, Nishizawa said. The cost of titanium ore is rising more than anticipated as demand increases in China and suppliers reopen suspended mines, he said.
The company’s overseas customers include Titanium Metals Corp., the Dallas-based supplier of the metal to Boeing. Osaka Titanium also supplies titanium sponge to shareholders Sumitomo Metal Industries Ltd. and Kobe Steel Ltd.
“Raw material prices are going up and we need to prepare for production facilities and arrange for workers in advance,” Nishizawa, 62, said yesterday in the interview in Tokyo. The company is likely to settle higher contract prices with “most customers,” he said.
Osaka Titanium plans to produce at an annual rate of about 27,000 metric tons of titanium sponge in the six months through March 2011, 50 percent more than the 18,000 tons in the first half, Nishizawa said. It will likely raise output by 30 percent to 35,000 tons in the following fiscal year, he said.
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