Japan’s titanium suppliers eye plane-maker exit from Russia

Japanese suppliers of titanium, a metal critical for manufacturing aircraft, have emerged as potential beneficiaries from moves in the aerospace industry to cut ties with Russia.

The war in Ukraine will likely prompt Boeing Co. and Airbus SE to review their long-term procurement and look for alternative sources to Russian titanium, according to Thanh Ha Pham, an analyst at Jefferies Japan Ltd. Osaka Titanium Technologies Co. and Toho Titanium Co. — which are among the very few suppliers outside of Russia — are set to help make up the shortfall, he said.

“Japan is regarded as an old friend and a good partner with the U.S. as a procurement source,” Thanh Ha said. “Both Boeing and Airbus will likely deepen ties with the two Japanese suppliers.”

Russia’s VSMPO-Avisma Corp. is the world’s biggest supplier of titanium and the main trading partner for Boeing and Airbus. The U.S. plane-maker has already halted purchases of Russian titanium. Airbus continues to source the metal from the country, but the company has said it will curtail its operations in Russia.

The war has put pressure on global plane-makers to cut dependence on the Russian titanium giant, which has links to the nation’s military.

Titanium is also a critical material for making missiles and rockets, and one of Avisma’s biggest shareholders is Rostec State Corp., a Russian government-owned defense conglomerate headed by Sergey Chemezov — a close ally of President Vladimir Putin.

The war has raised “questions over whether the aircraft makers can rely on Russia for titanium used by the military in their supply chains,” Thanh Ha said.

In response to tightening sanctions and economic measures, on Tuesday Moscow issued an order saying it would restrict trade in some goods and raw materials. If Russia does impose restrictions of titanium exports, the plane-makers’ shift to sourcing from Japan would accelerate, the Jefferies analyst said.

According to Toho Titanium, it’s ready to offer more supplies by tapping into its extra production capacity.

Unless the Ukraine crisis eases soon, Toho anticipates some orders and inquiries will likely come “in the mid to long-term,” said Hiromu Tomeba, manager of the company’s corporate planning division. It is yet to hold talks with buyers on additional supplies, he said.

“We’ll respond to needs from customers as much as we can,” said Tomeba.

The war hasn’t caused any disruptions in raw material supplies, as the company buys titanium ore from India, Canada and South Africa, according to Tomeba. Toho makes titanium sponge, a semi-processed metal that’s turned into finished products in the U.S. and Europe.

Osaka Titanium Technologies, Japan’s biggest supplier, hasn’t received any orders or inquiries, according to a company spokesperson who declined to talk about the outlook.