Cost Increases Related to the Producer Price Index for Titanium Mill Shapes on DOD Multiyear Contracts

DOD is subject to the volatility in the titanium market when pricing titanium materials in its contracts for DOD aerospace programs because DOD does not have a strategic purchasing program for titanium. Long-term contracts with U.S. titanium producers could substantially mitigate the effect of unexpected price increases due to the market volatility of titanium pricing. Long-term contracts could also be beneficial to the U.S. titanium producers because the agreements provide a baseline volume, which is critical to establishing standardized processes, securing necessary capital, negotiating purchasing agreements with vendors, and planning manufacturing resources. The U.S. titanium producer investments to meet demand for titanium products, coupled with the delays in the commercial aerospace market, present an opportunity for DOD to negotiate long-term contracts at preferential rates.