Building on strength of titanium
RMI Titanium has weathered the ups and downs of an erratic aerospace industry. But officials say the next 50 should bring smoother sailing.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
WEATHERSFIELD -- The year was 1951, the Korean War was raging and a Cold War was brewing between the United States and the communist Soviet Union.
The nation needed to beef up its defenses, and an obsolete steel mill on a country road in Weathersfield Township would serve as the perfect testing ground for a space-age metal -- titanium.
So began what the Mahoning Valley knows as RMI Titanium Co., now a major Trumbull County employer that celebrates its 50th anniversary this week.
With 600 employees and a payroll topping $32 million last year, RMI also serves as the nucleus for a larger parent company, RTI International Metals, which has 1,250 employees and operations in seven states and four European countries.
Plant's history: The Warren Avenue plant that now serves as headquarters for RMI and RTI had been a rolling mill for Sharon Steel, but its old-fashioned hand-milling lines had become obsolete by the late 1940s.
Instead of closing the facility, Sharon Steel partnered with the P.R. Mallory Co. in 1951 and added titanium production, renaming it the Mallory-Sharon Titanium Corp. The hand-processing lines were ideal for workers researching and developing uses for titanium, and the Navy provided financial backing because of the metal's expected military applications.
Since then RMI's history has been a roller coaster ride of record highs and lows, officials say, because it is closely tied to the equally erratic aerospace industry -- last year 70 percent of its revenue came from commercial and military aerospace sources.
But Tim Rupert, president and chief executive, said recent efforts to diversify the company by adding fabricating and distribution plants and stepping up the search for new markets for titanium are likely to give the company a smoother ride in the years to come.
"Lately, the titanium business has declined while the fabricating and distribution business has gotten better," he explained. "And when the titanium business picks up, it will probably outshine the fab and distribution business at some point. Adding those other divisions has had the intended effect of stabilizing things a little."
Financial report: Last quarter's financial report illustrates the point. RTI's titanium group, which includes RMI, earned just $100,000 on sales of $38.5 million, while its fabrication and distribution group took in a healthier $1.4 million profit on sales of $36.4 million.
Titanium prices were down last quarter because of a slump in aerospace, Rupert explained. Fabricating and distribution had higher profit margins because they handle a wider variety of value-added metal products and have a wider customer base.
The result, Rupert noted, was that RTI has been consistently reporting profits lately while other titanium companies in the U.S. have been losing money.
While titanium's light weight, strength, flexibility and rust-resistance are ideally suited for use in aircraft and spacecraft, Rupert said the nonaerospace uses are becoming more important to the company's bottom line.
Last year about 30 percent of RMI's titanium went into golf clubs, bicycles, eyeglass frames, military weaponry, artificial joints and other consumer and industrial uses. "All those little uses are now starting to make a significant mark," he said.
Natural element: While it took researchers and scientists several years to figure out how to process titanium, it is actually a natural element that was discovered 200 years ago by William Gregor, an English clergyman.
The fact that it is found in nature may contribute to its effectiveness in making artificial knees, hips and other joints, said Richard Leone, an RMI spokesman.
Leone said tests indicate the human body seems to accept titanium joints better than those made of other materials. Studies show that other types of implanted joints remain separate from the surrounding tissue, he said, but the human body accepts the titanium joint replacement so well that muscle tissue tends to grow around it.
The metal's superior strength and flexibility and its corrosion resistance have also given it a new role in construction of deep underwater gas and oil well drilling rigs and equipment.
One competitor even tried making a prototype car out of titanium, Leone said. Titanium is much more expensive to produce than steel, however, so the cost of mass-producing titanium cars would be prohibitive.
While RMI officials are determined not to trust their future to any one industry, no other market is likely to replace the aerospace market because it uses such large quantities. "It would take a lot of eyeglasses and golf clubs to make up for the titanium used in one fighter jet," Leone said.
Company contracts: RMI has contracts with Boeing, Airbus and most other aircraft manufacturers in the world, and Leone said company officials typically meet several times weekly with international visitors representing its own operations, its suppliers or its customers.
Rupert said the aerospace industry is expected to double its fleet size by the year 2020, assuming that air travel continues its annual average growth rate, and both Airbus and Boeing have committed to launching larger planes. Smaller, regional jet use is also growing -- it's expected to triple over the next two decades.
When construction on all those planes begins, Rupert said, titanium will be on board.
On the military side, RMI expects to begin shipping titanium sometime this year for more than 800 155-mm titanium Howitzer cannons to be produced for the U.S. Marine Corps and Army as well as for Italian and British armed forces through 2010.
The Department of Defense also approved production this month for 10 F-22 supersonic fighter jets for the U.S. Air Force, and its 2002 budget calls for 13 more. Classified as an experimental project until now, the F-22 is designed with about a 40 percent titanium content.
Rupert said the military wants to increase its orders for C-17 cargo planes and F-A18 fighter jets by 12 percent each next year as well. If those requests pass muster with U.S. lawmakers, RMI's bottom line will reflect the boost in business.
RTI stock trades on the New York Stock Exchange under the RTI symbol. Over the past 52 weeks, the stock's price has ranged from a January high of $17.75 to a low of $9.60 on Aug. 3. Since then its price has rebounded some, trading in the $11.40 range at midweek.