TITANIUM INDUSTRY SEEKS NEW MARKETS WHICH COULD BRING COMPETITIVE BENEFITS TO END USERS U.S. industry structure and markets Potential markets Automotive Energy Medical Sporting goods Aerospace Potential barriers to expanded use of titanium in industrial markets Cost considerations Resistance to change among end-users Industry initiatives to promote use of titanium Changing government role in titanium market Outlook Endnotes TITANIUM INDUSTRY SEEKS NEW MARKETS WHICH COULD BRING COMPETITIVE BENEFITS TO END USERS The U.S. titanium industry faces an uncertain future as it seeks to find new markets to replace its traditional aerospace markets, both military and civilian. These markets absorbed 75 to 80 percent of total titanium shipments of 55 million pounds in 1989, during the peak in U.S. military spending. Following declines in aircraft industry sales beginning in the early 1990s, total U.S. titanium shipments fell to 35 million pounds in 1991 and are projected to total 38 million pounds in 1994 (figure 1). Figure 1. U.S. titanium mill product shipments, 1983-94 Although the U.S. titanium industry is still pursuing areas of opportunity in these traditional sectors, demand for titanium by the aerospace industry likely will continue to contract during the early part of the next decade. To sustain a viable titanium industry, new markets must be sought. Titanium's unique properties--light weight, high strength-weight ratios, durability, and resistance to corrosion, high temperatures, and shock--make it suitable for many nonaerospace applications, although current barriers to expanded use include its higher price, as compared with that of steel, aluminum, and magnesium, along with the lack of practical experience in its use by many end-users. However, the industry is making rapid strides in reducing costs, developing new high-performance alloys, and demonstrating titanium suitability for newer applications. This article identifies some of the more promising markets for titanium and examines the benefits that may be derived for these markets (table 1). It also identifies current barriers to increased use of titanium and discusses titanium industry effort to overcome these barriers and the role of the U.S. Government in developing new titanium materials and processes. Table 1. Estimated potential titanium industrial end-uses: Specific applications, advantages of titanium, and total consumption by by year 2005 U.S. Industry Structure and Markets Titanium Metals Corporation of America (Timet Inc.) and Oregon Metallurgical Corp. (Oremet) are the only remaining U.S. firms producing titanium sponge,[1] following the closure of RMI Titanium's spongemaking facility in 1992. RMI continues to manufacture fabricated titanium products from purchased sponge. Current annual sponge-making capacity of the two U.S. producers is nearly 65 million pounds. Most sponge produced in the United States is manufactured into ingot, which is then sold to fabricators who use the material to manufacture mill products and castings, principally for aerospace materials and components. There are approximately 11 titanium ingot producers in the United States and nearly 28 fabricators of mill products and castings. The fate of this industry has traditionally been linked to its largest consuming market, the aerospace industry. Consumption of titanium by the aerospace industry fell dramatically from peak levels reached in the late 1980s and early 1990s as military aircraft shipments dropped to their lowest relative levels since the years after World War II. According to estimates of the Aerospace Industries Association, total U.S. industry aircraft sales will drop from the peak level of $76 billion reached in 1991 to nearly $59 billion in 1994 (figure 2). Military aircraft sales declined from $44 billion in 1987 Figure 2. Aircraft industry sales: By product groups, 1983-94 to an estimated $32 billion for 1994; as a result, by 1993 the total amount of titanium absorbed by the military fell to an estimated 7 million pounds from an annual rate of 15 to 18 million pounds during the mid-1980s. At the same time, demand for titanium by the civil aircraft market fell from a peak of 27 million pounds in 1990 to an estimated 20 million pounds in 1993;[2] civil aircraft sales, adversely impacted by price competition among airlines and industry consolidation, fell from $37 billion in 1991 to an estimated $27 billion for 1994.[3] The weakness in the civil aerospace sector should continue into 1995 as the yearend backlog of civil aircraft orders fell nearly $26 billion, from peak levels reached in 1991, to $83 billion in 1993.[4] The weakness in the military aerospace sector will likely continue much longer, given the pattern of reduced U.S. military expenditures following the end of the Cold War. Potential Markets Because the prospects for greater titanium demand by the aerospace industry have dimmed, the U.S. industry is focusing on product developments for nonaerospace applications. In some applications, such as those in the energy industry, where life-cycle costs are an important factor, titanium is already being commercially used; in other applications, such as automotive, prospects for titanium use are more long-term. The success of titanium in all markets will depend on industry ability to surmount certain economic and technical obstacles to further use. Automotive Possibly the largest potential nonaerospace application for titanium is in automobiles, where