Titanium, nickel, cobalt: ATI’s Q1 net income falls on raw material challenges

ATI

Speciality materials and components producer Allegheny Technologies Inc. (ATI) saw Q1 2019 sales rise by 3% y-on-y to US$1Bn, but net income fell to US$15M or US$0.12 per share, down from adjusted net income of US$43.3M or US$0.32 per share in Q1 2018.

Robert Wetherbee, ATI president and chief executive officer, noted there had been “unexpected operational headwinds” in both ATI business segments and confirmed that the company was working to proactively address challenges from short-term nickel powder billet shortages and higher operating costs. This included ramping up ATI’s own production to offset future uncertainty.

ATI acknowledged that segment results were also adversely impacted by the “temporary margin compression” caused by cobalt price volatility over the past 12 months.

ATI noted that its High Performance Materials & Components (HPMC) segment extended its long-term purchase agreement with Rolls-Royce to supply rotating disc quality speciality materials for the Trent engine family until 2029.

HPMC Q1 2019 sales were up 7% y-on-y, primarily due to higher sales of titanium and nickel-based products. In the Flat Rolled Products (FRP) segment, sales for aerospace & defence were up 70% y-on-y, supported by higher production of titanium armour plate for the Abrams tank in the USA and Stryker vehicle in the UK. Titanium FRP for jet airframes and nickel and cobalt-bearing alloy products for jet engines also performed well.

Roskill view

ATI’s supply chain issues highlighted how raw materials continue to be a risk for major fabricators and OEMs. Cobalt prices were above US$40/lb in Q1 2018 but, since then, oversupply set against sluggish demand brought about a 12-month period of price decline.

The nickel price regularly goes though periods of price volatility due to the demand cycle from the stainless steel industry. More recently, however, additional volatility has come from the rising hopes of increasing demand prospects from the battery sector.

Titanium prices have been relatively stable for the past decade owing to much better control of revert, although higher prices for sponge feedstock minerals such as rutile could see small increases passed on in 2019. The main issue in the titanium market at present is long lead times, with Ti alloy sheet lead times in excess of 52 weeks.

Roskill’s new Nickel: Outlook to 2028 report was published in April 2019. Click here to download the brochure and sample pages, or to access further information.