MINERAL SANDS BRIEFING PAPER October 2010

Transcription

1 MINERAL SANDS BRIEFING PAPER October 2010 An occasional briefing paper prepared by Iluka Resources to provide information relating to the company and/or mineral sands sector. Refer Disclaimer on page 5. TITANIUM METAL Titanium metal constitutes a small, but relatively rapidly growing component of demand for high grade titanium dioxide products, most notably rutile. Titanium metal constitutes approximately 5 per cent of end consumption demand for titanium dioxide raw material. High grade titanium dioxide products are the principal feed source for the manufacture of titanium metal. Titanium is an important strategic material, used in commercial aerospace (the fastest growing segment) and in military and industrial applications, as well as in a range of commercial, infrastructure and consumer applications. At a recent titanium metal conference in the United States, various industry participants presented. The following are summary extracts related to views on demand and end use applications for titanium metal presented at the conference, as provided by one of Iluka s North American marketing managers: The overall nature of the discussions at the conference centered on the uncertainty of forecast demand growth. In 2007 the general consensus was that titanium demand was expected to continue to grow rapidly through With the GFC, titanium demand declined. Many analysts and executives associated with sponge producers, fabricators and suppliers are again forecasting strong growth over the next 3-5 years. Chinese sponge manufacturers were not represented at this conference (refer below currently China constitutes approximately 34 per cent of global titanium sponge manufacture).japan also has a significant titanium sponge manufacturing presence with the two main players: Osaka Titanium Technologies and Toho Titanium Company Limited. INDUSTRY DEMAND TRENDS Extracts from company presentations include the following. ATI Aerospace Allegheny Technologies Incorporated is one of the largest and most diversified specialty metals producers in the world Forecast ~18 per cent growth in global commercial airframe market by

2 Forecast ~20 per cent growth in global commercial jet engine and aero-derivative gas turbines by 2013 Forecast ~22 per cent growth in titanium consumption in commercial jet engines by 2013 The ATI presentation referenced the key drivers for the use of titanium in jet engines including: higher build rates, larger engines and the unique characteristics of the metal, with applications in fans and compressors, cases, disc, blisks, impellers, blades, vanes and fasteners. RTI International Metals RTI International Metals is one of the world's largest producers of titanium. RTI manufactures and distributes titanium and specialty metal products for aerospace, industrial, defence, energy, chemical, and consumer applications. World commercial jet fleet forecast to double by 2029 Over 6 years of aircraft production currently on back log New aircraft (B787, A380, A350) contain almost twice as much titanium than the B777 (driven by higher fuel costs) Hempen Special Metals Hempel Special Metals, a business division of F.W Hempel & Co., is an international distribution specialist for high performance materials (Germany). TIMET Aerospace titanium still not back on track, lower build rates than previously expected, high stock levels. Global recovery in the industrial markets expected but still not back to 2007 levels. TIMET is the world's largest supplier of high quality titanium metal products (United States) VSMPO Forecast 28 per cent growth in military titanium demand VSMPO-AVISMA Corporation is the world leader on manufacture of the titanium metal (Russia). Slow steady demand growth, not expected to reach 2007 levels soon Russian/CIS airframe demand not expected to reach 2007/2008 levels until at least after 2015 Emerging markets, desalinization plants, LNG plants, alternative power generation may help raise demand to near 2007 levels by 2015 These emerging sectors are also higher risk 2 2

3 WORLD SUPPLY TRENDS Roskill Market analyst, information and consulting service provider in the metals and minerals industry. Forecasting 27 per cent growth in global sponge capacity by 2015 In terms of current global sponge production, the following is the global market share: - China: 34 per cent - 12 titanium sponge manufacturers (4 new projects planned) - Japan: 20 per cent - 2 manufacturers - Russia: 17 per cent - 2 manufacturers - Kazakhstan: 14 per cent - 2 manufacturers - United States: 10 per cent - 3 manufacturers - Ukraine: 5 per cent - 1 manufacturer Note: TZ Minerals International also undertakes analysis on titanium metal demand. CHARACTERISTICS OF TITANIUM METAL Titanium metal is characterised by its high strength-to-weight ratio and corrosion resistance. It has the highest strength-to-weight ratio of any metal. In its unalloyed form, titanium metal is as strong as steel but 45 per cent lighter, and while 60 per cent heavier than aluminium has twice the strength. A significant advantage of reducing weight in commercial and military aerospace applications is fuel efficiency. Titanium alloys are used in aircraft engines (up to per cent of the engine) and in airframes. Approximately 42 per cent of a fighter jet (engine and airframe) is typically made from titanium materials (TZ Minerals International, 2005). The Boeing A380 Airbus uses approximately 67 tonnes in the aircraft body and approximately 10 tonnes in its engines. The high corrosion resistant property of titanium metal makes it suitable for industrial applications, used in highly corrosive environments, such as chemical processing plants and desalination plants. When titanium is exposed to oxygen in the air and/or water, it immediately forms a stable, strongly adherent protective oxide film that is resistant to many highly corrosive environments, particularly oxidizing and chloride-containing process streams. As long as oxygen is present, the oxide film will self-repair if it undergoes any mechanical damage. Titanium metal is also used in heat exchangers, propeller shafts, rigging and other parts of vessels exposed to salt water. In consumer markets, sporting equipment makes use of the benefits of the high strength-to-weight ratio property of titanium metal in the manufacture of a range of sporting goods, such as golf clubs and tennis racquets. Medical and dental industry applications of titanium metal utilise its nonreactive properties (inertness), enabling its use in implants, such as hip replacements, heart pace makers and joint and bone reconstructive surgery Titanium Metal Use Demand = 321kt TiO 2 44% Industrial 35% Aerospace 11% 10% Defence Consumer and emerging Source: TZMI 3 3

4 Titanium Metal Feedstock Demand TiO2 kt 16.9% 5 Yr CAGR 8.4% 10 Yr CAGR Source: TZMI Growth trend in high grade titanium feedstocks expected to continue in titanium metal sector China sponge manufacturing now switching to high grade feedstocks Titanium feedstock supply linked to titanium dioxide pigment demand For further information on the mineral sands sector refer to Iluka briefing papers on its website Contact: Dr Robert Porter, General Manager, Investor Relations Phone: Mobile: +61 (0) robert.porter@iluka.com 4 4

5 Disclaimer Forward Looking Statements This briefing paper contains information that is based on projected and/or estimated expectations, assumptions and outcomes. These forward-looking statements are subject to a range of risk factors associated, but not exclusive, with potential changes in: - Exchange rate assumptions - product pricing assumptions - mine plans and/or resources - equipment life or capability - current or new technical challenges - market conditions - management decisions While Iluka has prepared this information based on its current knowledge and understanding and in good faith, there are risks and uncertainties involved which could cause results to differ from projections. Iluka shall not be liable for the correctness and/or accuracy of the information nor any differences between the information provided and actual outcomes, and furthermore reserves the right to change its projections from time to time. All currency referred to is Australian denominated unless otherwise indicatated. 5 5