manufacturers are currently exploring the use of titanium alloys to achieve weight-reduction benefits and improved fuel economy by exploiting the high strength and light-weight properties of the material. General Motors Corp. (GM) has successfully tested exhaust valves made of titanium aluminides and is investigating high-volume production of these components. GM is also testing the use of titanium aluminides in intake valves. According to GM, the company buys 72 million intake and exhaust valves per year and conversion of valves to titanium aluminide could eventually create annual demand for 5.5 million pounds of titanium (table 1). Benefits over conventional steel valves include lower density, a 50-percent reduction in valve weight, as much as a 3-percent improvement in fuel economy, higher operating temperature capabilities, and better engine performance.[5] Other potential automotive applications for titanium alloys include valve springs, valve spring retainer caps, connecting rods, rocker arms, and coil springs. The primary disadvantage faced by titanium in automotive applications is cost. Titanium alloys for use in automobiles are currently 10 to 25 times more expensive than steel and 2 to 4 times more expensive than other light-weight substitutes for steel, principally aluminum and magnesium, which may also be used in similar applications.[6] Because of the high-volume potential of the automotive market, the titanium industry is actively working to lower the cost of titanium aluminide to a level closer to twice the cost of steel components within the next decade, which would make titanium aluminide highly competitive with steel. Energy Recent developments suggest that titanium alloys have significant potential for use in the oil and gas industry, with growth prospects of 4 to 6 million pounds by the year 2005, due principally to their corrosion-resistance. In the largest related development to date, RMI Titanium won a $10 million contract in 1993 for the engineering, fabrication, and assembly of titanium-drilling risers for North Sea oil- and gas-drilling platforms.[7] Titanium was chosen over traditional carbon and high-strength, low-alloy steel in this application because of its high strength-weight ratio relative to competing materials. RMI is also pursuing other contracts in oil and gas projects in which adverse geological conditions, such as the appearance of salt water and sulfur, favor the use of titanium.[8] Reflecting significant prospects for material substitution, Timet Inc. has been awarded financial support from the National Aero-Space Plane Program (NASP)[9] for development of an alloy, TIMETAL 21S, which is highly corrosion-resistant and has applications for the oil/gas, medical, and aerospace industries. Timet has recently formed an alliance with a pipe manufacturer to produce TIMETAL 21S pipe and tubing for the oil and gas industry.[10] The alloy is anticipated for use as pipe and tubing in "sour" oil and gas wells, where titanium can better resist sulfurous underground conditions. The lighter weight of titanium also allows the use of larger diameter pipe, which increases the flow rate by 50 percent. TIMETAL 21S also has great potential for use in offshore drilling structures, where 2 million pounds of nickel-based superalloy bolts are replaced biannually because of corrosion damage.[11] Evaluations are currently being made with a view to replacing these bolts with permanent TIMETAL 21S bolts. Timet feels that cost savings may occur in the long-run due to the reduced need to periodically replace the superalloy bolts. Medical Titanium has an accepted compatibility with the human body, and its stiffness is close to that of human bone which has resulted in its emergence as a potentially suitable material in medical applications, such as hip and knee prostheses, dental implants, pacemaker components, and orthopedic wire.[12] Other medical advantages of titanium implants include shock absorption and dampening properties, which help to relieve the effects of arthritis and bursitis on patients. Medical applications currently account for 1 to 2 percent, or nearly 700,000 pounds, of U.S. consumption of titanium. This market, which is now expanding at nearly 20 percent per annum, may account for 5 to 8 percent of domestic titanium consumption by the next decade.[13] Sporting Goods The sporting goods market has long held promise for the titanium industry because these are noncritical applications and, as such, do not require long testing periods by end-users to qualify the material. On the other hand, these markets are also often highly price-sensitive, making future success for titanium dependent on the ability to control costs. Advantages of titanium in sporting goods applications include light weight and durability, as well as shock absorption and dampening properties. Welded titanium tubes are currently being used in a number of sporting goods applications, including bicycle frames, racing wheelchairs, golf club shafts, and baseball bats. Nearly 50,000 pounds of titanium tubing is currently used annually in the high-end bicycle market, with growth of 10 percent per annum anticipated.[14] Titanium is currently used in 13 percent of all golf shafts produced. Timet is seeking approval for a new titanium alloy softball bat made of Timetal 15-3 titanium alloy.