Overall Economic Situation of China’s Titanium Industry and Existing Problems



Overall Economic Situation of China’s Titanium Industry and Existing Problems

The year 2015 is a year of transition and development for the Chinese economy, it also marks a year of industrial structure adjustment in the titanium industry.

Owing to investment slowdown, capacity expansion, shrinking demand as well as structural surplus of titanium products, prices of titanium products remained at low level. Titanium smelting and small & medium sized processing enterprises mostly sustained loss, the loss coverage in the titanium industry gradually expanded, 2015 also marks a year of winter for China’s titanium industry.

In 2015, China’s titanium sponge output is 62, 035 tonnes, down by 8.5% on Y-o-Y basis, domestic actual sales volume is 58, 567 tonnes, down by 5.9% on Y-o-Y basis; China’s output of titanium processing products is 48,646 tonnes, down by 2.1% on Y-o-Y basis, domestic actual sales volume is 37,416 tonnes, down by l2.4% on Y-o-Y basis.

In 2015, although titanium sponge output declined by 8.5% on Y-o-Y basis, production capacity on the contrary dropped significantly by around 50% compared to previous two years, recording only 88000 t/a, capacity utilization is 70.5%. This is mainly due to the fact that “de-capacity” process of titanium sponge started four years ago, whereas the “de-capacity” process of titanium ingot only began two years later, which is completed through furnace type conversion. In 2015 the capacity utilization of China’s titanium ingot is only 44.3%, mainstream furnace types of below 2 tonnes were gradually replaced by 5 tonnes above furnace types such as large vacuum consumable electrode melting furnace, and electron beam cold hearth. In the aspect of titanium products, main pure titanium sheets represented by the past “piece-type” rolled sheets were gradually replaced by cold/hot rolled strips & coils, tube products also evolved from the seamless tube in the past to welded tube.

According to statistics from relevant departments, among 506 titanium related enterprises registered in Baoji in 2015, due to sluggish market, now over 180 enterprises are facing shutdown or bankruptcy, accounting for over one third of registered titanium enterprises, titanium industry enterprises experienced unprecedented dilemma in real operation, domestic titanium industry entered “winter” period.

In the aspect of enterprise import/export trade, in 2015 import/export volume and net export volume of titanium sponge both dropped significantly, this also reflects the status quo of weak market demand; in 2015 import volume of titanium processing products increased by 11.4%. The main reason is that imports of high quality titanium strip, titanium alloy bar and titanium welded tube all increased to certain degree, whereas export volume basically stayed at the level in the same period last year, therefore, the net export volume of titanium processing products also correspondingly decreased by nearly 10%. Against the background of cooling global titanium market, demand of domestic high-end application fields for pure titanium strip for welding tube, titanium alloy bar for space and pharmaceutical, and titanium welded tube for coastal power station is steadily growing, which also reflects certain gap between the above-mentioned domestic titanium product varieties and overseas same- category products in terms of quality, colleagues in the domestic titanium industry still need to study hard and catch up.

In 2015, in the entire titanium industrial chain, enterprises attaching great importance to market, technology development, product differentiation, and diversification development, along with those emphasizing capital maneuver, and industry certification often received good performance. In summary, downstream enterprises in titanium industry performed better than upstream enterprises, titanium processing industry performed better than smelting industry, enterprises with little assets performed better than enterprises with heavily loaded asset.

In 2015, China’s titanium industry did not lack bright spots, for instance Baotai Group for the first time signed long-tern supply agreement with Bombardier, SSA of the United States, and China Aviation Supplies Import&Export Group Corporation; Nanjing Baose exported 63 units/sets of large reactor equipment to the United States (250 million), both the quantity of equipment and output value recorded highest level in foreign trade for a single project; Jiangsu Hongbao Group adopted over 70 tonnes pipe products manufactured with self-developed pipe-production titanium alloy in special brands, for the first time replaced nickel-based alloy as well-completion oil pipe at Sinopec Yuanba Changqing gas field, and reaped success smoothly, which provided new thinking approach for cost reduction and efficiency increase by CNPC in follow-up marine phase well-completion and production gas test; Zhangjiang Port Huayu Nonferrous Metals Material Co., Ltd developed titanium tubes for replacing seamless copper alloy tube products for air conditioner and refrigeration use, and has started massive production and usage; Shaanxi Xingsheng Metals Co., Ltd has started batch production of TC4 titanium alloy special shaped wire for Apple iPhone mobile phones in different models following independent R&D, its sales volume in 2015 approached 100 tonnes, etc. Against the background of sluggish titanium market, domestic titanium product deep processing enterprises still created quite many “beautiful landscapes” in the titanium industry through market development, innovation and progress.

Titanium industry has entered the New Normal of development, those with no innovation will be overtaken or phased out, currently a number of domestic enterprises are trapped in shutdown or semi shutdown dilemma due to operation difficulty and rupture of capital chain, it is estimated that in 2016 this trend will further accelerate, it is certain that a batch of enterprises will be eliminated in the fierce and harsh competition, the key to survival for titanium enterprises lies in hard efforts in mastering skills, destroying the old and establishing the new, improving survival ability and core competitiveness, so as to seek greater development opportunities in market competition.

