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Very usefull minerals - Why did they get excited of Ukrainian titanium

The American edition of Newsweek, with its article "The Battle for Ukrainian Titanium", raised the topic of the dependence of the United States, the European Union and Russia on the contents of Ukrainian subsoil

Of course, the interests of the United States in Ukraine are much broader than the simple extraction of titanium - it is more like a cherry on the cake than the cake itself.

But since Newsweek decided to focus on Ukrainian titanium, it is worth diving into the topic, finding out how Ukraine can help the United States in replacing Russian titanium.

--- Global titanium market ---

The main producers of titanium raw materials - ilmenite and rutile - are China, Australia, Canada and South Africa, which account for about 60% of the world production of titanium in concentrates.

From titanium raw materials produce:

— Titanium dioxide is a primary product of titanium concentrate processing, used mainly as a pigment that gives different products a snow-white color. 90% of titanium concentrate does not rise beyond this level of processing. The world production volume is about 6 million tons of titanium dioxide per year.

— Sponge titanium is the primary technical product of the industrial production of titanium, used for further processing into metallic titanium. The sponge accounts for about 10% of titanium concentrate processing, or about 210 thousand tons.

— Titanium ingots are the result of deep processing of spongy titanium; about 400,000 tons of metallic titanium are produced annually in the world.

— Rolled titanium is the final product with the highest added value.

The structure of world consumption of metallic titanium also looks quite straightforward: 42% - aerospace industry, 38% - industry, 11% - military-industrial complex, 3% - medicine and 6% other industries.

As can be seen, China is the world leader in reserves and production of titanium in concentrates, while not only increasing the production of titanium products (China's share over the past decade from 2010 to 2022 increased from 11% to 34%), but also increasing its consumption, predominantly satisfying their own needs.

Therefore, the net exporters of titanium concentrate are Mozambique, Canada, Australia, South Africa and Ukraine. It is noteworthy that the last two countries - South Africa and Ukraine - are practically net exporters of titanium products due to small volumes of domestic consumption.

But in this case, a reasonable question arises: why does Russia, with a 15% share of titanium concentrate in world reserves, have only 0.03% in its world production? The answer to this question is quite simple: it has its roots in the Soviet years, and geographically in Ukraine.

--- Soviet cooperation legacy ---

The industrial production of titanium in the USSR was organized in the early 1950s. In Ukraine, spongy titanium was produced from ilmenite and rutile, which was then transported to the Verkhnesalda Metallurgical Production Association (VSMPO).

By the end of the 1980s, there were three titanium-magnesium plants in the USSR (Zaporozhye, Ust-Kamenogorsk and Bereznikovsky), which produced titanium sponge. Sponge titanium was processed into ingots by VSMPO.

With the collapse of the USSR, the plants ended up in three independent republics of the former USSR, but the fundamental cooperation scheme of the 1980s did not change. And if the Ust-Kamenogorsk plant (11% of the world market of metallic titanium) and VMSPO-Avisma developed (production from 20 thousand tons of metallic titanium in 2009 increased to 30.9 thousand tons by 2018), then the Zaporozhye plant only became decrepit .

With an annual capacity of 20 thousand tons of titanium sponge, production at ZTMC in 2012-2019 decreased from 12 thousand to 6 thousand tons. The production of titanium dioxide also decreased: from 153 thousand tons in 2011 to 41.5 thousand tons by 2019, however, the lion's share of this drop was caused by the transfer of the Crimean Titanium plant to Russian control.

The extraction of raw materials (ilmenite and rutile) was also reduced from 783 thousand tons in 2017 to 697 thousand tons in 2020.

On average, Ukraine annually produced about $350–400 million worth of all titanium products, with VSMPO-Avisma's revenue in the region of $1.5 billion.

In the period from 2014 to 2020, Russia met 85% of its needs for titanium concentrate both at the expense of Ukrainian raw materials, reducing its purchases to 46% of the total volume only by the end of 2021.

