Rapport de recherche sur l'industrie du titane 2020

1.What is titanium

Titanium is a strategic metal with outstanding performance and strength advantages.

Titanium element symbol Ti, atomic number 22, belongs to refractory rare light metal. It is a silver-white metal with low density, high melting point, high specific strength, high corrosion resistance, high and low temperature performance, non-magnetic, non-toxic, good biocompatibility and other characteristics. Among them, high specific strength performance is particularly outstanding, high strength titanium alloy strength and high strength steel equivalent, but the density is almost half smaller. In addition, titanium and alloys also have the characteristics of shape memory, superconductivity and hydrogen storage. At present, titanium and alloys are widely used in chemical, marine engineering, aerospace, military, metallurgy, medical, sports and leisure fields. Therefore, titanium is a strategic metal and an indispensable key material in the field of modern high technology, also known as "space metal" and "marine metal".

Located in the midstream of the industry chain, there are various ways to classify

Titanium is the titanium processing material, which is the carrier of the specific application of titanium's excellent performance, connecting upstream resources as well as downstream applications, and is in the middle of the industry chain. It refers to titanium sponge (or titanium sponge plus alloying elements) by melting to form titanium ingots, and then by forging, rolling, extrusion and other plastic processing methods to process the ingots into materials.

According to different criteria, titanium has a variety of classification methods, which are more common according to the form and whether involved in the military industry method. According to the morphology, titanium includes rods, wires, tubes, plates, profiles, etc. And according to whether it involves military industry, titanium can be divided into military titanium and civilian titanium.

High-end product quality is demanding and the barriers are high

Titanium processing is difficult, including multiple links, involving materials, equipment, process control and other factors, with high technical, financial, equipment and other barriers. Among them are used in aerospace, weapons and other high-end titanium materials, product quality requirements are demanding. In the titanium material "high uniformity, high purity, high stability" put forward higher requirements, so manufacturers are required to be equipped with high-precision equipment, with titanium alloy material design capabilities, refinement of production process control, process and equipment matching, perfect quality control system and other comprehensive capabilities.

Encourage the development of high-end products, military products to implement the administrative licensing system

Titanium materials belong to the scope of new materials, and the important national new materials policy and titanium materials also have some relationship. In general, the policy encourages the development of high-performance advanced titanium materials for aerospace and marine engineering, and is committed to making China a strong country in titanium materials. For military titanium, due to the special nature of the military industry, subject to the supervision of the National Defense Bureau of Science and Industry, using a strict administrative licensing system. Undertake the task of scientific research and production of classified weapons and equipment of enterprises and institutions, must obtain the corresponding qualifications, permits.

2.Mid- to high-end areas to drive future titanium demand growth

China's titanium consumption is mainly concentrated in the chemical industry, aerospace, power three major fields, of which the chemical industry accounts for the largest share, but the share has declined since 2010, has dropped from 53% in 2010 to 45% in 2018, 2019 because of the chemical PTA investment scale, the chemical industry rebounded to 51%. The aerospace sector is developing better, and the consumption share in titanium continues to increase, from about 10% in 2010 to about 18% in 2019.

Compared with the United States, Russia and other advanced titanium countries to aerospace as the main downstream, China's titanium consumption structure, the proportion of industrial consumption is high, high-end aerospace, civilian products accounted for a low proportion of the future titanium structure optimization of space.

China is a major global consumer and demand is generally growing

Titanium has a wide range of downstream areas, and demand and macroeconomic and aerospace industry developments are highly correlated. Globally, since the 1980s, the global titanium industry has experienced three major boom and bust periods, and the global economic development cycle is basically consistent.

In China, with the slowdown in economic growth and economic restructuring in 2013, there was a certain decline in the consumption of common titanium in China, which led to a decline in titanium sales and lower sales levels continued into 2016. Along with the recovery of China and the global economy in 2017, the growth in demand for mid- to high-end titanium materials and the completion of the industry's de-stocking, the sales volume of titanium materials in China increased significantly to 55,000 tons in 2017 and further increased to 69,000 tons in 2019 (including 56,000 tons of domestic sales). China has now become one of the world's major consumers of titanium, accounting for about 40% of global titanium consumption.

