We are going through hard times where we experience once again how deeply the relationship between aviation and politics is. The fact that Russia pressed the button to invade neighboring Ukraine rallied the aviation realm. The mutual showdown will not be limited to the closure of airspaces and the extension of flight routes. A much bigger crisis is around the corner! Possible trade wars between Russia and the West can pose a severe risk in their supply chains. This could put stocks of Titanium, a metal commonly used in aircraft construction, into trouble!
The world had previously experienced an oil crisis, especially during various events involving the Middle East, such as the Iraqi invasion of Kuwait. But no international crisis in the recent past has ever hit all raw material markets so hard and so fast at the same time. Following Russia’s invasion of Ukraine, waves of heavy sanctions were adopted by the US and Europe against Russia.
Western companies, on the other hand, are afraid of running into problems with Russian products in their supply chains if Moscow retaliates against such sanctions. Titanium, most of which is supplied by Russia, has been used in different parts of aircraft for decades, especially in jet engines. Titanium use has increased even more with new generation aircraft such as Boeing 787 and Airbus A350, reaching almost 15% of an empty commercial aircraft weight.
TITANIUM - A STRATEGIC ASSET
Titanium, a Cold War material formerly used to build spy planes and submarines, is perceived as a serious trump card for economic dependency in strategic sectors such as civil aviation.
Russian VSMPO-AVISMA, the world's giant titanium producer, supplies 25% of global demand for titanium, a lightweight, strong and corrosion resistant metal that is also used in nuclear energy.
European aircraft maker Airbus relies on Russia for half of its titanium needs for its aircraft. US Boeing, on the other hand, is claimed to procure one third of its requirements from VSMPO-AVISMA. At the Dubai Airshow last November, Boeing renewed its twenty-year partnership with VSMPO-AVISMA and committed to continue its collaboration with the Russian company as the largest titanium supplier. Brazilian manufacturer Embraer also supplies most of its titanium needs from Russia.
SUSPENDING TRADE UNFAVORABLE FOR ALL!
VSMPO-AVISMA makes around three quarters of its sales from aviation industry despite efforts to diversify. In 2018, a draft law in Russia's parliament proposed restricting titanium exports in response to tightening Western sanctions. But the country's trade minister was reported saying the idea was blocked to prevent losing stable foreign buyers.
A draft law drafted in the Russian parliament in 2018 proposed restricting Titanium exports in response to escalating sanctions in the West. However, Russia's trade minister explained that this idea was blocked from being implemented in order to avoid losing stable foreign buyers.
The US Commerce Department imposed several restrictions on VSMPO-AVISMA in December 2020, but only three weeks later such restrictions were lifted.
Therefore, targeting Russia and accordingly VSMPO-AVISMA will uprate Russia's strategic presence with close ties to critical industries such as the defense and aerospace. Western aerospace companies do not seem to be content for this decision.
Although titanium is not directly targeted, it is known that Western aerospace companies have multiplied their inventories or diversified their supply sources since 2014, when Russia was sanctioned for its illegal annexation of Crimea in Ukraine. Decline in aircraft manufacturing due to the pandemic also gives companies the opportunity to increase their reserves and overstock. However, it may take years for companies to include new titanium producers in their ecosystems given the strict quality circle procedures and practices.
CONCERNS OVER HIGHER TITANIUM COSTS
Independent investment research company S&P announced last year that Russia might limit exports of strategic materials due to escalating tensions, but that this is not the most-likely case. It was also commented that suspending the trade would not be favorable for both sides.
Aircraft manufacturers could face higher titanium costs. It is more likely that supply constraints would increase prices broadly, rather than tough sanctions. In addition to the high inflation concerns across the world in the post-pandemic period, the rise in raw material prices due to such political crises could put severe cost burden on commercial aviation companies.
Why is Titanium Quite Critical in Aerospace Industry?
Since its discovery in 1791, titanium has been a highly sought-after material in manufacturing processes. However, it did show its presence both in the military and commercial aviation industries until the Cold War. Today, the aerospace industry is the leading customer for titanium alloy products. Titanium has several properties that make it a perfect fit for usage in the aerospace industry.
• great strength/lightweight
• high-temperature performance
With the demand for innovative, more efficient airplanes on the increase, the demand for titanium is also on the rise. Countries with considerably high military budgets, such as the US, show high demand for titanium and consider the availability of titanium a matter of national security.
Today, commercial airplanes like the Airbus A350 and Boeing 787 use more titanium than previously developed airplanes. However, the military aerospace industry consumes the largest amount of titanium. Military aircraft, such as the F-22, F/A-18, C-17, F-35 and the UH-60 Black Hawk helicopter are among some of the military’s assets that use large quantities of titanium in production.
With the rising fuel prices and the environmental sensitivities, the need for more fuel-efficient aircraft has become a priority. Taking advantage of titanium’s weight-to-strength ratio, airplanes that are made from titanium parts are lighter and consume less fuel. Titanium has been replacing aluminum parts in aircraft manufacturing because of its ability to resist heat and corrosion. It is being used in the fastening elements, airframe and landing gear of airplanes.
Aircraft engine manufacturers are also among the customers of titanium. The high strength and low density of titanium can provide aeroengine manufacturers with the high-performance levels they desire. Jet engine and airframe parts need to withstand extreme temperatures both 50-55 degrees Celsius below zero and 600 degrees Celsius, making titanium’s high temperature performance ideal. Engines parts manufactured from titanium are used in the exhaust part of the engine, in the discs inside the front fan, in the engine blades, shafts and protective coatings.
It should also be noted that titanium has a significant share in the spacecraft developed by NASA and other companies.
Titanium has proven to be a valuable element in many industries, especially the aerospace industry. The aerospace industry and the titanium industry are very dependent on each other. As the demand for more planes and more efficient air travel continues to increase, titanium's position in the market seems to be much stronger in the future.