Aluminum heat-treat plate has seen its share of turbulence, with aircraft program delays pushing the market from its lofty heights to a lull in the latter half of last year. And while the depth of the drop wasn't quite enough to send frequent flyers reaching for a paper-bag, the once red-hot market certainly left more than a few feeling a little queasy.
Just a little more than a year ago heat-treat plate was on allocation, but setbacks to major commercial airplane programs—the Airbus SAS A380 and Boeing Co.'s 787 Dreamliner—resulted in discounts of 5 percent to nearly 15 percent off the book value.
But that wasn't necessarily all bad. In fact, when shipments of heat-treat plate from Alcan Rolled Products-Ravenswood LLC, Ravenswood, W.Va., were disrupted in March due to a failure of a critical piece of equipment, several market players noted that it was advantageous timing because the market was in need of some tightening.
Now the market could be gearing up to take flight again amid rising demand for aerospace- and defense-related products, especially in emerging overseas markets.
Michael Goldberg, president and chief executive officer of Franklin Park, Ill.-based service center chain A.M. Castle & Co., said that while the market still remains somewhat stalled, there are indicators on the horizon that could be cause for optimism. "We are anticipating some pull through on the A380 in the second half of the year as production starts to ramp up, and that is a critical factor to us and to the whole marketplace as a major consumer of heat-treated plate," he said.
Just how important is it for aluminum producers that Airbus ramp up production of the A380? Well, there are about 2.2 million pounds of heat-treated plate on every A380. Should Airbus ever reach its forecast of 30 aircraft annually, it would equal the amount of aluminum heat-treat plate used in approximately 270 smaller A320s.
Goldberg said there are two stages to the recovery. "I think there is the shedding of the current over-inventory situation in parts and all sorts of things, which is still going to play itself out," he said. "And then the second part will be just the incremental demand, which would put the whole market into a better balance."
One producer that has a more bullish outlook is Kaiser Aluminum Corp., Foothill Ranch, Calif., which sees higher production rates and massive order backlogs leading to extremely favorable market conditions that should continue for at least the next seven years.
Keith Harvey, Kaiser Aluminum's vice president of sales and marketing of aerospace and general engineering products, freely admits that the delays to Boeing's 787 Dreamliner program and by Airbus have "taken the edge off" of the heat-treat plate market. However, he said the market is now booming due to incredible global demand.
In the past several years, Kaiser has more than doubled heat-treat plate capacity at its Trentwood, Wash., rolling mill via a $139-million expansion that included the addition of an 82-mega-newton heavy-gauge stretcher, multiple horizontal heat-treat furnaces, self-guided material handling equipment and a "tankless" ultrasonic inspection system.
"Exports are saving the day," Harvey said, noting that robust orders during the past two years have pushed backlogs of large commercial aircraft to close to 7,000 units, equal to about seven years' production for Airbus and Boeing.
Rising demand for aerospace- and defense-related products led Kaiser to more than double its first-quarter net income to $39.1 million from $17.1 million in the same period last year on sales that rose just 1.7 percent to $399 million (AMM, May 9).
Countries like Brazil, China, India and Russia also now have budding air-travel industries. "At the end of the day, we're talking about a billion people that are starting to fly," Harvey said.
Another issue facing aluminum producers is the encroachment of carbon fiber composites. With the cost of oil and jet fuel at record levels, aircraft manufacturers are increasingly requiring reduced fuel burn, greater payload, extended range and reduced maintenance costs.
Alcoa Inc., Pittsburgh, driven by the need for lighter materials, has been one of the leaders in developing advanced aluminum-lithium composites, which can cut the weight gap between aluminum and carbon fiber composites by half and can be manufactured by mostly traditional techniques. New-generation aluminum-lithium alloys also provide excellent corrosion resistance, good spectrum fatigue crack growth performance and a good strength-and-toughness combination. But the trade-off is that it is still about four or five times more expensive to produce that traditional heat-treat aluminum plate.
In order to push the new alloys, Alcoa has been working with Bombardier Aerospace. The airplane manufacturer announced early this year that its new C Series aircraft, which should be ready for delivery by 2012, will have a fuselage made largely of composites and aluminum-lithium alloys in its structures. Because Bombardier is a smaller company than Boeing and Airbus, it can often push its strategy forward more quickly than its larger rivals.