Most golf equipment companies are working hard to keep the shelf prices of their new metal woods offerings between $300 and $400, but they might be fighting a losing battle.
The cost of titanium, particularly the workhorse 6/4 Ti alloy used in most driver head bodies today, is soaring to new heights. Such increases, if they continue, could cost equipment companies millions of dollars in supply costs and potentially drive some smaller companies and independent club makers out of business.
Equipment companies are reluctant to provide exact wholesale costs they pay from foundries, most of which are in China, but sources tell PGA.com the average wholesale cost of a titanium club head, depending on the complexity of that club head, is between $60 and $100.
Mike Tait, president of SMT Golf, a highly respected component company based in Oswego, Ill., said the wholesale price of club heads from his Chinese vendor has increased a whopping 310 percent since Jan. 1.
"That's a pretty substantial number, but that number doesn't bother me as much as not having any material," Tait said. "Everything is going to the highest bidder."
In Communist China, the military is undoubtedly at the head of the line for titanium, as well as any other materials it needs to build and maintain its forces against perceived threats. As China continues its economic evolution away from Mao and more towards Hayek, the world's most populated country (more than 1.2 billion) is using more and more of the world's resources -- from cement to steel to titanium and graphite -- to reinvent itself as a First World country in time for the 2008 Olympics in Beijing.
Meanwhile, the most visible Western players in the rush for titanium are Boeing and the European Union's Airbus. Those two airline manufacturers are buying up every available piece of virgin titanium (the same kind used by most big golf equipment companies) in a mad race to bring to market the next generation of super airliners. Airbus, in fact, successfully tested its "superjumbo" A380 last week in France and plans to have the mammoth airliner, the largest to ever fly, in service next year.
Boeing has its 787 Dreamliner in production to compete with Airbus, and each company has already signed billions of dollars worth of contracts for the giant passenger jets, meaning that many other industries, including golf, could be left out in the cold when it comes to securing titanium at anywhere near reasonable costs.
Much of the Boeing Dreamliner's structure, including the fuselage and wings, is made of graphite materials combined with a tough epoxy resin as the main composite -- a reason why graphite costs in the golf industry also have quickly risen the past year. The plane's wings are a mixture of titanium and graphite called a TiGr composite.
The Airbus A380 reportedly uses eight times the titanium as an existing Airbus, providing a good guess as to where all that titanium is going.
And more important for the golf industry, where it is not going.
"Those companies that saw this coming and locked in (purchase orders) with their suppliers are hanging in there OK. Those that did not are now being subjected to both delays in delivery of the materials as well as higher prices for what they do get," said Tom Wishon, president of Tom Wishon Golf Technology and a contributor to PGA.com.
While the Boeing vs. Airbus race is a big reason for the price increases in titanium, there is another player -- Uncle Sam. Like the Chinese, the United States military needs its share of exotic materials to maintain its might.
"The government has supplies of metals it keep for strategic issue (such as for armor plating and bullet-proof vests), and it has bought a bunch," said Tom Olsavsky, Director of Product Creation for TaylorMade-adidas Golf. "Titanium (prices) are going to go up on some of our new programs, at least that's what we've been hearing. We haven't seen all the details. That's just cost to us.
"Our vendors are our partners; we're not going to run away from them to go to somebody else, but we're certainly trying to watch every cost pretty closely. What's challenging is, you can't really charge more in the marketplace some times with all the competitors out there."
Sources tell PGA.com that the battle for titanium is expected to last at least five years, and that the wholesale cost of component titanium club heads will move well past $100 each. Sooner or later -- probably sooner -- the equipment companies will be forced to pass along those higher costs to consumers or risk serious injury to their bottom lines.
