ONWARD AND UPWARD: MARKET FORECASTS BY AIRBUS, BOEING OFFER INSIGHT FOR TITANIUM INDUSTRY BUSINESS, SUPPLY CHAIN On the eve of TITANIUM 2014, the ITA’s 30th annual conference and exhibition, Boeing Co., Chicago, and Airbus SAS, Toulouse, France, have unveiled their long-range market outlooks. As commercial aerospace remains the largest business segment for the global titanium industry, company executives, suppliers and stake holders, throughout the length of the global supply chain, pay close attention to the forecasts offered by the two aerospace giants. Boeing, in its report, forecasts long-term demand for 36,770 new airplanes, valued at $5.2 trillion through the year 2033. “We project that 15,500 of these airplanes (42 percent of all new deliveries) will replace older, less efficient airplanes,” the outlook stated. Airbus, with an outlook that runs through the year 2032, projects that “air traffic will grow at 4.7 percent annually, requiring over 29,000 new passenger aircraft and freighters deliveries at a value of nearly $4.4 trillion. Weighing the respective long-range outlooks put forth by Boeing (36,770 new airplanes) and Airbus (over 29,000 new planes), Henry Seiner, vice president of business strategy for Titanium Metals Corp. (TIMET), and the chair of the ITA’s aerospace committee, explained there was some “apples to oranges” comparisons involved. According to Seiner, Boeing’s outlook considers all jets (except business jets) 30 seats and above and all freighters while Airbus’ outlook considers planes more than 100 seats and freighters more than 10 metric tons. “So although they do have some fundamental differences, for instance, (projected) growth prospects in Latin America, the 36,770 and 29,000 totals are not as far apart as they seem,” Seiner said. Regarding the status of the titanium supply chain for the global aerospace business, Seiner said that recent trends towards vertical integration and consolidation will have likely had a positive impact. “The supply chain should be more responsive to demands from the original equipment manufacturers as a result of consolidations,” Seiner said. “Rather than needing to hand-hold changes through the various sub-tier levels, (Boeing and Airbus) should be able to rely on the better integrated supply chain to help carry the ball.” Kevin Michaels, vice president, ICF International, Ann Arbor, MI, echoed Seiner’s thoughts on the vertical integration trend taking place in the titanium/aerospace supply chain, which he categorizes as mainly affecting Tier 3 and Tier 4 suppliers. Michaels noted the aerospace industry annually consumes in excess of $15 billion of Tier 4 products, the tier that includes titanium companies. This lucrative chunk of the supply chain provides the incentive for companies to position themselves with vertical integration acquisitions. “Downstream customers are trying to simplify their supply chains and demanding more ‘near-net shape’ and finished components,” Michaels stated. “By vertically integrating, Tier 4 suppliers are addressing this need.” “The industry has seen major consolidation in recent years and that trend is continuing,” Dawne Hickton, vice chair, president and chief executive officer of RTI International Metals, said. “The newly emerging companies are vertically integrated organizations that have the capacity to deliver solutions across the entire supply chain,” “There will be fewer companies doing more the business and they will be companies that have not only the organizational capabilities to deliver, but just as important, the financial strength to take on and manage higher levels of risk.” Reflecting on the outlook reports by Boeing and Airbus, Hickton sees opportunities and challenges ahead. “If the forecasts by Boeing and Airbus play out as predicted, it should produce enormous opportunity for the international titanium industry,” she said. “The backlog of plans on order is at record levels, and each of the advanced designs call for significant amounts of titanium in aerostructure and engines. But titanium suppliers cannot be complacent. The original equipment manufacturers have made it very clear that all suppliers will have to earn their way onto the new commercial airliners in the pipeline, with products and services that meet the highest technical specifications and cost effectiveness.” Brett Paddock, the president of the ITA’s board of directors, and the president and chief executive officer of Titanium Industries Inc., Rockaway, NJ, said the distribution market for the aerospace titanium supply chain, in recent years, has experienced lower inventories at most all levels—suppliers of finished goods; the manufacturing sub tiers; and the strategic inventories for original equipment manufacturers. However, demand is currently on the upswing and mill lead times are being extending, Paddock surmised. “We feel most distributors are now in a ‘buy’ mode and are boosting inventories to support this increasing (aerospace) demand, according to their minimum stocking levels, safety stock, and lead-time analysis.” Shawn L. MacLeod, vice president of President Titanium Co. Inc., Hanson, MA, shared his perspective on how the market outlooks by Boeing and Airbus will translate into business opportunities for the international titanium industry. President, founded in 1973, is a distributor of titanium materials (bar, billet, sheet and plate) and an approved supplier to Boeing and major jet engine manufacturers. “Right now there is a lot of material in the market place and it will take some time for those inventory levels to be driven down,” MacLeod said. He further explained as Boeing and Airbus build rates continue to climb, it will have a great impact on the entire titanium market as far as deliveries and pricing which may in turn, have an impact non-aerospace titanium consumers. Seiner also provided observations on the growing emphasis of closed-loop scrap recycling efforts. “Unknowns remain concerning whether the considerable progress made will be sufficient (to satisfy the revert mandates of aerospace companies),” he said. “Today there is more revert generated in geographic regions further removed from the melting locations entailing more costly and complicated returns to melting locations.” He said new cold hearth melting furnaces, which have come online in the last five to seven years, are capable of using a higher percentage of revert and recycling it back into more applications. More discussion on the titanium supply chain is anticipated at the TITANIUM 2014 held at the Hilton Chicago September 21-24th. Registration is available at titanium.org or simply contact the International Titanium Association at 303-404-2221 for more information.
Posted on: Tue, 16 Sep 2014 18:37:57 +0000
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