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Despite Sluggish Trends in Oil/Gas Exploration, Titanium Opportunities Could Unfold in Refining and Downstream Petrochemical Production

Non-aerospace global industrial markets are expected to present a bumpy ride for titanium business in 2016 and through the first half of 2017, dictated in large part by the vicissitudes in global oil and gas sector. However, a decline at one end of the industrial business spectrum may in fact create opportunities at the other end for the titanium market.

Collapsing Oil, Gas Prices
Market analyst Chris Olin, the president and founder of the Olin Research Group LLC, Avon, OH, said that, compared with business activity in the aerospace sector, non-aerospace industrial markets for titanium are likely to be tepid for most of 2016, going into early 2017. Olin, on Dec. 18, 2015, conducted a conference call to share his outlook for titanium business in 2016.

Olin said his list of key non-aerospace global industrial markets include desalination, oil and gas, power generation, general industry and infrastructure, chemical processing, ocean and naval, and nuclear power. “We’ve been seeing weakness in the industrial categories—everything non-aerospace,” Olin observed, noting that, year to year, business levels could be down as much as 10 percent in 2016. “The main problem has been the collapse in oil and gas prices. At the moment, there really are no positive outliers in industrial markets for titanium business.” As a result, he said distributors, quite wisely, have been hedging away from the industrial sectors and adjusting their inventory levels accordingly.

As Olin sees it, oil must recapture a level of at least $50 per barrel to jump start a new wave of capital investments, which would have a cascading effect among various industrial markets. This would spark capital investment dollars. “It’s been tough to get major projects off the ground,” he said.

There is a potential for a rebound in industrial markets by 2017, he said, pointing to the fact that the titanium supply chain and overall inventory levels are now in “a much better balance” compared with recent years. “The major headwinds for industrial markets (seen during the second half of 2015) have died down and there’s much less inventory pressure coming from distributors. The inventory levels of distributors are now lean. And the industrial markets are less bad.” As such, Olin anticipates improvement in industrial business for titanium during 2017, picking up momentum heading into 2018.

As industrial markets continue to adjust to the precipitous drop in oil prices, and fallout ripples through various business sectors, Rob Henson, the chair of the International Titanium Association’s Industrial Committee remained optimistic that the titanium industry will regain its momentum as the petroleum industry retargets capital investment during the next 12 to 18 months.


 

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