Aerospace titanium flying into sunnier skies for 2012

As uncertainty over the global economic picture clouds the outlook for steel and other commodities, the future for aerospace titanium—buoyed by expanding airliner production schedules—looks bright.

“In the metals industry, titanium stands out,” said John Mothersole, principal of IHS Global Insight’s pricing and purchasing service in Washington. Mothersole noted that construction in North America is “a disaster” and that metals demand from the automotive industry, while not slumping, nevertheless probably won’t reach its “demographic potential” in sales until 2013. “But when you get to aerospace, it looks great,” he said, noting that despite the overall recession sentiment, revenue passenger miles are strong while falling oil prices are a “positive” for air travel.

“The industry still looks very healthy,” Mothersole said, pointing out that while the emergence of composites in airliner construction might generally be considered a problem for metals, titanium “mates well” with these non-metallic materials, helping to expand its role.

Mothersole expects domestic mill product shipments—which jumped 38.3 percent to 84.4 million pounds in 2010, according to the U.S. Geological Survey (USGS)—to end 2011 at a record 89.5 million pounds and possibly even top the 90-million-pound mark. But even that bullish prediction might have to be revised upward. Following Mothersole’s forecast, the USGS in November reported first-half mill product shipments of 24,700 tonnes (54.45 million pounds)—an annualized rate of almost 109 million pounds, which would outstrip most estimates. More than 65 percent of the shipments were to the commercial and military aerospace sector.

Indeed, second-quarter shipments of 14,300 tones (31.53 million pounds) were not only 24.3 percent ahead of the same period a year earlier but were nearly 39 percent greater than the first quarter of 2011. Part of the increase was due to non-aerospace pipe skelp in strip being produced for a Mideast desalination plant, and whether or not this torrid pace could hold was still being debated as the year was drawing to a close and spot prices appeared to be leveling in what some observers described as a quiet market.

Mothersole believes that whatever might undercut a strong outlook for commercial transports doesn’t necessarily lie inside the aerospace industry but rather in the global economy, particularly the danger of a “disorderly” resolution of the euro zone financial crisis. Still, barring any economic reversal that results in wholesale order cancellations, the prevalent view of industry watchers such as Mothersole, as well as those within the industry, is that commercial aviation is on the threshold of a few years of steadily growing production.

For titanium, this growth was temporarily sidetracked by more than three years of delays on the Boeing 787 Dreamliner, the largest aerospace titanium consumer with a buy weight estimated at 225,000 to 250,000 pounds per plane, but the first of more than 820 planes on order was finally delivered in September. Michael Metz, president of VSMPO Tirus US, Highlands Ranch, Colo., the U.S. arm of Russian producer VSMPO-Avisma Corp., told the International Titanium Association (ITA) conference in October that he expected 2011 to be “the best year for aircraft build rates in the last 15 years.” Metz, who is also ITA president, noted that Chicago-based Boeing Co. had forecast continued improvement, with deliveries of 33,500 new aircraft over the next 20 years.“ That should mean a healthy demand for titanium,” Metz said, pointing out that Boeing’s single-aisle 737 airliner, whose build rate is due to increase to 42 per month from 31 by the first half of 2014, would at that point represent some 10,000 tones (22.05 million pounds) of annual consumption. The larger, twin-aisle 787 is slated to reach a build rate of 10 per month by late 2013 after the initial assembly line in Everett, Wash., is joined by a new line in North Charleston, S.C., also consuming some 10,000 tones per year.

Following what Boeing chairman, president and chief executive officer W. James McNerney Jr. described to investors as a “clear priority” to ramp up production across the range of its commercial transports, the aircraft builder also is raising output of its twin-aisle 777, which in the second quarter was increased to seven planes per month from five, with plans to reach 8.3 per month in the first quarter of 2013. Just how directly this will translate to future titanium shipments isn’t clear, since Boeing had continued to take titanium deliveries under its long-term purchase agreements with mill suppliers during the delay in the 787 program, helping to produce a significant overhang in the supply chain.

While this oversupply has been declining, John Byrne, vice president of aircraft materials and structures in supplier management for the Boeing Commercial Airplane subsidiary in Everett, has estimated that BCA would continue to take the minimum contract amounts from its mill suppliers through 2013, with 2014 a “transition year” when its annual buy could either be increased or continue to be held at the minimums. Contrasting with the outlook for commercial aerospace is military aircraft, which in terms of the domestic market is on a decline as the largest defense consumer of titanium, the F-35 Joint Strike Fighter, faces cuts in its estimated production rates. The plane’s original projected build of 250 planes in 2014 has now fallen to just under 100.

At the same time, there’s likely to be a shift in global defense spending towards Asia. Dawne S. Hickton, vice chairwoman, president and chief executive officer of RTI International Metals Inc., Pittsburgh, told the ITA conference that the worldwide military market for titanium will grow by 32 percent to 41 million pounds in 2015 from about 31 million pounds in 2010. But total U.S. defense spending is actually expected to fall by 14 percent during the same period, while other major Western powers also will see drops. China, on the other hand, will more than double its military spending, accounting for more than half the global growth in worldwide military spending.