Reports of aluminum heat-treat plate's demise
in the aerospace industry have been greatly exaggerated,
analysts say, despite the persistent onslaught of headlines
about the impending switch to carbon fiber composites.
Despite the encroachment of lightweight
composites, aerospace aluminum plate demand will register a
40-percent increase over the next four years, peaking at
slightly less than 700 million pounds annually vs. 500 million
pounds currently, according to Kevin Michaels, principal and
co-founder of AeroStrategy LLC, Ann Arbor, Mich.
Michaels said he completely understands why
there is a perception among the public that composites will
soon eliminate the need for aluminum plate, but there isn't
really any data to support that outlook. That's why
AeroStrategy embarked on a wide, sweeping raw materials market
assessment study over the past year. "We were frustrated by
analysis by antidote, where someone would throw out that the
(Boeing Co.) 787 is 52-percent composite so aluminum must be
dead," he said. "We found out that just isn't true. People are
still going to be making planes that have a very high aluminum
But there are some dark clouds on the
horizon. According to the AeroStrategy study, the aluminum
aerospace market will start to edge lower in 2012. "That will
happen because of a combination of the anticipated downturn in
deliveries as well as full production rates (being achieved)
for higher composite-content aircraft," Michaels said. "But the
interesting finding is that even with that, aluminum demand in
2015 is (expected to be) higher than it is today."
But pretty much every analyst queried said
it's past time for aluminum producers to adapt and proactively
face the threat of composites. Specifically, the emergence of
Boeing's 787 Dreamliner, which has only a 20-percent aluminum
content, should be a real wake-up call for the aluminum
There has been a movement toward lighter
planes during the past few years, Michaels said. "Even before
the relatively recent surge in oil prices, there was a major
push to lighten aircraft. There is a massive economic
imperative to reduce fuel consumption and the aircraft's
Taking a broad view, titanium, carbon fiber
composites and aluminum-lithium alloys are going to win when it
comes to light-weighting at the expense of traditional aluminum
and some steel alloys, he said. "If you are one of the aluminum
companies, you have a real imperative to develop advanced
alloys, such as aluminum-lithium, as fast as you can to better
compete against composites. That is going to be absolutely
While Michaels doesn't expect the recent hike
in oil prices to significantly impact the pace of production,
he said the near-term reaction is that operators are going to
ground old, less-fuel-efficient aircraft as a means to conserve
"What really matters is the production rates,
and those aren't changing as a result of high oil prices.
Manufactures like Boeing and Airbus (SAS) have backlogs of four
to six years. We will have some cancellations of orders, but
not enough to change production rates," he said.
However, there are clearly some analysts
that, after three years of record plane sales, say a slowdown
in orders might become inevitable because airlines can't keep
up with the cost of fuel.
With oil hovering around $150 a barrel, jet
fuel prices have surged 67 percent from 2007 levels, according
to the Washington-based Air Transport Association of America.
The trade group, which represents U.S. airlines, notes that
fuel now accounts for about 40 percent of airline costs, up
from around 15 percent in 2000.
If oil stays above $135 a barrel for the rest
of the year then airlines will lose $6.1 billion in 2008,
according to Giovanni Bisignani, director-general and chief
operating officer of the International Air Transport
Association in Geneva, Switzerland.
"Although the Boeing backlog is currently
huge, we expect declining orders and delivery deferrals to
result in a flattening off in production from 2010," Rob
Stallard, analyst at New York-based Macquarie Capital USA Inc.,
said in a research note.
While the short-term pace of production
likely won't be affected, the high price of oil is already
slowing the rate at which airlines place orders. Orders for
Airbus' A380 are running about one-third lower than previously
predicted for this year as higher fuel costs and an economic
slowdown continues to dent travel, John Leahy, the company's
chief operating officer, said. Airbus might receive only about
20 orders for the 525-seat jetliner in 2008, he added.
Also, Boeing reportedly received 67 new
orders (61 for 737s and six for 777s) in May vs. 92 in the same
month last year.
In the short term, aluminum will continue to
enjoy strong demand from the aerospace sector, but producers
will have to act decisively to counteract the growth of
composites in aircraft construction, Ronald Epstein, aerospace
analyst at Merrill Lynch & Co. Inc., New York, said, adding
that the strong aerospace cycle should continue through 2010 or
2011. But by the beginning of the next cycle, aluminum
producers are going to have to change their strategy, he
The 787 Dreamliner is a "game-changer,"
Epstein said, heralding a secular shift toward composites as it
has a far higher composite content vs. aluminum alloys than any
The decision by Bombardier Aerospace early
this year to make the fuselage of its new C Series
aircraft-expected to be ready for initial deliveries by
2012-largely of composites, with the structures comprised of
aluminum-lithium alloys, could very well foreshadow what Airbus
and Boeing might do in their next-generation planes, another