Russia's military actions against Ukraine affected the development of the titanium industry in Ukraine, in particular, the mining of ores containing titanium and the production of titanium products. The volume of exports of ores containing titanium in 2022 decreased by more than 40%. In addition, the sanctions policy and the return to state ownership of titanium assets may lead to a redistribution of the market.
Titanium production in Ukraine: decline by all indicators
In 2022, the export of ores containing titanium from Ukraine decreased by 41.8% to 322.1 thousand tons in 2022. The turnover of titanium exporters decreased by 19.6%, to $130.1 million. We will remind that in 2021, Ukraine increased titanium exports by 3% to 553,000 tons worth $161.9 million (+17%).
According to the US Geological Survey, as of 2021, Ukrainian ilmenite accounted for about 5% of the world production of ores used for the production of titanium.
The main export destinations were the Czech Republic (47.9% of deliveries in monetary terms), the USA (11.9%) and Romania (9.7%). The regional structure of titanium exports from Ukraine differs significantly from 2021, when export supplies of titanium ores were made to Mexico (21.2%), China (18.2%) and the Czech Republic (14.1%).
The titanium market in Ukraine during the war: activity of titanium enterprises
The main producers of titanium in Ukraine:
- "Zaporizhia Titanium-Magnesium Plant" (ZTMK) - manufacturer of titanium sponge;
- "Sumikhimprom" - a manufacturer of titanium dioxide;
- "Velta" suspended the construction of a titanium products factory in the city of Novomoskovsk, Dnipropetrovsk region, and concentrated on the relocation of production facilities to a safer place.
The main titanium ore mining companies in Ukraine:
- PJSC "United Mining and Chemical Company" (OGHC), controls Vilnohorsk Mining and Metallurgical Combine and Irshansk GZK;
- LLC "Mizhrichkovy GZK";
- "Valky-Ilmenit" LLC;
- VKF "Velta" LLC.
The war significantly affected the work of enterprises in the titanium industry of Ukraine. Some of the enterprises of the titanium industry of Ukraine were directly affected by the hostilities, but the nature of the damage is not reported, the enterprises for obvious reasons do not share information about their activity during the hostilities. Ukrainian titanium companies are in no hurry to disclose their production figures, but according to market estimates, they have significantly decreased.
In the first half of 2022, the titanium business enterprises of Group DF (the structure includes LLC "Mizhrichenskyi GZK", LLC "Valky-Ilmenit" and Motronivskyi GZK) extracted 1.07 million cubic meters. m of ilmenite ore (-25% compared to the same period in 2021) and produced 62 thousand tons of ilmenite concentrate (-5.7%).
The "United Mining and Chemical Company" reduced production during the war and changed logistics - the company arranged the shipment of ilmenite ore through ports in Romania and Poland.
During the war, the Velta company used only 50% of its production capacity due to electricity restrictions.
Distribution of the titanium market in Ukraine
Redistribution of ownership of assets is possible on the Ukrainian titanium market. In May 2022, the court confirmed the return of ZTMK to state ownership. Even under martial law, ZTMK and OGHC can be put up for sale as part of "great privatization."
However, it is unlikely that such privatization auctions will be effective before the end of active hostilities. It is obvious that the state is not determined to create its own vertically integrated closed cycle of titanium production, which was actively discussed before the war.
Ukraine confiscated 100% of the authorized capital of VSMPO Titan Ukraine LLC (manufactures titanium pipes), whose corporate rights were transferred to ARMA. And in February 2022, the High Anti-Corruption Court satisfied the lawsuit of the Ministry of Justice of Ukraine for the transfer to the state ownership of Ukraine LLC "Demurinsky Mining and Processing Plant", which belonged to Russian businessmen Mykhailo Shelkov and Serhiy Chemezov.
The fate of the Velta company, which was put up for sale in 2022 due to bank loan debts, is still unclear. However, the sale auction on August 1, 2022 did not take place due to a lack of participants.
What are the reserves of titanium ores in Ukraine
According to the legislation of Ukraine, information on titanium ore reserves is a state secret. At the same time, the US State Geological Survey estimates them at 8.4 million tons, of which: ilmenite – 5.9 million tons, rutile – 2.5 million tons. These volumes make up 1.12% of the world's titanium reserves.
At the same time, ODGC notes that Ukraine has about 20% of the world's recorded reserves of titanium ores. According to the OGHC, the total volume of balance reserves of titanium ores as of January 1, 2022 was 40.2 million cubic meters. The volume of conditionally on-balance sheet and off-balance sheet reserves of titanium ores was 81.15 million cubic meters.
According to the report of the consulting company EY, 78 titanium deposits of different levels of exploration have been discovered in Ukraine. However, in fact, the mineral and raw material base of titanium in Ukraine is represented by approximately 40 titanium deposits, including one unique, 13 large and 10 medium deposits. Currently, titanium ores are mined in Ukraine only from placer deposits, which make up about 10% of all explored reserves.
