Above: TSI Titanium’s No. 18 Medart Bar Peeler.

Titanium heavyweights work together to forge a stronger future in a growing industry

April 2014 - Innovation and demand both loom large for the titanium industry. With an ever-increasing call for lighter-weight aerospace components, the advent of 3-D printing and Baby Boomers seeking to stay active in retirement, interest in titanium is on the rise.

Two well-established companies—Sierra Alloys, in Irwindale, Calif., and TSI Titanium, based in Derry, Pa.,—are joining forces to meet growing demand from current and future customers.

“Both companies were founded in the early 70s by two entrepreneurs, Joe Augustyn and my father Ed Sobota,” says TSI Titanium president Ed Sobota. Augustyn had moved to California while working for RTI Titanium and started Sierra Alloys in 1974, while Ed’s father, a metallurgist for a steel mill processing titanium, founded TSI in 1975. Coincidentally, both Augustyn and Sobota Sr. passed away in 2010, leaving behind strong, family-owned businesses.

Over time, each family made the decision separately to sell its company to Platte River Ventures (now Denver-based Platte River Equity) in late 2011. That move, organized under new parent PRV Metals, led the two companies to rely on each other’s experience and expertise to grow capabilities and customer base.

“We are two good companies with strong reputations in the industry but servicing slightly different markets, TSI is primarily a titanium round bar producer and Sierra is primarily a rectangular bar producer with an emphasis in titanium, but they also work with nickel and some of the different stainless grades of steel,” says Sobota. “The idea with Platte was not to combine us, but that the two of us together represent a big chunk of the titanium industry and with what Sierra does in the other materials, to see what we can best do together.”

Staying the course

Like any industry, the economy has impacted Sierra and TSI, and both Sobota and Sierra Alloys president Craig Culaciati expect the effects to last into the first half of 2014. 

“As an industry we’ve been lagging,” says Sobota. “We haven’t ramped up to the level the OEMs and the industry analysts have been forecasting for the last couple of years.”

 “The overall economic malaise, excess capacity, excess inventory and things like sequestration have made it challenging for our two companies. Commercial aircraft programs are starting to achieve the ship/set schedules that the OEMs said they would, but they’re still not where we thought they’d be at this time a year ago,” says Culaciati.

That said, there are positive signs moving into the latter half of the year. Culaciati cites aircraft build rates as one. “Boeing just announced that they’re up to about 10 aircraft a month on the 787 program and the Airbus A350 is coming along as planned. These are both composite-based aircraft that will use more titanium product. Some of the newer aircraft in the future, like the 777X and other next-generation aircraft, will have more composite structure to  them, so I think those are all good signs for the titanium industry on the aerospace side.”

Adjusting for competition

Business is business—and with that in mind, domestic suppliers are keeping a close eye on domestic and international activity. Ed Brennan, vice president of sales and marketing for Sierra, states, “The landscape of the market is very dynamic; supply chains are constantly in motion and what is in place today will most likely not be there tomorrow. The challenge for us, strategically, is who do we align with and how do we drive a competitive advantage into the market place. TSI and Sierra are working to understand the dynamics of the entire marketplace both domestically as well as internationally and develop strategic partnerships with key producers that provide us that competitive edge.”

Looking to the future

Medical grade titanium 6AL4V and 6AL4V ELI may be the ticket, with close to 80 million Baby Boomers living in the United States. Calculate the possible number of hip and joint replacements and there’s no ceiling on the growth opportunity that exists in medical applications. In fact, a 2007 study published in the Journal of Bone and Joint Surgery predicts the number of primary total knee arthroplasties will increase 673 percent by 2030.

“We have a real interest in the medical side,” says Culaciati. “There’s a lot of Baby Boomers getting ready to retire and I am one of them. We’ve all been active all our lives and at some point, we’re all going to get knee replacements, hip replacements—you name it—because we’re going to want to stay active and I think that titanium usage for medical applications in the next 10 years is going to be a real opportunity for us.”

Titanium’s high strength-to-weight ratio, along with its compatibility with the human body, make it a go-to choice for joint replacements. “Titanium is a perfect metal for that application,” Culaciati says. “We’re already starting to see some of that, so I am optimistic about what percent the medical business could be of our total business a year or two years from now.”

Still, aerospace remains Sierra and TSI’s bread and butter. It’s an industry that both companies have long served, and in fact, Sierra Alloys has won deserved praise as a certified gold supplier to Boeing for the last six years running and has been nominated as a Supplier of the Year in 2014. Because the business is deep-seated in aerospace, trends there often have an immediate impact on Sierra and TSI. As Brennan says, there are factors in aerospace that can indicate which direction their companies are headed.

“I think there a few key elements that drive the aerospace market,” says Brennan. “Interest rates, fuel costs, and market momentum—currently these elements are all in line with one another and there should be promising years in front of us.”

Positioning for a new marketplace

Both Sierra and TSI recognize their strength in the marketplace as boutique suppliers.  “We offer the end users typically quicker turnaround and smaller minimums,” says Sobota. “We have that personal touch—you’re talking to the same person all the time, whether it’s a technical or delivery question. And we both make an extremely high quality product.”

“I think the one thing we need to be cognizant of with the OEMs is the people that drive the marketplace are continually looking at their supply base,” says Culaciati. “We have to make sure we’re in the forefront of the supply chain decision-making process. We have a definite niche and we have to be sure we competitively market that.” MM