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TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 2
What’s driving scrap production?
Industry is using more titanium
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 3
Commercial aerospace the main driver of titanium demand
Titanium demand from ‘next gen’ aircraft
(buy weight tonnes)
Raw material spend US$ billion based on buy weight
Source: Arconic @ ITA Scottsdale 2016 Source: ICF International Scottsdale 2016
47.0% 44.0%
21.0%21.0%
11.0% 13.0%
10.0% 10.0%
6.0%5.0%
6.0%6.0%
80%
40%
0%
100%
60%
20%
Ti Alloys
2020
Other
Al Alloys
Steel Alloys
Super Alloys
Composites
2015
102
20
21
77
0 50 100 150 200
B767
Tonnes
410%
348%
+139%
B787
A350
A330
B777X 184
94
B777
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 4
Typical aerospace supply chain
PCC30% shareDynametBoeing
TMX
ATI
Timet
VSMPO
Alcoa30% share
LISI15% share
Others
Boeing55% share
Airbus35% share
Others10% share
Distributors
Brokers
Direct buyers
Buy from
distributors
Directed buy
Various
Yield loss 30%
Yield loss 10%
Direct to OEM or tier
supplierDirect to OEMIngot direct
to wire / coil
/ bar
converter
Perryman
NF&M (VSMPO)
Sponge to
ingot & billet
Materials
procurementFastener OEMs
Wire / coil / bar
convertersDistributers Tier suppliers
Aerospace
OEMsFeedstock
Iluka
Rio Tinto
CIS
Other
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 6
Purpose of the melting process
• Combination of various metals to make analloy with certain properties
• Homogeneity
• Scrap can add “unwanted” impurities
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 7
The big picture – how scrap fits into the alloy process
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 8
Two major routes to make ingot/ slab
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 9
Scrap – relationship with melt technologies
• Not all scrap can be remelted
– Form
– Cleanliness
– Certification/ control
• Vacuum Arc Remelt (VAR)
– Welding electrodes is time consuming and does not lend itself to small or odd shapes
– does not remove HDI contamination (ie tungsten-carbide from drill tools)
– very low use of turnings
• Non consumable furnaces – not electrode forming is required.
– Can use small solids and turn
– But sorting of small solids is expensive
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 10
Scrap is difficult to manage on a large scale
• Intensive need of manual labour
– Manual piece-by-piece testing
• General exclusion of certain type of scrap
– Cracks, holes, etc
• Intensive processing needed for turnings
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 11
Scrap management is complex & costly
Source : Goldman Titanium
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 16
Compacted and welded electrode
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 17
Example of an aerospace scrap/ metal supply chain
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 18
United States melters are the biggest users of scrap
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 19
Scrap & the sponge industry
• Sponge is a very capital intensive.
– High cost – long-term investment decision (normally!)
– Long-term contracts for offtake – cost inputs like feedstock not necessarily the same.
– Offtake can be take-or-pay
• Scrap industry
– Price of titanium unit typically sits under the cost of sponge
– Price can spike if Ferro-titanium demand increases sharply
– Type of melt technology available can determine usage
TZMI CONGRESS 2016 | IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 20
Take home points
• Scrap is a very important part of the metal supply chain.
• Not all scrap is the same
• Scrap flexibility is dependent on melt technology and other factors such ascertification of supply chain
• Control of the scrap lifecycle is becoming extremely important to aerospace OEM’s.
• Contaminated/ non usable scrap is mostly sent to the ferro-titanium market
Coming up
Review of Current Freight Market Dynamics and OutlookPeter MalpasBraemar ACM Shipbroking
The Link between Iron Ore Mining and Chinese TiO2 Feedstock SupplyHugh StackpoolJ.P. Morgan
Minerals Sand: The Capital Market PerspectiveIngo HofmaierHannam & Partners (Advisory) LLP