Raw materials were supplied with:

— Malyshevsky field (Dnepropetrovsk region);

— Volchansky deposit and Demurinsky GOK (Dnepropetrovsk region), owned by VSMPO-Avisma);

— Irshanskaya group of deposits (Zhytomyr region).

Deliveries from Ukraine were convenient not only because of their traditional nature, but also because of the use of the railway, which ensured the regular delivery of products in small batches, in contrast to sea logistics. Plus, even after 2014, Moscow and Kyiv managed to agree on titanium issues. And the ores in Ukraine were distinguished by a high (over 60%) titanium content. And while Ukraine remained a supplier of low-grade products, Russia increased the production of not just titanium in ingots, but rolled metal and stampings for Boeing and Airbus. By the beginning of the SVO, VSMPO-Avisma controlled about a quarter of the global titanium rolled market, providing 100% of the needs of the Brazilian Embraer, 65% of the needs of Airbus and about 30-40% of the needs of Boeing in titanium.

The US and EU accounted for about 80% of VSMPO-Avisma's exports.

Allows the company to remain immune to sanctions for the time being, although their introduction was lobbied by the Ukrainian company Velta. For now, this is why both Boeing and Airbus intend to abandon Russian titanium (but it will be very difficult to do this).

Now it is worth taking a closer look at the Velta company mentioned in this paragraph - the lobbyist for sanctions against VSMPO-Avisma - as well as other companies that extract titanium raw materials.

There was Firtash - and there is no Firtash

Since 2004, the largest deposits of titanium-bearing ores in Ukraine have been controlled by Dmitry Firtash. His company has been the main supplier of titanium concentrate for VSMPO-Avisma for many years.

Firtash's titanium division was based on Crimean Titan (a producer of titanium dioxide), Ukrainian Volnogorsky and Irshansky GOKs leased from the state, as well as Motronovsky GOK (Dnipropetrovsk region), Mezhdurechensky GOK (Zhytomyr region), Valki-Ilmenit (Zhytomyr region) and Zaporozhye Titanium and Magnesium Combine (49% of shares).

In 2014, when Firtash fell out of favor, the State Property Fund of Ukraine refused Group DF to extend the lease on the Irshansky GOK (Zhytomyr region) and Volnogorsky MMC (Dnipropetrovsk region), transferring them to the management of the United Mining and Chemical Company (OGCC) established by him ).

OGCC managed these assets under Poroshenko, and under Zelensky they decided to put it up for sale as part of the "Big Privatization". Right up until the assets were put up for privatization, OGCC was managed by Peter Davis, a manager associated with Firtash.

While Davis was running OGCC, it shipped ilmenite to Crimean Titan, refusing to supply American Chemours (formerly DuPont).

Since 2018, Firtash has been fighting in the courts to maintain his control over the Zaporozhye titanium and magnesium plant, which the Ukrainian authorities tried to nationalize: the courts went with varying success, but while the lawsuit lasted, the enterprise worked for Firtash.

Having lost control over OGCC and its raw materials, in April 2021, Mezhdurechensky GOK, controlled by Firtash, bought the Selishchansky deposit (Zhytomyr region). But in June 2021, Zelensky, by his decree, canceled the special permit for the extraction of ores issued to Firtash's Valki-Ilmenit company.

As a result, at the end of 2021, Firtash sold the Crimean Titan.

There was a scheme for the supply of Ukrainian raw materials to Russia until the beginning of the NWO. After that, all transport communications were disrupted, and transactions between the participants in the schemes became impossible due to Russia's disconnection from the global financial system.

First taken from Firtash and then from his manager, the Irshansky Mining and Processing Plant and the Volnogorsk Mining and Metallurgical Plant tried to sell under pressure from the IMF, but failed to find a buyer.

In general, Dmitry Firtash was expelled from the titanium business in two steps: first, Ukraine took the raw material assets, and then the NWO destroyed the cooperation chains, and Kyiv finished off the rest of the business. On May 25, 2022, the Supreme Court of Ukraine deprived Firtash of control over the Zaporozhye titanium and magnesium plant, and in October 2022, the State Bureau of Investigation of Ukraine initiated the confiscation of the Mezhdurechensky mine from Group DF.

