Titanium is a rare metal with low specific gravity, high specific strength, high toughness, excellent fatigue resistance, corrosion resistance, and temperature resistance. As a national military strategic material, the development of China's titanium alloy is strongly supported by the state. It is widely used in chemical, aerospace, marine engineering, metallurgy, electric power, medical, and pharmaceutical.
From the 1950s to the first ten years of the 21st century, China completed the industrialization and rapid development stage of the titanium alloy industry. After entering the 21st century, stimulated by downstream demand, the output of titanium alloys has soared, from 2500 tons in 2000 to more than 50,000 tons in 2011, in which most of the increase came from traditional industrial fields such as the chemical industry and metallurgy. After the expansion in 2011, the domestic production of low-end titanium alloys is much higher than the consumption, while the supply of high-end titanium alloys for aerospace and aviation is seriously insufficient, which can be seen that the product structure of the titanium alloy industry needs to be improved. After 2012, the domestic titanium alloy industry has entered an adjustment stage. Titanium alloy companies have gradually adjusted their business structure, improved high-end titanium alloy R&D capabilities and business scale, and gradually improved corporate profitability. The structure of China's titanium alloy industry has been improved and optimized.
Industrial Chain Analysis of China's Titanium Alloy Industry
The upstream of the industrial chain of China's titanium alloy industry includes suppliers of raw materials and production equipment, and outsourcing processing enterprises. The middle reaches of the industrial chain are mainly titanium alloy production and processing enterprises, and the downstream mainly are chemical, aerospace, electric power, and pharmaceuticals, marine engineering, and metallurgy.
Profits of Titanium Alloy Enterprise Are Affected by Sponge Titanium
The upstream entities involve raw material suppliers, outsourcing processing companies, and equipment suppliers. The raw materials of titanium alloy are titanium sponge and intermediate alloys such as aluminum and chromium. Among them, sponge titanium is the main material for titanium alloy production and processing, and its cost accounts for more than 60% of the total cost of raw materials. The market price of sponge titanium fluctuates greatly. The data shows that the price of sponge titanium has fallen by 30% since the high, which has reduced the cost of titanium alloy production and processing enterprises and increased their profit margins.
The High-End Market Space Is Larger Than the Low-End Market, Which Is Good for High-End Titanium Alloy Processing Enterprises
Midstream participants in the industrial chain of China's titanium alloy industry are titanium alloy production and processing enterprises. According to differences in competitiveness, participants have different product positioning and profitability. Generally speaking, they are low-end titanium alloy companies that produce and process conventional chemical, metallurgy, and electric power, as well as high-end titanium alloy companies that produce and process aerospace, high-end chemical, and marine engineering fields, some of which has developed from low-end and middle-end companies.
As there are many participants which lack technology and R&D capabilities in the middle and low-end titanium alloy market, the market is oversupply and the product gross profit margin is low; on the other hand, high-end titanium alloy products have high technical barriers, in which only a few companies with strong technical accumulation have high-end product production and processing capabilities. With the development of China's aerospace, high-end chemical, and marine engineering applications, the demand for high-end titanium alloys is growing rapidly, with a higher market profit than that of the low-end market, which provides a broad development space for companies with technical strength, while the profitability of companies with weak technical strength will continue to decline.
Taking the leading companies in the industry as an example. Though the production scale of Western Metal Materials is larger than Western Superconducting Technologies, the gross profit margin of Western Metal Materials in the titanium alloy business is much lower than Western Superconducting Technologies since its technology R&D and processing capabilities are weaker than Western Superconducting Technologies and its high-end titanium alloy business in aerospace has a small proportion.
The Domestic Downstream Structure of Titanium Alloy Is Different from the Global Structure
The downstream are companies in the chemical, aerospace, power, pharmaceutical, marine engineering, shipbuilding, and metallurgy, in which the development of downstream terminal applications has a direct impact on the demand for titanium alloys and the development of industry technology.
In the demand structure of titanium materials in China, titanium alloy is mainly used in the chemical industry. Compared with the global, the main difference is in the aviation field. Globally, aviation titanium materials always account for about 53% of total titanium demand, while the domestic proportion of titanium used in aerospace is only 20%, indicating that the domestic aviation titanium market still has great potential.
A Considerable Increase in Aviation, Bright Prospects for the Development of the Titanium Alloy Industry
Due to the advantages of lightweight, high strength, high-temperature resistance, and corrosion resistance, titanium alloy is the main construction material of aircraft. Under the conditions of the independent and controllable requirement for military products and the continuous development of civil aviation, the demand for titanium alloys will continue to rise, thus, the domestic titanium alloy industry has bright prospects.
The Development of Offshore Engineering Field Is Ready to Take Off, Offering a Huge Demand for Titanium Alloy
In 2019, the national marine product value was 8941.5 billion yuan, an increase of 6.2% year-on-year, accounting for 9.0% of the GDP, which played an important role in promoting the development of the national economy.
Under the guidance of the development strategy of the Chinese government to vigorously support the marine economy and build a maritime power, the marine engineering field will develop steadily, and the scale of marine engineering investment and output value will continue to rise. As an important material for marine engineering construction and equipment, the demand for titanium alloys will keep growing.
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