Investing: Why Titanium is the New Gold
Filed under: Investing
By Ross Kenneth Urken
DailyFinance.com
In recent years, many people have been shunning stocks and investing in gold, usually thought to be a safe play for troubled times. But gold is looking somewhat tarnished lately. From its high of around $1,920 an ounce in September, it has lost almost 18% as of June 11. Other metals have followed a similar downward trend.
Yet there's a shiny glimmer amidst the investment dross, a metal that for the moment appears to be a winning alternative to the favorite of King Midas: Behold titanium, whose outlook is robust thanks to a big uptick in the aerospace industry.
The Deflating Gold Bubble
Right now, gold is falling so steadily even alchemists must be getting disgruntled. Certainly investors in it are groaning. Gold futures dropped another 6% in May to continue a four-month streak of losses.
"Gold is a bubble, and I think the bubble continues to unwind," said John Mothersole, the lead nonferrous metals analyst with IHS Global Insight's Pricing and Purchasing Service. "Unless you believe in the Mayan calendar cycle, gold is a bad decision."
The tumble that gold prices have taken can be traced in part to a decline in the rupee-dollar exchange rate that began in the third quarter of 2011. India is the largest consumer market for gold in the world, and the drop in the purchasing power of the rupee has big effects.
"The price of gold has just shot up dramatically for someone in India, and in the consumption market basket, that means a big decline in demand," Mothersole explained.
Aerospace Is Looking Up
On the other side of the coin, though, you have the projections for titanium. Aerospace manufacturing is in a healthy growth phase, and that means a rapidly rising demand for the strong, lightweight metal.
The Boeing (BA) 787 Dreamliner is in production with a delivery goal of 10 planes a month. Over at rival Airbus, the troubles and delays plaguing the A350 have been resolved, and that widebody aircraft will go into commercial production by 2014.
Both planes use loads of titanium, which gives the market for the metal significant buoyancy. After the typically volatile titanium market hit bottom in 2010, it rallied, with U.S. mill product shipments clearing 100 million pounds for the first time ever. That figure is projected to reach 110 million pounds this year, according to the IHS Global Insights April titanium report. And there could be double-digit price gains to boot.
"You're got record backlogs at Boeing and Airbus, so unless you get cancellations -- but that's inconceivable -- there will be real product shipments of titanium sheets, tubes and pipe product, such that shipments look to set records over the next two to three years," Mothersole said.
Meanwhile, China is looking to hop on the large plane bandwagon too: It hopes to have its first Comac C919s ready for delivery in 2016. And Beijing is directing significant investments into commercial space exploration.
Coupled with those civilian uses, there's a big military industrial need for titanium. Over the next few years, Lockheed Martin (LMT) will be building hundreds of F-35 fighter jets for the U.S. and a host of friendly foreign powers.
DailyFinance.com
In recent years, many people have been shunning stocks and investing in gold, usually thought to be a safe play for troubled times. But gold is looking somewhat tarnished lately. From its high of around $1,920 an ounce in September, it has lost almost 18% as of June 11. Other metals have followed a similar downward trend.
Yet there's a shiny glimmer amidst the investment dross, a metal that for the moment appears to be a winning alternative to the favorite of King Midas: Behold titanium, whose outlook is robust thanks to a big uptick in the aerospace industry.
The Deflating Gold Bubble
Right now, gold is falling so steadily even alchemists must be getting disgruntled. Certainly investors in it are groaning. Gold futures dropped another 6% in May to continue a four-month streak of losses.
"Gold is a bubble, and I think the bubble continues to unwind," said John Mothersole, the lead nonferrous metals analyst with IHS Global Insight's Pricing and Purchasing Service. "Unless you believe in the Mayan calendar cycle, gold is a bad decision."
The tumble that gold prices have taken can be traced in part to a decline in the rupee-dollar exchange rate that began in the third quarter of 2011. India is the largest consumer market for gold in the world, and the drop in the purchasing power of the rupee has big effects.
"The price of gold has just shot up dramatically for someone in India, and in the consumption market basket, that means a big decline in demand," Mothersole explained.
Aerospace Is Looking Up
On the other side of the coin, though, you have the projections for titanium. Aerospace manufacturing is in a healthy growth phase, and that means a rapidly rising demand for the strong, lightweight metal.
The Boeing (BA) 787 Dreamliner is in production with a delivery goal of 10 planes a month. Over at rival Airbus, the troubles and delays plaguing the A350 have been resolved, and that widebody aircraft will go into commercial production by 2014.
Both planes use loads of titanium, which gives the market for the metal significant buoyancy. After the typically volatile titanium market hit bottom in 2010, it rallied, with U.S. mill product shipments clearing 100 million pounds for the first time ever. That figure is projected to reach 110 million pounds this year, according to the IHS Global Insights April titanium report. And there could be double-digit price gains to boot.
"You're got record backlogs at Boeing and Airbus, so unless you get cancellations -- but that's inconceivable -- there will be real product shipments of titanium sheets, tubes and pipe product, such that shipments look to set records over the next two to three years," Mothersole said.
Meanwhile, China is looking to hop on the large plane bandwagon too: It hopes to have its first Comac C919s ready for delivery in 2016. And Beijing is directing significant investments into commercial space exploration.
Coupled with those civilian uses, there's a big military industrial need for titanium. Over the next few years, Lockheed Martin (LMT) will be building hundreds of F-35 fighter jets for the U.S. and a host of friendly foreign powers.
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