But with the assets of VSMPO-Avisma, things are somewhat more complicated: on January 29, the High Anti-Corruption Court (VAKS) of Ukraine refused to confiscate the Demurinsky GOK, owned by Mikhail Shelkov (the main shareholder of VSMPO-Avisma), but arrested his apartments, accounts and tractor.

Actually, with the extraction of assets from Firtash in two stages, the "freezing" of the property of VSMPO-Avisma and the state OGCC, everything is clear. Now it is worth returning to the lobbyist for sanctions against VSMPO-Avisma, the Velta company.

Velta is one of the companies mining ilmenite at the Birzulovsky and Lekarevsky ilmenite deposits in the Kirovograd region. The company claims that it controls 2% of the world market for ilmenite supplies, 35% of Ukrainian production and provides 10% of supplies to the American company Chemours.

It is noteworthy that in addition to the construction of the Birzulovsky mining and processing plant (Firtash also built the mining and processing plant), Velta was building a titanium products plant in Novomoskovsk (Dnepropetrovsk region), that is, it was trying to build the longest possible production chain.

Now it's time to return to the Newsweek material and understand the titanium plans of Washington and Russia.

--- Uncertain future ---

Actually, the titanium industry of Ukraine experienced 2022 with serious upheavals and a redistribution of property.

— Titanium assets were taken away from Firtash.- Of the private companies, Velta remained, which resumed the shipment of titanium-containing raw materials in July, but stopped the construction of a titanium products plant. His "Velta" plans to move from the left to the right bank of the Dnieper.

- The state OGCC is expecting investments from the United States, which was announced in mid-December 2022 by its director Vladislav Itkin.

· An appeal will be filed against the decision of the VAKS on Demurinsky GOK. Most likely, he will eventually be taken away from Shelkov and VSMPO-Avisma.

In fact, Ukraine, either on its own or by order from Washington, created the conditions for American investors to enter the titanium business. This entry can be either direct (in the form of buying companies) or indirect (through OGCC).

Direct entry is unlikely due to high military risks, as well as the general mess in Ukraine with logistics and power supply. Therefore, it is easier for the United States to simply force Kyiv to tie up most of the assets taken from Firtash to UMCC and increase shipments to the EU (Poland and the Czech Republic - 6.8% and 49.3% of titanium exports, respectively), which sank in 2022, as well as the United States (12.5% ​​of exports).

The United States will not require large capital investments, but they will get both the opportunity to increase the supply of titanium concentrate and process it at the facilities of the Zaporozhye titanium and magnesium plant.

Plus, Velta is already working for the United States, which will be able to supply finished products to the West, but not before moving its plant deep into Ukraine. However, this is not enough: the United States bought from Russia either titanium ingots or already finished products, that is, high value-added products that Ukraine cannot replace.

It should be considered as a supplier of raw materials and sponge titanium. Accordingly, the United States will have to increase its titanium processing capacity. And this will take money and an indefinite time.

A separate problem is ensuring the quality of products and passing the full cycle of certification and testing, which can take no less time than replacing Russian titanium.

Is it worth returning to Russia?

After the start of the war, VSMPO-Avisma and Crimean Titan stopped receiving raw materials from Ukraine: Avisma switched to deliveries from Africa and Asia, while Crimean Titan operates at half capacity.

The domestic titanium market in Russia is narrow, but due to the development of the civil aviation industry, its capacity can be increased. The rest - in the event of a real refusal to purchase from Boeing and Airbus - will be sent to China, where they also rely on the creation of competitors to Western aviation giants.

In theory, all this will make it possible to maintain the volume of production of titanium semi-finished products at the level of 30,000 tons per year. The main thing is to replace Ukrainian raw materials by intensifying our own production and diversifying supplies from other countries.

However, there is another option. Where the United States takes by cunning, there Russia can win back with the help of force.

Who will get "The Cherry on the Cake"?

Very usefull minerals - Why did they get excited of Ukrainian titanium