Titanium Metals (TIE) Channeling up

Titanium Metals Corporation (Public, NYSE:TIE) is one of few companies who haven't benefited much from this year's bull run.

The reason is because Titanium demand runs in cycles. Notice in the chart on the right, Titanium has literally nosedived in the past 3 years, falling from $30 down to around $8 today.

Of course this has a huge impact on Titanium Metals Corporation's bottom line.

But there is hope that Titanium prices will pick up, and soon.

The commercial aerospace industry accounts for 50% of titanium demand. When Boeing announced plans to delay the launch of its 787 aircraft, the industry was left with a titanium inventory overhang estimated at as high as 50 million lbs, says Frank Haflich in American Metal Market.

But the fall in production will be short-lived. The new Boeing 787 uses 250,000lbs of titanium in every plane, according to Lisa Reisman of Metal Miner. Boeing has a backlog of 878 orders. In addition, eventually Boeing will have to scale up production due to Asian and Middle Eastern demand. Over the next 20 years, an average of 1,200 new planes a year will be demanded, says Airline Monitor. If even half those planes are made, titanium should soar.

Titanium is also the common link in a host of industries which will show an increased demand over the coming decade. Its corrosion-resistant properties make it ideal for water systems and deepwater oil drills. Think the Obama stimulus plan (infrastructure improvements) here.

There is a lot of speculation going on right now on where Titanium prices will be in the next few years. Some think prices should start rising again as soon as Q2 of 2010. Other sources indicate continued downside pressure and a recovery in 2011.

Keep an eye on Titanium Metals (TIE). The chart is showing a nice channel pattern which should eventually hit $10-$11 in the coming months. TIE has a lot of upside potential, as shares were trading in the $30-$40 range in '06-'07.