[15] Other sporting goods applications using titanium alloys and soon to be on the market include arrows, backpack frames, mountain climbing equipment, tennis rackets, ski poles, and lacrosse sticks. The primary disadvantage of using titanium in sporting goods applications is the higher cost of producing seamless titanium tubing to compete with seamless steel tubing. Seamless titanium tubing for use in sporting goods applications currently often costs 10 to 15 times more than seamless steel tubing. However, manufacturers feel they are better able to compete with steel tubing by producing welded titanium tubing and cosmetically removing the weld, allowing the cost of a titanium-framed bicycle to be reduced by 60 to 70 percent and permitting titanium alloy bicycles to compete more effectively against steel- and aluminum-frame bicycles.[16] Aerospace Although the U.S. titanium industry does not see an immediate turnaround, the industry is guardedly optimistic that aerospace demand will eventually recover somewhat due to a number of projects on the horizon. Beginning in 1995, production of the Boeing 777, the newest U.S. major fleet airliner, is expected to use a substantial volume of titanium. According to Timet, 9 to 11 percent of the new airliner will be made of titanium, compared to only 6 percent and 2 percent, respectively, for Boeing's 757 and 767 models. Timet projects that the new airliner could account for nearly 200,000 pounds of mill products annually by 1995 and nearly 10 million pounds per year by the end of this decade, making it the single biggest consumer of titanium since the B-1 bomber.[17] In addition, the sale of 72 F-15 fighter planes to Saudi Arabia could represent 1 to 1.5 million pounds of mill shipments over the next 2 years.[18] Finally, according to some estimates, the F-22 now under development by a consortium of aircraft manufacturers could require nearly 100,000 pounds of titanium mill products per plane, nearly twice as much as the F-15.[19] Potential Barriers to Expanded Use of Titanium in Industrial Markets Prospects for further expansion of titanium use in industrial markets are largely related to cost or to end-user reluctance to substitute titanium alloys for materials that are presently providing effective service. At this point, titanium has proven to be superior to steel, aluminum, magnesium, or nickel- based alloys in certain applications that emphasize resistance to corrosive environments, light weight, and high strength-weight ratios. However, further penetration into industrial markets will not likely be made until the industry overcomes existing barriers to acceptance in these markets.[20] Cost Considerations For many applications, such as those in energy-related fields, cost considerations are secondary in importance to quality considerations. Titanium is being increasingly used in oil and gas drilling platforms, for example, because the additional cost of the titanium alloy component is a small percentage of the cost of the entire platform. When life-cycle costs are considered, titanium is often less expensive than competing materials. Manufacturers find it cost-effective to pay more for a titanium alloy component that will last the life of the platform or the project than to use less expensive components that must be replaced periodically. However, in other more price-sensitive applications, the superior performance properties of titanium alloy articles often do not compensate for the additional cost of using the material. For example, because titanium alloy for use in automobiles may cost as much as 10 to 25 times more than steel used in the same applications and 2 to 4 times more than magnesium and aluminum, titanium alloys are not being used on a large scale in automobiles.[21] Similarly, because the sporting goods market is highly price-sensitive, the comparatively high cost of titanium alloy tubing is an important factor currently limiting titanium use in this market. Also contributing to the cost barriers faced by titanium alloys is that in many nonaerospace applications titanium is not produced in sufficient volume to reduce unit costs. Unit costs in manufacturing tend to decline with large production volumes as manufacturers take advantage of large economies of scale to spread their total costs. The titanium industry is hopeful that sufficient demand will be generated to justify large production runs. Resistance to Change Among End-Users Titanium alloys are known to be superior in quality to many of the alloys currently used in automotive- and energy-related applications, but progress in these markets has often been slow because of the resistance of end-users to add new materials, such as titanium, to their list of qualified, or approved, materials. In many cases, end-users are reluctant to go through the expense of qualifying new materials to meet industry standards for approved material use when materials already in use have proven to be adequate and have familiar properties. For example, steel has long been used in automotive applications, such as engine valves and valve and coil springs, and its reliability has been well documented. Qualifying new materials such as titanium for use in automotive critical components such as engine valves requires extensive planning and testing procedures that may eventually cost millions of dollars.