IMPORTANCE OF SCRAP TO THE

Transcription

1 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN David McCoy TZMI.COM

2 What s driving scrap production? Industry is using more titanium TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 2

3 Commercial aerospace the main driver of titanium demand B777 Titanium demand from next gen aircraft (buy weight tonnes) Tonnes % B777X 184 A % 80% 60% Raw material spend US$ billion based on buy weight 6.0% 5.0% 10.0% 10.0% 11.0% 21.0% 6.0% 6.0% 13.0% 21.0% Other Composites Super Alloys Ti Alloys Steel Alloys A % 40% B % 47.0% 44.0% Al Alloys 410% B % Source: ITA Scottsdale 2016 Source: ICF International Scottsdale 2016 TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 3

4 Typical aerospace supply chain Feedstock Sponge to ingot & billet Materials procurement Wire / coil / bar converters Fastener OEMs Distributers Tier suppliers Aerospace OEMs Iluka Rio Tinto Other CIS Timet ATI VSMPO Boeing TMX Ingot direct to wire / coil / bar converter Dynamet Perryman NF&M (VSMPO) Yield loss 30% PCC 30% share Alcoa 30% share LISI 15% share Others Yield loss 10% Distributors Brokers Direct to OEM or tier supplier Various Direct buyers Buy from distributors Directed buy Direct to OEM Boeing 55% share Airbus 35% share Others 10% share TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 4

5 Typical CP ingot process TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 5

6 Purpose of the melting process Combination of various metals to make an alloy with certain properties Homogeneity Scrap can add unwanted impurities TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 6

7 The big picture how scrap fits into the alloy process TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 7

8 Two major routes to make ingot/ slab TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 8

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 9

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 10

11 Scrap management is complex & costly Source : Goldman Titanium TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 11

12 Bulk weldables TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 12

13 Bulky scrap TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 13

14 Typical agglomerate scrap TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 14

15 Turnings TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 15

16 Compacted and welded electrode TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 16

17 Example of an aerospace scrap/ metal supply chain TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 17

18 United States melters are the biggest users of scrap TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 18

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 19

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 as certification 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 TZMI CONGRESS 2016 IMPORTANCE OF SCRAP TO THE METAL SUPPLY CHAIN 20

21 TZMI.COM Thank you TZ MINERALS INTERNATIONAL PTY LTD

22 Questions

23 Coming up Review of Current Freight Market Dynamics and Outlook Peter Malpas Braemar ACM Shipbroking The Link between Iron Ore Mining and Chinese TiO2 Feedstock Supply Hugh Stackpool J.P. Morgan Minerals Sand: The Capital Market Perspective Ingo Hofmaier Hannam & Partners (Advisory) LLP

24 Lunch break Session re-commences at 13:00