In application fields, in 2015 China’s titanium processing products presented decrease of usage volume to varying degrees in traditional fields such as chemical, metallurgy, electricity, and salt-making fields, in contrast it experienced sharp surge in in high-end air & space, shipbuilding, and pharmaceutical fields, especially air & space fields which recorded the biggest growth in demand. In 2015, demand from the above-mentioned three major fields only accounted for 20% of domestic total usage, it is estimated that within the next 3-5 years, total demand from the above-mentioned three fields will surpass titanium demand from traditional chemical industry. Apart from chemical industry, in recent years the sector with the most steady demand for titanium application is electricity industry, whose annual demand stays around 6000 tonnes, accounting for about l5% of total application volume.

Prominent problems in current development of China’s titanium industry mainly include: Homogenization, mid to low-end titanium products have surplus capacity. Industrial structure adjustment is inevitable

In 2015, due to downturn in domestic economy, domestic titanium market subsequently experienced slowdown in demand, actual sales volume of titanium sponge and titanium products are respectively 58,567 tonnes and 37,416 tonnes, operating rate is inadequate, furthermore most enterprises all target at the positioning of mid to low-end products, products are homogenous, competition is fierce, loss coverage is expanding, in Baoji area alone there are over 180 enterprises facing shutdown or bankruptcy.

On the other hand, in the R&D and production of high-end products for air & space, shipbuilding and pharmaceutical fields, we still cannot meet domestic development needs, titanium alloy materials for air & space, shipbuilding and pharmaceutical fields still need import. Therefore, industrial structure adjustment of China’s titanium industry is inevitable.

Industry promotion & application and enterprise market development still need vigorous propelling

At present, domestic titanium industry and enterprises mostly still conduct product sales by revolving around traditional titanium application fields and customers inherited for long years in the past, besides half of the enterprises are still engaged in businesses related to upstream and downstream of the industry, downstream enterprises find it difficult to develop new markets and applications due to self strength, innovation and business ability, and this requires enterprises within the industry to, under leadership of the association, seek warmth from each other, stay united, and organize themselves to jointly develop new application markets.

Stability of titanium and alloy products lags far behind overseas products

At present, technology equipment of China’s titanium industry already occupies world leading position, it also generates massive quantity of superior titanium alloy materials to meet the needs of national economic development. Nevertheless, the titanium alloy materials for high-end fields such as air & space and pharmaceutical still have poor organization consistency and batch stability, which results in low material performance of titanium alloy in key components in the above-mentioned fields, it still is unable to totally meet the needs for materials in the above-mentioned high-end fields.

In view of the status quo in titanium industry, industry insiders must properly handle the following several points:

Firstly, intensify efforts in scientific/technological innovation, drive forward product upgrading

At present, China’s titanium industry still lags far behind world leading standard in high-end technology fields including titanium sponge smelting technology, cold hearth melting technology, titanium alloy superplastic forming technology and 3D printing technologies etc, which urgently requires the whole industry to intensify efforts in scientific and technological innovation, improve titanium sponge’s stability and zero grade product rate, advanced titanium alloy and its processing technology, overcome technological difficulties of titanium and its alloy processing product performance consistency, stability and batch consistency, promote all-round upgrading of titanium alloy processing product performance, so as to fulfill the transition from extensive style growth represented by scale expansion to connotative growth model focusing on enhancing quality and technology content, so as to meet China’s demand for high performance titanium products in air & space, pharmaceutical and shipbuilding fields.

Secondly, stick to national strategies represented by “Reform of the supply side” to promote enterprise transition & upgrading

As the state government’s key strategies including “Reform of the supply side”, “One Belt One Road” and “Made in China 2025” begin execution and make progress, key engineering projects including Big Airplane, manned space, marine engineering, moon exploration, nuclear power and petrochemical projects are making final preparations before final kickoff, this will considerably boost the demand for titanium and titanium alloy products, and will surely bring tremendous business opportunities to China’s titanium enterprises, enterprises should grasp the opportunity, promote enterprise transition & upgrading through combined driving force such as management enhancement, product transition & upgrading and scientific & technological innovation.

Finally, it is imperative to intensify efforts in industry application promotion and enterprise market development, promote cooperation between industries, build platform for sharing information and resources, and expand titanium application market

Centering on enterprises, with help from backbone enterprises in the industry organized by industry association, carry out market application development on fields of focused public concern such as pharmaceutical, architecture, marine engineering, and daily use articles, through survey, communicate and cooperate with relevant design institutes and users, identify bottleneck problems in application and promotion of relevant titanium products, work in concerted efforts, join hands with relevant associations inside/outside the industry and government organizations, together overcome difficulties.

Guided by the market, build Internet of Things supply platform of the titanium industry, assemble premium products and spot goods resources in the industry onto the Internet of Things platform for matched trading, through intervention of financial capital, using restriction means such as credit evaluation and trading rules, promote communication, sharing and trading of information, resources and products in the industry, promote enterprise development, and propel industry transition & upgrading.