[22] Planning includes the manufacture of prototype components for further testing and the evaluation of the manufacturing development process to assess whether the manufacturing base and processing capability exist to manufacture large quantities of the component at reasonable unit costs. Testing includes a number of costly durability tests, both of engines and components, and corrosion tests. Obviously, automakers are reluctant to undergo the planning and testing required to qualify new materials unless there are clear benefits to doing so. Industry Initiatives to Promote Use of Titanium Titanium manufacturers seek to deal with the issues of cost and end-user resistance to change by emphasizing a "life-cycle" concept of titanium use. That is, although titanium has higher initial costs than competing materials, long-term costs can actually be lower because titanium is durable. Titanium manufacturers attempt to overcome resistance to titanium use by convincing end-users that long-term net savings can be achieved if titanium is an integral part of the project, from the design to completion stage, with other features of the project designed around the use of titanium.[23] Titanium manufacturers also attempt to address the higher cost of titanium alloys by creating lower cost alloys suitable for use in markets where the cost of components is critical. The cost of titanium alloy is largely influenced by three factors:  Cost of the alloying elements  Product yield  Processing cost In recent years, metallurgists have largely focused on lowering the cost of titanium alloys by developing newer alloys that use less expensive alloy elements. For example, Timet has recently developed a low-cost alloy (TIMETAL LCB) that uses ferromolybdenum, rather than higher cost conventional alloying elements such as vanadium. As a result, Timet believes that if LCB is produced in large volumes it can be sold for $10 per pound, a price at which it can compete with steel in automotive valve and suspension spring applications, compared to $25 per pound for conventional titanium alloy.[24] Finally, producers are seeking to overcome end-user resistance to the adoption of titanium alloys by stressing titanium performance qualities. Titanium producers are attempting to convince automakers to use titanium in passenger vehicles by demonstrating titanium abilities in race cars and other high-end, high-performance applications. General Motors Inc. is currently using titanium valves and other titanium components in three of its test vehicles while Del-West Inc. is producing a limited number of titanium alloy valves for the racing industry and other high-performance automotive applications.[25] Titanium manufacturers feel that the successful performance of titanium in these critical applications may eventually translate to the use of titanium in passenger vehicles.[26] Changing Government Role in the Titanium Market The involvement of the U.S. Government in the titanium market is expected to shift from that of a primary purchaser of titanium (as contained in defense and aerospace systems) to active cooperation with private industry in attempting to develop potential new titanium materials and markets. The National Aero-Space Plane (NASP) program and National Aeronautics and Space Administration (NASA) High-Speed Research Program are currently assisting private industry in developing new titanium alloys and manufacturing processes while certain processes funded by the Advanced Materials and Processing Program (AMPP)[27] seek to lower the cost of producing titanium through development of new manufacturing processes. In addition to the potential benefit to the U.S. aerospace industry, application of NASP-developed materials and technologies, including advanced titanium materials technologies, also should improve the long-term productivity and competitiveness of a number of critical U.S. industries, including the energy, medicine, automobile, and chemical industries.[28] Titanium materials have been an important focus of NASP research and TIMETAL 21S, developed by NASP and Timet Inc., is probably the most significant titanium alloy developed under the NASP program. TIMETAL 21S exhibits 100 times the corrosion-resistance and equal strength and thermal properties as standard aircraft titanium alloys and has great potential in energy, medical, and chemical applications, as well as in aerospace applications.[29] NASP has also aided titanium development through the development and promotion of improved manufacturing process technologies. Requirements of the NASP program have led to the need for thin-rolled sheets (3 to 6 mil) of titanium aluminides for the manufacture of metal-matrix composites. Prior to NASP, sheets of this thickness did not exist. However, Texas Instruments, under contract to NASP, has invented and developed a process for rolling thin-gauge sheet to permit the manufacture of titanium composites and titanium foil for eventual use in the manufacture of artificial heart valves, heart pacemakers, piping for water desalination plants, and automobile catalytic converters.[30] NASA High-Speed Research Program, begun in 1990 to address technical solutions to the environmental challenges faced by industry in deciding to build a new supersonic airliner, is now focusing on taking certain technology concepts out of the laboratory and bringing them closer to commerciali zation. The program is developing lower cost titanium alloys that promise to be 15 to 20 percent stronger and stiffer than those available now. NASA researchers are also looking at advanced processing techniques, such as superplastic-forming/diffusion bonding and laser-welding combined with superplastic-forming, to manufacture these new alloys.