OAO VSMPO-Avisma, the world’s biggest titanium producer, said China poses a threat to the market within a decade as the country increases output.
“While the Chinese presence is not yet that noticeable, in five, seven to 10 years, the Chinese factor will become significant,” Chief Executive Officer Mikhail Voevodin said in an interview on April 1 in Moscow.
China entered the market by producing non-aviation titanium in niche areas such as golf clubs, pushing Japanese producers to target aircraft makers, often with discounted prices, said Voevodin. That creates difficulties in contract talks with buyers such as Boeing Co. and Airbus Group NV. VSMPO-Avisma supplies 30 percent of the titanium used in the aviation market.
Voevodin said he’s concerned that China will repeat tactics used in the magnesium market, where its producers squeezed out rivals by cutting prices. China has started to export welded titanium pipes, used in oil drilling to shipbuilding, at a 20 percent discount to the market, according to the CEO.
VSMPO-Avisma seeks to increase its annual output to 40,000 metric tons in 2020 from 30,000 tons, Voevodin said.
China and Russia together account for almost 80 percent of global titanium output, according to Bloomberg Intelligence data.
China’s exports of titanium bars, roads, shapes and sections almost tripled from 2009 to 2013 to 4,462 tons, according to International Titanium Association data.
VSMPO-Avisma’s sales haven’t been hurt by U.S. and European sanctions against Russian individuals or state-controlled companies, according to Voevodin. Russia’s Rostec State Corp. holds 25 percent plus one share of VSMPO-Avisma, and Rostec CEO and VSMPO-Avisma Chairman Sergey Chemezov is on the U.S. and European Union blacklist.
“Quite the contrary, our partners had fears that Russia may ban exports of titanium,” he said. “Thus they asked us to create inventories of our products in the U.S. and Europe, sufficient for half a year of consumption.”
VSMPO-Avisma fell 0.5 percent to 8,900 rubles in Moscow trading, paring this year’s gain to 6.7 percent.
While VSMPO-Avisma continues to buy ilmenite, used in titanium production, from Ukraine, it has also started to make purchases from Australia, according to Voevodin. The company has stockpiles of 55,000 tons, enough for several months of work.