Mining Profits...Investing In Industrial Metals

A booming aerospace industry is bringing bad news to cycling enthusiasts by sparking higher prices for fancy bikes.

Airplanes and high-end bicycles are made of specialty materials such as titanium and carbon fiber, which have risen in price because of soaring demand. This means bike makers -- along with makers of sailboats, lacrosse sticks, tennis rackets, jewelry and bone screws -- are paying 25 percent more for raw materials and passing along costs to consumers. Makers of titanium golf clubs are refraining from raising prices since their markups were already high before the specialty-materials crunch.



Amid rising demand, titanium and carbon-fiber makers are largely catering to their bigger customers: the aerospace industry. Zsolt Rumy, chief executive of St. Louis-based Carbon Fiber maker Zoltek Companies Inc., says he is trying to keep prices lower for bigger customers by raising prices for smaller ones, such as bike and golf-club makers, who constitute 15 percent of his company's business. "We really jack up the price" for smaller customers, he says. He's passed on more of the 60 percent to 100 percent increases to sporting-goods customers.

Meanwhile, the three domestic titanium makers -- Allegheny Technologies Inc. in Pittsburgh, RTI International Metals Inc. in Niles, Ohio, and Titanium Metals Corp. in Denver, Colo. -- are planning expansions of raw-materials and titanium production -- but they don't want to ramp up too much and too fast, in case there is a collapse in the aerospace market.

"Markets climbed so rapidly, they outpaced our ability to produce," says Robert Borowski, director of global procurement at Titanium Metals, which sells 95 percent of its titanium to aerospace, industrial and military companies and less than 5 percent to sporting-goods and jewelry makers.