Chemical sector benefits from PTA investment wave, expected to return to stable in the future

The application of titanium in chemical industry includes chlor-alkali, organic and inorganic synthesis, fertilizer, plastic and so on. In recent years, with the rise of private refineries, China's use of titanium PTA projects have increased in large numbers, promoting the growth of demand for titanium in the chemical industry.

According to the PTA project production plan, China's PTA in 2020 ~ 2022 in the peak construction period, as equipment materials, titanium demand in advance of the planned production time. For this reason, we believe that the demand for titanium materials in China's chemical industry is still relatively strong in 2019~2021. And from 2022, the demand for titanium materials in chemical industry will turn into a relatively stable stage.

Defense costs continue to increase, laying the foundation for the growth of military titanium

As a light metal with high melting point, titanium has inherent advantages in the aerospace field. In China's titanium consumption, the aerospace sector is also one of the few areas of sustained growth, with a market size of about 13,000 tons in 2019 and a compound annual growth rate of up to 15% in demand from 2010 to 2019.

Aerospace includes military and civilian, of which military is influenced by defense spending and policy. According to the white paper "China's National Defense in the New Era" released by China in July 2019, China will commit to national defense modernization, implement an active defense military strategy, increase the elimination of old equipment, and form a weaponry system with a backbone of high-tech equipment. It is foreseeable that China's defense spending will continue to increase in the future, and high-tech equipment is of great concern, and titanium as a basic material for military aviation has a broad growth prospect.

Domestic large aircraft to help, civil aviation titanium into the golden period

In terms of large civil aircraft, in May 2008, Commercial Aircraft Corporation of China Limited ("COMAC") was established, marking the start of China's civil aircraft. After years of efforts, the regional aircraft ARJ21 is now in operation, with 520 orders and 34 deliveries. The C919, a large civil airliner, has received orders for 815 aircraft and will deliver its first aircraft to customers in 2021, while the CR929, a long-range wide-body airliner, has also been launched.

It is expected that in the future, with the delivery of more domestic large aircraft, China's civil passenger aircraft will occupy a place in the global aviation market, China's civil aviation titanium materials will also usher in a golden period.

High-end field drive, China's titanium demand faster growth.

Titanium demand forecast

We expect demand for titanium in China to maintain rapid growth driven by high-end fields such as aerospace, with the market size increasing from 69,000 tons in 2019 to 110,000 tons in 2025, at a compound annual growth rate of 8.2%.

3.Upstream constraints are not obvious, high-end titanium short board

Titanium supply: global titanium resources are abundant and unevenly distributed

The abundance of titanium element in the earth's crust is 0.61%, mainly in the form of oxides and silicates. The earth's crust contains nearly 140 kinds of titanium minerals, at present, the mining value is mainly for titanium oxides. Titanium oxides mainly include ilmenite (FeTiO3) and rutile (TiO2), of which rutile titanium has excellent properties and is an important raw material for high-quality titanium products.

According to USGS (United States Geological Survey), the global titanium resources are relatively abundant, with reserves of 820 million tons in terms of titanium dioxide equivalent and resources of more than 2 billion tons. In the global titanium reserves, ilmenite accounts for about 94%, rutile accounts for about 6%. In terms of distribution, ilmenite is mainly distributed in Australia (32.5%), China (29.9%) and India (11.0%), while rutile is mainly distributed in Australia (61.5%), India (15.7%) and South Africa (12.9%).

China's low endowment of titanium resources, high-quality titanium concentrates rely on imports

China is the world's largest titanium resources, titanium reserves and resources of 230 million tons and 830 million tons of titanium dioxide equivalent, of which vanadium and titanium magnetite as the main ilmenite accounts for about 98% of China's titanium resources, rutile titanium ore accounts for only 2%. Distribution region, China's titanium resources are more widely distributed, of which Sichuan and Hebei is the main distribution, the two account for about 65% of China's titanium reserves and resources of 92%.

Despite the large reserves, but China's titanium resource endowment is low, there are more poor ore, polymetallic symbiotic ore is dominant, rutile ore and other problems, for this reason, China's high-quality titanium concentrate still needs to be met by imports. 2019 China's titanium concentrate production of about 5 million tons, ranking first in the world, but still imports about 2.6 million tons, accounting for about 34% of China's titanium concentrate demand.

