Analysts don't anticipate
major ramifications for the steel market if the U.S. Army
shifts billions of funding dollars out of heavy military ground
vehicle programs, although a lot of things aren't yet known
about how such an initiative could unfold.
There is still a lot of negotiating
taking place at the government level and it is far from decided
how money will be divvied up between existing and Future Combat
Systems (FCS) ground vehicles in coming years, according to
Dean Lockwood, weapons systems analyst at Newtown, Conn.-based
research firm Forecast International Inc.
"What you end up with, regardless of
which way the budget goes, is that raw material requirements
are basically going to be a wash," Lockwood said. "Whether it
is going to FCS or existing programs, you are probably going to
end up with the same dollar amount going either way and buying
the same amount of raw material."
Farnborough, England-based BAE Systems
Plc, for example, builds the M2 Bradley infantry fighting
vehicle rumored to be up for funding cuts. However, the company
has secured contracts to build some of the new FCS ground
vehicles. For the steel armor industry it might not matter if
BAE Systems orders supplies for M2 Bradleys or for FCS
vehicles, depending on the volumes ordered, he said.
Marcia Price, president and founder of
Vector Strategy Inc. in Southern Pines, N.C., said there are a
number of dynamics that will drive armor plating demand in
coming years in addition to shifts in procurement spending
between heavy military and FCS vehicles.
First, a natural downturn is expected
in 2010 and 2011 because production of mine-resistant,
ambush-protected (MRAP) vehicles will wind down next year.
"MRAP production created a huge spike in armor plate demand
that you can't really replace or expect to continue to the same
extent," Price said. Some natural easing in demand also is
anticipated when the United States eventually pulls out of
Also important is that an increased
emphasis on procuring intelligence, reconnaissance and
surveillance equipment could lead to reduced funding for heavy
and medium tactical ground vehicles, thereby reducing demand
for armor plating, she said. The caveat is that either the new
White House administration or a new U.S. Army budget could mean
different priorities. If, for example, FCS manned ground
vehicles aren't ready in time or M113 armored personnel
carriers are retired, the Army might decide to order Abrams
tanks, M2 Bradleys and Stryker wheeled combat vehicles after
"Overall, I think we are kind of in a
period of not knowing, a period of strategy formation from the
government, and it is difficult to see how that might net out
on the combat side," Price said.
In a study released in August, Vector
Strategy projected that between $15 billion and $22 billion of
armor plate for use in U.S. military ground vehicles will be
procured by the Defense Department between 2009 and 2015. The
$22-billion figure is the most likely scenario if Defense
Department budgets remain stable; $15 billion looks more
probable if budgets are retrenched.
The Army's plan to shift funding into
FCS vehicles has generated debate in Washington, given that
some FCS technologies won't be at a combat-ready stage for
several more years.
The FCS network technologies are
designed to "provide future soldiers with the ability to have
individual and collective training products at their
fingertips. By updating training packages through the network
and embedding those onto the hard drive of the soldiers'
vehicles, the Army will provide the ability to train anywhere,
anytime," the U.S. Army says on its FCS web site. If a gunner
of an FCS mounted combat system vehicle wants a specific set of
gunner training instructions, for example, he could use the
vehicle's Warfigher Machine Interface to access the specific
training package embedded on the vehicle's computer hard drive.
The soldier could then perform the training using the actual
vehicle he is assigned to and in any location vs. current
methods where training occurs at a specific location and
Furthermore, while Stryker vehicles
were only intended to be an interim solution until FCS vehicles
arrived, they have gained favor among soldiers due to their
mobility and ability to withstand attacks. Some lawmakers want
to trim funding for FCS vehicles until its technologies are