Don't Count on Aerospace to Help Metals Demand

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Despite Boeing’s multiple problems in delivering their much anticipated 787 Dreamliner aircraft (now six months delayed) along with a just-announced executive management shakeup, according to this article from The Seattle Times, it all may just not really matter very much. The FAA equivalent in China has recently advised the Chinese airline industry to cancel and/or postpone deliveries for aircraft in 2009. The Civil Aviation Administration of China according to this Forbes article, is telling the Chinese airline industry to “retire old aircraft”. In addition, the governmental body also announced to the industry that it would not consider any new airline applications until 2010.

If there was any hope that emerging markets might help soften the blow for American manufacturers, this story feels more like a cold shower. Of course extricating oneself from an aircraft purchase is not as simple as other purchases. However, companies like Boeing may be more lenient, given all of their supply chain problems. Airbus will likely feel a lot more pain than Boeing, according to the article.

Metal demand within the aerospace industry has shifted. Though aluminum represents a substantial portion of defense aircraft, the Boeing 787 only contains 20% aluminum by weight as compared to 50% aluminum by weight for the 777, according to this article. The growth of carbon composites has taken market share from aluminum within the aerospace industry.

On the other hand, the aerospace industry represents the largest application for titanium products. Titanium is often used in engines and airframes with demand of 36,000+ tons expected in 2009. According to the International Titanium Association, demand is expected to increase to 65,600 tons by 2015. But those estimates are predicated of course on big backlogs for both Boeing and Airbus of 7500 aircraft. This announcement by the Chinese government may directly impact that backlog.

Moreover, titanium demand for all other industries equates to 13,610 tons. If aerospace demand for titanium starts to sputter, we can expect even more falling prices.

–Lisa Reisman

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