Adequate supply of raw material titanium sponge does not constitute a constraint

The raw material used for titanium processing material is titanium sponge, and titanium sponge is available for titanium ingots by processing. Overall, the supply of titanium sponge is relatively adequate, with a production capacity of 110,000 tons of titanium sponge in China in 2019, with an output of 75,000 tons and a capacity utilization rate of 68%.The concentration of titanium sponge production is high, of which the market share of titanium sponge CR6 in national production in 2019 is 88%. Despite the high concentration of the industry, we believe that titanium sponge does not pose a constraint on the development of the titanium industry due to the relatively abundant production capacity.

China has a structural surplus of titanium materials and a relative shortage of high-end products

China is a major producer of titanium, and according to the China Nonferrous Metals Industry Association's Titanium and Zirconium Hafnium Branch, the global titanium production is expected to exceed 150,000 tons in 2019, and it can be estimated that China accounts for about 50% of the global titanium production. Overall, China's titanium production and consumption change trends are basically the same, with titanium production declining in 2013 and resuming growth in 2017, reaching 75,000 tons in 2019. In terms of product mix, China's titanium is dominated by plates, which accounted for about 52% of China's titanium production in 2019, followed by rods (18%), with tubes in third place (14%) and less in other forms.

Despite improvements in recent years, China's titanium industry still suffers from the contradiction that there is excess capacity at the middle and lower ends of the chemical and metallurgical industries, while there is a relative lack of capacity for high-end products such as aviation and medical, showing a structural overcapacity pattern overall. Taking titanium ingots as an example, the production capacity of titanium ingots, which are closely related to titanium materials in China, exceeded 178,000 tons in 2019, while the output of titanium ingots was about 88,700 tons in 2019, and the capacity utilization rate of titanium ingots was less than 50%.

Concentration continues to rise, the scale and high-end products enterprise development opportunities

China's titanium import and export volume also reflects the structural surplus of China's titanium industry, in 2019 China exported about 21,000 tons of titanium, but at the same time imported more than 8,000 tons of titanium, aerospace and other high-end areas with titanium alloy plate, bar, wire import demand is still large. Domestic high-end titanium in the stress design, safety factor selection, alloy system and performance research (corrosion, blast impact, fracture, fatigue), processing technology, welding technology and other aspects of a large gap.

On the other hand, with the development of the industry, the concentration of titanium production in China has gradually increased, and the market share of the top ten titanium producers by sales volume has increased to 79% level in 2019. We judge that the concentration of the titanium industry will continue to rise in the future, and the leading titanium enterprises with scale advantages and the titanium producers with technical advantages and mainly high-end products will gain greater development in the market competition.

4.Industry trends and major companies

Combined with the characteristics of the titanium industry chain, we believe that the future development trend of the titanium industry mainly has the following points.

(1) strengthen the alliance of upstream enterprises to obtain and control the advantage of the resources to ensure product quality, titanium materials, especially high-end titanium materials for titanium raw material quality requirements are high. Although the global titanium resources are more abundant, but the proportion of high-quality rutile less than 10%, with a certain degree of scarcity, rutile titanium resources in China is particularly scarce, most rely on imports. Titanium production enterprises to unite upstream resource development enterprises, access to or control the advantage of titanium resources is important, will become one of the future industry development trend.

(2) high-end titanium will become the industry's development plateau at present, China has become the world's major titanium production and sales countries, but the traditional power, chemical, metallurgical and other fields in the maturity of the growth space is not large. On the other hand, in China's industrial upgrading and military policy, aerospace, marine engineering, ship sub-sector demand is good, the technical threshold is high, will become the industry development highland.

(3) the leading enterprises to strengthen the advantages of the industry strong strong titanium, especially high-end titanium production involves many production links, high technical threshold, large investment in fixed assets, requiring production enterprises with capital, talent, management and other aspects of the comprehensive advantage. Titanium leading enterprises have the first-mover advantage, with the future development of the industry, the comprehensive competitiveness will continue to strengthen, the industry will show the strongest trend.

5.Investment advice and risk tips

We believe that China's titanium industry has the structural problem of fierce competition in low-end products and short boards in mid- and high-end products, and the growth of the industry mainly comes from the aerospace, marine, and offshore engineering fields where demand for mid- and high-end products is strong. At the same time, the quality of medium and high-end titanium products requires strict quality, and the leading enterprises with better product structure have first-mover advantages in R&D, equipment, management and technology, and are expected to enjoy the dividends of the development of medium and high-end titanium materials.