"The main resources of titanium ores are concentrated in indigenous deposits. They can be enough for a long period of time of operation of titanium ore mining enterprises. But there is a problem in the shortage of ores with fresh ilmenite, the reserves of which in Ukraine are mostly associated with the large Stremyhorodsky and the smaller Fedorivsky native deposits. The main problem with the development of these deposits is that their exploitation requires the involvement of significant capital investments: for the construction of new mines and processing plants," the EY report emphasizes.
Investment attractiveness of Ukrainian titanium
The military aggression of the Russian Federation against Ukraine changed the situation on the world titanium market as well. The Russian Federation, represented by the company "VSMPO-Avisma", lost two of the largest consumers of titanium products - Airbus and Boeing. Airbus is trying to find alternative suppliers and will stop supplying titanium from Russia for several months. Boeing suspended the purchase of titanium from the Russian Federation at the beginning of the war. Previously, the American corporation covered up to a third of its needs at the expense of Russian titanium. At the same time, the European Union recently excluded VSMPO-Avisma from the seventh package of sanctions.
Norsk Titanium MERKE IV RPD 3D printer produces titanium structural components for the Boeing 787 Dreamliner.
The OGHC believes that the USA can direct strategic investments to the development of the titanium industry in Ukraine, and Ukrainian titanium products can be replaced by Russian ones. OGHC has already concluded a direct agreement to supply 80,000 tons of ilmenite concentrate to the American The Chemours. In turn, "Velta" received a license to export ilmenite concentrate to the USA last summer.
At the state level, it is believed that the titanium industry of Ukraine will become one of the foundations for attracting foreign investment and the political protection that comes with it.
"Today we have titanium and we have lithium, both of these metals are in high demand now and will be even more in demand in the future," Oleh Ustenko, Zelensky's economic adviser, told Newsweek. "As far as I understand, most of these deposits are not even developed. Business opportunities in this sector are really huge, it's important in terms of increasing the stability of the world system and the global supply of these resources, we see our role not only within the EU, but also at the level of global supply. But, again, for that we need to end the war ".
Steven Blank, a senior fellow at the Institute for Foreign Policy Studies and a former professor of Russian studies at the US Army War College, told Newsweek that Ukraine could begin supplying significant amounts of titanium to the West within months of the war's end.
"They're going to have to rebuild the whole country from top to bottom, which, if you think about it, is a great opportunity for investors." According to him, to unlock the potential, the support of the governments in Kyiv and Washington will be needed: "The state will also play a big role... Signals from the governments that it is safe to invest will be necessary." If Kyiv supports, "we will see a huge leap forward."
The war for the Ukrainian titanium
The war led to the fact that strategic plans for the development of the Ukrainian titanium industry were postponed until the best of times. However, despite the hostilities, Ukrainian titanium assets remain attractive for investment. Analysts believe that titanium can become one of the foundation elements for the post-war reconstruction of Ukraine.
Currently, the United States and allied states are making every effort to identify, develop and use huge reserves of the most important metal on the territory of Ukraine, which is of crucial importance for the advanced military technologies of the West, which will become the basis of the future deterrence of Russia and China.
It is known that titanium is a light but strong metal widely used in the production of military equipment, such as fighter jets, helicopters, naval vessels, tanks, long-range missiles and much more.
If Ukraine wins the war with the Russian Federation, the US and its Western allies will be in an advantageous position to build a new supply channel for titanium from Ukraine. But if Russia manages to capture titanium deposits and factories in Ukraine, the Russian Federation will strengthen its global influence at the expense of a strategic resource.
Russian President Vladimir Putin and his allies have already offered a variety of reasons for a military invasion. The capture of Ukraine's titanium sponge reserves is not one of the Kremlin's public goals, but it would be a boon for Moscow, because the reserves of titanium minerals in Russia are relatively small.
Titan is vital to Russia's current offense. The rockets that fly to Ukraine almost every day have a very high content of titanium. If Moscow can face a significant shortage of modern high-precision weapons, if it cannot secure new supplies of titanium.
Most of the fighting took place in the east and south of Ukraine, where mineral wealth worth trillions of dollars is concentrated. In the first months of the invasion, Russian troops captured at least two titanium ore mining sites.
Even before the February 2022 military attack, Russia had hoped to obtain vital titanium resources through its corrupt network of oligarchs, officials and intelligence agents in Ukraine.
Ukrainian oligarch Dmytro Firtash, now living in exile in Austria, was forced to sell 49% of the Zaporizhzhia Titanium-Magnesium Combine – Europe's only titanium sponge factory – in 2021 after he was accused of selling titanium to Russia for military purposes . In January 2022, Firtash sold the Crimean titanium plant to the Russian company Titan.
Access to the Ukrainian titan will help the US in its conflict with China, which, according to politicians, awaits us in the 21st century.
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