[31] Developments in the High-Speed Research Program are expected to produce important spin-off technologies that benefit nonaerospace industries. In addition to the activities of NASP and the High-Speed Research Program, the U.S. Department of Interior, under the Advanced Materials and Processing Program (AMPP), is developing two promising technologies for producing titanium powder. Successful development of these technologies may eventually lower the cost of titanium sponge by 20 to 40 percent, thereby helping to further open the automobile and medical markets to titanium.[32] Outlook The titanium industry has witnessed a number of emerging and promising developments in its efforts to replace declining aerospace markets for its products with potentially expanding industrial markets. Significant penetration into the automotive and energy markets alone would compensate for much of the anticipated shortfall in demand caused by a weak aerospace sector. Much future success of titanium will depend on the ability of the industry to produce new alloys with enhanced properties, reduce product costs to levels of competitive substitute materials, and emphasize the long-term cost advantages of using titanium. U.S. Government initiatives are important in addressing these goals. Through programs like National Aero-Space Plane program, the High-Speed Research Program, and the Advanced Materials and Processing Program, the Federal Government is funding cooperative programs with private industry that seek to develop new titanium materials and manufacturing processes to enable the industry to broaden its product mix and its customer base, making the industry less vulnerable to the fortunes of any single market sector. A number of U.S. industries could experience a significant additional economic benefit as a result of improved productivity and competitiveness from the many advantages offered by titanium use in industrial applications. Vincent DeSapio (202) 205-3435 ENDNOTES: 1. Sponge is an intermediate product, produced from titanium ore and used to manufacture ingot. 2. Frank Haflich, "Titanium Outlook Cloudy Until 1995," American Metal Market, Titanium Supplement, Sept. 30, 1993, p. 4A. 3. "Aerospace 1993 Review and Forecast," Aerospace Industries Association, Dec. 1993, pp. 12-14. 4. Ibid. 5. Susan Hartfield-Wunsch, General Motors Inc., telephone interview by U.S. International Trade Commission (USITC) staff, Washington, DC, June 1994. 6. Al Wrigley, "Titanium Aluminide Auto Usage is Eyed," American Metal Market, Oct. 8, 1993, p. 8. 7. These risers are made of 32 individual 50-foot-long pieces of titanium weighing nearly 300,000 pounds. 8. Philip Burgert, "Titanium Pushes into Second-Tier Markets," American Metal Market, Titanium Supplement, Sept. 30, 1993, p. 17A. 9. The NASP is a joint project, begun in 1986, involving the combined efforts of the Defense Advanced Research Projects Agency (DARPA), the National Aeronautics and Space Administration (NASA), and the U.S. Air Force. The objective of the program is to promote key technologies to permit the United States to develop a hypersonic, single-stage-to-orbit space transport vehicle. 10. Burgert, "Second-Tier Markets," p. 17A. 11. "Value of NASP To This Country: The Return on Investment From A National Perspective," National Aero-Space Plane Joint Program Office, Nov. 12, 1992, p. 5. 12. Timet's TIMETAL 21S alloy is awaiting approval by the Food and Drug Administration (FDA) for use in human implants. 13. Burgert, "Second-Tier Markets," p. 17A. 14. For more detailed information, see "U.S. Bicycle Industry Uses Metal Matrix Composites," Industry Trade and Technology Review, May 1994. 15. Burgert, "Second-Tier Markets," p. 17A. 16. Ibid. 17. Frank Haflich, "Cutbacks Hit Crescendo, Market Bottoms Out," American Metal Market, Aerospace Metals Supplement, May 17, 1994, p. 4A. 18. Ibid. 19. Ibid. 20. Paul Bania, Timet Inc., telephone interview by USITC staff, Washington, DC, June 1994. 21. Ibid. 22. Andrew Sherman, Ford Motor Co., telephone interview by USITC staff, Washington, DC, June 1994. 23. John Odle, RMI Titanium Inc., telephone interview by USITC staff, Washington, DC, June 1994. 24. Steven Ashley, "Boeing 777 Gets A Boost from Titanium," Mechanical Engineering, July 1993, p. 64. 25. Andrew Sherman, Ford Motor Co., telephone interview by USITC staff, Washington, DC, June 1994. 26. Paul Bania, Timet Inc., telephone interview by USITC staff, Washington, DC, June 1994. 27. The Federal Coordinating Council for Science, Engineering, and Technology (FCCSET) was established in 1976 to address science and technology policy issues affecting multiple Federal agencies. The organization has recently been changed to the National Science and Technology Council. The AMPP is one of six original FCCSET initiatives focusing on high-priority fields of science and technology. 28. "Value of NASP To This Country: The Return on Investment From A National Perspective", National Aero-Space Plane Joint Program Office, Nov. 12, 1992, p. 3, and Terry Kasten, National Aero-Space Plane Program, telephone interview by USITC staff, Washington, DC, June 1994. 29. Ibid. 30. Ibid., pp. 12-14. 31. Louis J. Williams, "Finding the Right Stuff for Supersonic Flight," American Metal Market, Aerospace Metals Supplement, May 17, 1994, p. 12A. 32. Paul Turner, U.S. Department of Interior, telephone interview by USITC staff, Washington, DC, Sept. 1994.