Aviation leads the development of the titanium industry, and the civil titanium space is broad

      China's sponge titanium production accounts for more than 50% of the world's production, titanium industry strength is strong, industrial structure continues to improve, recommend titanium resources leading Vanadium titanium shares (000629.SZ), Anning shares (002978.SZ). From 2001 to 2021, the composite growth rate of China's sponge titanium production was 20.24%, and the sponge titanium production maintained rapid growth. In 2021, China's sponge titanium production is about 140,000 tons, accounting for about 57% of the global sponge titanium production. China's titanium metal industry chain is complete, titanium alloy products continue to meet the downstream needs of chemical, aviation, daily necessities, and the overall strength of the titanium metal industry is strong. China's sponge titanium industry has a high concentration, and the industry CR5 in 2021 is 74.14%. China's high-quality sponge titanium and high-end titanium materials are partly dependent on imports, but the high-end of domestic sponge titanium and titanium materials continues to promote, and the industrial structure is constantly optimized. In 2021, China's titanium imports are 7175 tons, and the unit price is 450,000 / ton, and there is still import substitution space for domestic titanium materials.

      Aerospace leads the development of the titanium industry, and the civil titanium space is broad. In 2021, chemical industry and aerospace accounted for 47% and 18% of China's titanium material demand, respectively, and chemical industry demand is the main downstream of China's titanium material. The technology and quality requirements of titanium alloy products are high in aerospace, and with the development of commercial aircraft in China, the demand for titanium materials in China's aerospace field will steadily rise, and aerospace will lead the development of the domestic titanium industry. In the civil field, the demand for chemical industry is stable and rising, the demand for metallurgical and power titanium materials is stable, and the demand for consumer electronics and daily titanium materials is gradually rising, and the future space for civil titanium materials is broad. China's titanium exports have risen steadily, with exports of 15,700 tons in 2021, up 3.2% year-on-year, and titanium exports are an important supplement to China's titanium demand.

       The cost of sponge titanium in the whole process mainly comes from high titanium slag and magnesium metal, and China's titanium resources are highly dependent on imports. The production process of titanium sponge is divided into full process and half process. The whole process is chlorinated refining of high titanium slag, magnesia thermal reduction and electrolytic magnesium, and the half process only includes magnesia thermal reduction. According to estimates, in the production cost of titanium sponge in the whole process, the proportion of high titanium slag and metal magnesium is 39% and 49%, respectively. In the production of semi-process titanium sponge, the cost of titanium tetrachloride and magnesium accounted for 55% and 39% respectively. Since the whole process can realize the recycling of magnesium resources, the production cost of titanium sponge in the whole process is generally low. Titanium concentrate import dependence is high, in 2021, China's titanium concentrate imports accounted for about 38% of the total supply, titanium metal industry costs are greatly affected by overseas.

        Titanium metal industry chain to resources, high-end titanium materials profit better. According to the annual reports of each company in 2021, the gross profit of titanium concentrate, titanium sponge and titanium alloy processing enterprises is 1,933 yuan/ton, 20,700 yuan/ton and 44,800 yuan/ton, respectively, and the gross profit margin is 82%, 22% and 23%. Western Materials and Western Superconductor, which are engaged in high-end titanium material processing, have gross profit margins of 70,000 yuan/ton and 200,000 yuan/ton respectively in 2021, and gross profit margins of 23% and 45% respectively. From the perspective of the industrial chain, titanium resources and high-end titanium processing have good profitability.

Risk warning: chemical demand has fallen sharply, titanium sponge production capacity has grown too fast, and raw material prices have risen sharply.