The Case for Titanium and Various Super Alloys

Titanium and super alloy demand is currently skyrocketing due to increased aerospace and defense spending, rising energy production, and new technologies based upon such elements as Hafnium, Cobalt, Nickel, and Tantalum. For example, the new semiconducting medium, developed by separate teams at Intel and IBM (IBM is a stock I recommend and own) that allows for much greater performance than conventional poly silicon chips, is a hafnium alloy. New airliners such as the Boeing's Dreamliner and Airbus' A380 Super Jumbo Jet use incredible amounts of titanium and many super alloys due to their low weight, incredible strength, and ability to resist corrosion under extreme operating conditions. So do the F-35 Joint Strike Fighter, F-22 Raptor, Dassault Rafale, and Eurofighter Typhoon. Other military applications for these metals include the US Navy's planned CX-1 class warships and DDX Destroyers, ballistic and non-ballistic missiles, and spy satellites. What's more, is that demand is being driven by the increase in electricity demands that is resulting in the building of additional power plants all over the globe. Titanium and many super alloys are used in the construction of these plants due to the same reasons for their use in domestic airliners and defensive and offensive weapons. A new possible catalyst for titanium demand as well as super alloy demand, that, in my opinion, is not priced into the market is the adoption of biofuels in the United States and around the globe. Ethanol, which is primarily composed of water cannot be transported by conventional methods. The pipelines used for gasoline, which are made from an advanced steel alloy, will corrode quickly if utilized for ethanol transport. The same scenario will result from such gasoline-ethanol blends as E-85. Train and other transportation methods face the same obstacles as the container cars in the case of trains and and those used in tanker ships are also made from steel. If these tanker ships, container cars, and pipelines were made from titanium or, perhaps, a super alloy this problem would be alleviated. Without such a solution there will never be a widespread adoption of any fuel containing high amounts of ethanol. Moreover, ethanol production facilities face the same hurdle and will need to construct their machinery and storage tanks out of corrosion resistant materials, which will create even more demand for titanium and super alloys. Domestic stock plays in the Titanium and super alloy industry are Allegheny Technologies (ATI), Titanium Metals (TIE), RTI International Metals (RTI), and, to a lessor extent, Carpenter Technologies (CRS). There is also a Russian player, which I might add is the world's largest producer of Titanium but does not trade on any domestic exchanges. For purposes of disclosure, I own shares of RTI International (RTI).