NEW YORK (AP) -- Shares of metal producer Allegheny Technologies rose more than 5 percent on Monday as an analyst believes demand for titanium will increase by the end of the decade.
THE SPARK: Stephen Levenson of Stifel Nicolaus said in a client note that demand for titanium — which Allegheny produces — will likely rise by the decade's end. The analyst believes the market will reshuffle itself a bit following the completion of Precision Castparts acquisition of Titanium Metals Corp. Both Allegheny and Timet produce titanium sponge along with melted and mill products.
Precision announced its $2.9 billion purchase of Timet on Friday at a premium of more than 40 percent over the stock's closing price.
THE ANALYSIS: "We think the (Timet) transaction illustrates the importance of titanium in the present and future, and particularly the value of aerospace-qualified titanium," Levenson wrote. The analyst said that most of the increased demand for titanium will come from the aerospace market, as new plane designs will use more of the material than the planes they are replacing.
Jet engine technology also uses titanium for some critical parts. Levenson believes that Allegheny and Timet are currently the only ones that supply the melted titanium products that are needed.
SHARE ACTION: Allegheny Technologies Inc.'s stock gained $1.36, or 5.1 percent, to $28.13 in midday trading. The shares have traded in a 52-week range of $26.26 to $53.