Non-ferrous metals: sharp decline in production capacity, demand is expected, titanium prices cautiously optimistic

From the perspective of supply, from 2013, China's sponge titanium industry has gradually entered the stage of capacity reduction. By 2015, the production capacity of titanium sponge has been greatly reduced by 50% from the previous two years, to 88,000 tons, basically falling back to the level of 2009; correspondingly, the output has decreased by 16.44% and 8.54% respectively for two consecutive years. The rate has risen to over 70% and the situation of overcapacity has eased. From the demand side, foreign demand has continued to weaken in recent years, and net exports have declined instead of rising; domestic demand has also been sluggish, but the decline in consumption has been slightly slower than production, which has slightly improved the supply and demand structure. From the downstream of the industry chain, the demand for titanium materials is strong. Although the usage of titanium materials in traditional chemical, metallurgy, and power fields has decreased to varying degrees in recent years, it has grown rapidly in high-end fields such as aerospace and medical, especially in the field of aerospace. Annually reached 41.2%.

At present, among the world's major titanium producers, Japan has no aerospace industry, so there is not much demand for aerospace in downstream applications; the United States due to its strong aviation and industrial undertakings, related applications account for 80% of the total; Russia The main industries are mainly used in aviation, accounting for about 60%.

　　In contrast, in my country, titanium is mainly used in the low-end field, while the application in aerospace accounts for only 16% of the total, far lower than the utilization ratio of other countries. With China's rapid development in the aerospace field, both in the civil aviation field and the military aerospace field, there is a huge demand for high-end titanium materials. In the future, the proportion of downstream demand will be closer to the United States, Russia and other countries, with considerable increments . On the whole, due to the significant progress in supply-side capacity reduction, the weak demand-side situation is expected to improve, and production costs continue to rise. It is expected that the price of sponge titanium will increase steadily in the future.

　　 Risk warning: Capacity contraction is not as expected, downstream demand growth is not as expected, and cost changes are risky. (Haitong Securities)