The article named «Ukrainian titanium: to be or not to be» in the July issue of Metals Market was rather incorrect pointing out that Ukraine has no large manufacturing facilities for titanium ingots. In fact, the productive facilities are available, but the problem rests on a ridiculously low demand of the solvent Ukrainian companies for titanium products. At the moment, both FIKO plant and to a lower degree the pilot plant of the Titanium Institute can easily satisfy Ukrainian internal demands for titanium ingots. Back in the golden age of the USSR, Ukraine annually consumed some 15 ths. tons of titanium. Today, the «Soviet» consumption level is completely unattainable owing to low supplies. Sure thing, Russia supplies processed titanium to the aerospace complex of Ukraine, where the metal has been under certification tests for decades and no one would dare working with new suppliers. As for the rest of titanium consumers in Ukraine, they annually purchase not more than 20-30 tons of high-quality titanium products for their purposes from FIKO.
TITANIUM BOOMERANG
The article named "Ukrainian titanium: to be or not
to be" in the July issue of Metals Market was rather incorrect pointing out that
Ukraine has no large manufacturing facilities for titanium ingots. In fact, the productive
facilities are available, but the problem rests on a ridiculously low demand of the
solvent Ukrainian companies for titanium products. At the moment, both FIKO plant and to a
lower degree the pilot plant of the Titanium Institute can easily satisfy Ukrainian
internal demands for titanium ingots. Back in the golden age of the USSR, Ukraine annually
consumed some 15 ths. tons of titanium. Today, the "Soviet" consumption level is
completely unattainable owing to low supplies. Sure thing, Russia supplies processed
titanium to the aerospace complex of Ukraine, where the metal has been under certification
tests for decades and no one would dare working with new suppliers. As for the rest of
titanium consumers in Ukraine, they annually purchase not more than 20-30 tons of
high-quality titanium products for their purposes from FIKO.
From the viewpoint of titanium manufacturers, the Ukrainian
market is in strong dependence on the overall situation in the domestic industry.
Traditionally, chemical plants have been the major consumers of titanium in Ukraine
(excluding the aerospace industry, of course). However, prices for modern Ukrainian-made
chemical products are noncompetitive on the world market. Besides, the chemical industry
has a rather poor record of timely settlements for obtained titanium products.
Nonetheless, we will continue working with domestic clients; thus, starting 2000, FIKO
will recommence supplies of rolled titanium to chemical plants by employing barter
transactions. So far, every other year we obtain new orders and do not get the necessary
payments for them. For three consecutive years, even AzovStal orders 6 ths. tons of
titanium sheet and for all the three years it has not settled for the obtained titanium
products offering us barter deals with rolled metal, the production cost of which already
surpasses the world prices by some 30%.
Operations with titanium on the external markets cause
numerous problems as well. The problem is not only the low global price for titanium.
Previously, VSMPO (Verkhnyaya Salda, Russia) ranked the first in the world by titanium
sales. Nowadays, the Russian company has descended all the way down to the third standing,
while the US company Allegheny-Teledyne (which has recently merged with Oremet) took the
first position and Timet – the second. Nevertheless, VSMPO easily beats both Oremet and
Timet by volumes of output. A short while ago, VSMPO produced up to 60-65% of titanium
sponge in the world. Both European and American markets are not eagerly awaiting for VSMPO
or FIKO. In every country of the world the military industry and related sectors consume
the bulk of titanium products. It is obvious, that the military people foremost value
independence from foreigners. A good example to this statement is the recent case with
VSMPO on the US market. After Boeing had performed certification of the VSMPO products and
signed a long-term contract for supplies of 2,000 tons of titanium ingots with the Russian
company, the USA imposed a 15% import duty on titanium products, thus safely protecting
its local manufacturers of titanium sponge. It will be a mistake to think that Ukraine
will be treated differently in similar situations. Therefore, Ukrainian companies should
necessarily search for unusual sale markets and not work with foreign military enterprises
only. This is precisely how FIKO has arranged its business. We have set up joint ventures
in Germany and in a number of other European countries and promote our products to the
civil sectors, which utilize rolled titanium. Unique corrosion-resistance and other
properties of titanium enable application of this metal in chemical industry, medical
science, pulp and paper industry, and a number of other sectors.
Unfortunately, today we have to state that titanium
business does not yield profits in Ukraine, while the volumes of export remain too low.
Therefore, extra-quality products made back in 1997 are still stockpiled at the FIKO
warehouses. Intense competition for sale markets leads to large Asian and Western
consumers searching for permanent business partners, which will be able to timely deliver
metal products of the required quality. To minimize business risks, foreign consumers
conduct preliminary tests of potential suppliers for some 2-3 years. Therefore, Ukrainian
companies should be a bit more aggressive on foreign markets to let foreign companies know
about their existence. Every year FIKO participates in at least two international
exhibitions: one in Europe and one in Asia. Our company has established presence on the
South Korean market (we have executed first supplies to Hyundai Titanium), on the Indian,
Turkish, and Common European markets. The upcoming century is the time of the yellow race;
thus we are extremely interested in the Japanese market. For a long time, we have been
negotiating with large Japanese corporations.
