Japan 2 Ti Sponge Makers Suffer Low Profit Despite of High Demand

Japanese 2 major titanium sponge makers are expected to gain annual net profit for fiscal 2012 ending in March 2013. However, Osaka Titanium Technologies forecasts slightly lower operating profit for fiscal 2012 than fiscal 2011. Toho Titanium’s profitability would not improve largely despite of full output plan of titanium sponge in fiscal 2012. Sponge shipment is expected to increase mainly for airplane industry but ore cost upsurge is likely to lower the sponge makers’ profits.

Osaka Titanium Technologies forecasts 2.1% year-to-year higher net profit for fiscal 2012 thanks to the tax revision while 6.9% lower operating profit mainly due to cost expansion. Toho Titanium eyes 1.1 billion yen of annual net profit for fiscal 2012, the first annual black since fiscal 2008. However, the net profit would not recover to the level at 4.1 billion yen in fiscal 2008.

Titanium sponge shipment is expected to continue increasing. Osaka Titanium Technologies and Toho Titanium conducted output capacity expansion in fiscal 2011 when the demand maintains globally steady from airplane industry. Positive effects of the favorable demand are eliminated by price of high grade titanium ore. In recent years, ore usage has rapidly increased by paint and pigment industry, which consumes about 90% of the all titanium ore, especially in emerging countries. Ore supply has tightened and the price has surged also for high grade ore.

Non-titanium businesses are also in unfavorable conditions. Osaka Titanium Technologies suffer lower price and less sales volume of polycrystalline silicon to offshore customers when the demand deteriorates from semiconductor industry.