Business and Finance

The heavy metal life

June 28 - July 5, 2006
Gulf Weekly The heavy metal life

The huge new Airbus A380 cannot take off without it, nor can Boeing’s 787 Dreamliner – titanium has become an essential component in modern aircraft.

The Urals contain much of the world’s reserves of this metal, and the Russian company VSMPO-Avisma, as the world’s largest producer, has closed lucrative contracts with aerospace sector in the West.
The fact has not gone unnoticed in Moscow. After recovering control of oil and gas, the Kremlin is now looking at retaking control of the metal industry.
Aircraft manufacturers in Europe and North America are concerned. They fear the Russian state could exert influence in the way it has recently in energy politics.
But at VSMPO-Avisma the concern is that circles around President Vladimir Putin are less concerned about national strategy than about personal gain.
With every billion dollars that flows into the Russian state coffers as a result of the continuing high energy prices, the Kremlin’s confidence in its economic policy grows.
A few months ago Putin announced the formation of a state holding company for the decaying Russian aircraft construction sector. It is to fall under the arms exporter Rosoboronexport.
Rosoboronexport head Sergey Jemesov, a close Putin associate, made clear to the titanium producer while on a visit to the Urals that the state would not tolerate an independent concern in a key strategic area of this kind.
VSMPO-Avisma, which produced around 30,000 tonnes in 2005, also supplies titanium for submarines, rockets and nuclear power stations.
VSMPO-Avisma general director and major shareholder Vladislav V Tetiyukhin believes it only a matter of months before the company is sold to the state.
Speaking at the company’s headquarters in Verknyaya Salda near Yekaterinburg, Tetiyukhin says that neither the clients, such as Boeing and Airbus, nor the company’s employees need be concerned about the future.
But there are other voices being raised. A manager says she fears a state takeover.
“We have never seen the state managing a business effectively,” she says, pointing to reports of poor management at the huge gas production company Gazprom, which has effectively been renationalised over recent years.
Western aircraft manufacturers could also find that renationalisation could have unfortunate consequences for them.
There are fears that Rosoboronexport could make deliveries of the strong and light metal dependent on Western countries buying Russian aircraft in return.
VSMPO-Avisma is unusual among Russian commodity producers, as it does not export the raw materials but actually processes them.
With an annual turnover of $400 million, the company supplies around a third of world titanium demand. Almost 75 per cent of its production goes to exports.
In an attempt to allay the concerns of the company’s staff, Tetiyukhin says it is not year clear whether the Kremlin will take a majority shareholding.
Tetiyukhin sees the threat to his company as not yet serious, but the example of Yukos has shown how quickly that situation can change.
Precisely these agencies acted as the long arm of the Kremlin in destroying what was the largest Russian oil concern and then selling it to the state-owned competition.

Using Titanium
· It is used to make propeller shafts and rigging and in the heat exchangers of desalination plants and in heater-chillers for salt water aquariums, and lately diver knives as well.
· It was the principal material used in the construction of many advanced Russian submarines, including the deepest-diving military submarines to date.
· It is used to produce relatively soft artificial gemstones.
· Titanium tetrachloride (TiCl4), a colourless liquid, is used to iridise glass and because it fumes strongly in moist air it is also used to make smoke screens and in skywriting.
· In addition to being a very important pigment, titanium dioxide is also used in sunscreens due to its ability to protect skin by itself.
· Because it is considered to be physiologically inert, the metal is used in joint replacement implants.
· Its inertness and ability to be attractively coloured makes it a popular metal for use in body piercing.
· Titanium alloys are also used in spectacle frames.

· Stefan Voss

More on Business and Finance