Might Have a Russian Titanium Problem
Comment of the Day

March 09 2022

Commentary by Eoin Treacy

Might Have a Russian Titanium Problem

This article from Barron’s may be of interest to subscribers. Here is a section:

There is a lot of lightweight, ultrastrong titanium metal in modern jet planes. Titanium cuts weight and improves fuel efficiency. That’s the good news.

The bad news is that Russia is a big supplier of titanium. That might become an issue for Boeing (ticker: BA) shares depending on how long the Russia-Ukraine conflict rages, how long sanctions are in place against Russia, and how long it takes other titanium suppliers to ramp up production.

Monday, The Wall Street Journal reported that while Boeing has suspended parts of its business in Russia, Boeing’s relationship with titanium supplier VSMPO AVISMA remains up in the air. Boeing didn’t immediately respond to a request for comment about its VSMPO relationship.

Eoin Treacy's view

Gold mine investors are familiar with the arguments for sourcing supply from politically stable parts of the world. Everyone else is waking up to the reality of political volatility now. This is going to be a consideration for every shovel ready project going forward. Russia’s supply is integral to the smooth functioning of the global economy and sourcing fresh sources from outside the country is going to take both time and money. That’s a recipe for volatility, both up and down, over the coming years.

I had the pleasure of meeting Philip Andrews, CEO of Resource 500 in Riyadh in January. He is raising capital to develop a high grade, vanadium/titanium resource in Greenland. At the time he was pitching it to the Saudi government. My understanding is the company is primarily interested in finding a partner to help develop the asset, and is not picky about where the ore will eventually be processed. Here is a link to the pitch deck.

China is the primary supplier of titanium so it is one more industry they have control over.

Boeing is short-term oversold and shares a similar pattern with many of the airlines and travel companies. Any weakness in oil prices is likely to be a salve to selling pressure in these sectors. There is short-term scope for a relief rally, but a break in the succession of lower rally highs will be required to signal a return to demand dominance.

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