Despite all the hardships, we continue scientific research
on technologies for titanium treatment. In fact, to save money, we have to employ our own
means to design and implement modernization projects. Well, this is the reality of doing
business in Ukraine. At the moment, FIKO works on the second unit to manufacture ingots
630, 6 tons in weight, which are required to roll sheets and rods. Right now we possess
capacities for 350-400 tons of titanium per year, while installation of the new unit will
enable production of 2,500 tons. However, the main obstacle to commissioning of the new
unit is lack of qualitative titanium raw at acceptable price in Ukraine. Today, we have to
operate using scrap and waste titanium because we are not interested in purchasing the
expensive titanium sponge made by Zaporozhje Titanium and Magnesium Works (ZTMW).
Nonetheless, we have scheduled commissioning of the new unit for late 2000. If the pricing
problems of the ZTMW are not solved by then, we will start importing titanium sponge from
Russia. Besides, we have given orders to our German joint venture to purchase waste
ICTM-standard titanium in Europe in order to manufacture products, which comply with the
international standards. When we meet the standards, we will have the markets.
If we obtain sufficient investments, we will commence
implementation of a long-term project to work out a technology for closed-cycle rod
manufacturing. When being fed with an ingot, the unit will output rods of any diameter
including extra-thin rods for manufacturing of titanium wire. We also have plans for
production of titanium wire (both welding and medical microwire) due to the small number
of global manufacturers of this commodity.
One should state a complete failure of the state program
for comprehensive development of the Ukraine’s titanium industry. The program exists in
paper reports, but not in practice. Of course, we also participated in creation of the
program and gave our opinion on its contents. However, the present execution of the
program is simply horrible. The executors, who lack clear vision of the full problem, try
to settle some insignificant details. A lot of what is put down in the program has been a
bluff from the moment of its acceptance, the bluff needed to obtain money from the state
budget. By the way, speaking about the money from the budget, the ZTMW obtained USD 15
mln. for reconstruction. It would be much better to give USD 100 mln. or to give nothing
at all. As an outcome, the ZTMW reconstructed the obsolete manufacturing facilities with
high costs. Hence, titanium sponge made by the ZTMW fails to compete with commodities by
other manufacturers. In Zaporozhje, a kilogram of titanium sponge 120 costs USD 5.2 plus a
20% VAT, while the Russian competitors offer similar commodities for USD 3 per kg.
The state program has also been devised to get funding for
the vacuum-arc treatment method. Of course, the whole world acknowledges that the electron
beam method is much more costly owing to high consumption of materials, power, and other
resources. However, the question is why should we spend foreign currency to purchase
abroad the vacuum-arc equipment, while our own country has both designers and military
enterprises capable of manufacturing this machinery? FIKO employs only Ukrainian
specialists in this direction. We have our own design bureau, whereas Bolshevik plant
executes the orders using our engineering layouts.
It is frequently mentioned that Ukraine has a closed cycle
of titanium processing from sponges to titanium tubes. This is true, but all the
productive plants possess highly worn out and obsolete technological equipment. Owing to
this and some other factors, Ukrainian-made products have much higher costs compared to
the world products. The whole titanium industry desperately requires investments. As a
matter of fact, this industry is about as profitable as, for instance, the nuclear power
engineering. The State necessarily has to participate in the investment process in the
titanium industry due to the simple fact that Ukraine has deposits of titanium ores. Thus,
Ukraine has one of a kind chance not to depend on anyone throughout the whole chain of
titanium treatment starting from mining titanium ore near Malin of Zhitomir region and
Volnogorsk of Dnepropetrovsk region and ending with making titanium tubes at Ukrainian
tube works. To a great approximation, the overall investments in the industry should
amount to at least USD 200 mln. Naturally, the State does not have this money. Therefore,
the only solution is to privatize Zaporozhje Titanium and Magnesium Works in order to
transform it into an open joint stock company. By the way, foreign companies can also
acquire a controlling interest in the ZTMW. We should not be afraid of foreigners. That is
when new production of titanium sponge will commence, which will result in normal
functioning of the whole industry. Any smart long-term investor will not even export this
sponge because Ukraine has cheap labor. By employing tolling schemes, it will be possible
to process this titanium sponge at FIKO, Frunze Manufacturing Association, Alchevsk Iron
& Steel Works, or Nikopol YuzhnoTrubny Works. Thus, end products with high added value
will be exported from Ukraine. It is needless to mention how much Ukraine will benefit
from this.