Aerospace aluminum plate demand is expected to surge in coming
years as aircraft manufacturers make more and bigger planes and
aluminum-lithium alloys gain traction in the market, according
to a recent analyst report on the sector.
The potential growth
should significantly boost prices, increase mill capacity
utilization rates and encourage aluminum companies to add new
capacity, Davenport & Co. LLC analysts Lloyd T.
OCarroll and John F. Ockerman said in a recent research
demand for aerospace aluminum plate should outpace planned
increases in supply, pushing the industrys effective
utilization rate to its highest level since 06, a time
when prices spiked and OEMs (original equipment manufactures)
pressured mills to add capacity," OCarroll and Ockerman
wrote in the July 15 note.
Aluminum plate demand
for aircraft is expected to rise 62.5 percent to 798 million
pounds in 2017 from 491 million pounds in 2012, the analysts
said. Meanwhile, mill capacity utilization is expected to rise
to 62 percent in 2013 from 57 percent in 2012 before shooting
up to 78 percent in 2017, they said.
That equates to
aluminum demand seeing a compound annual growth rate (CAGR) of
10 percent for 2012-17, the analysts said, noting that rising
capacity utilizations rates should give mills leeway to
"gradually increases contract prices" with major aircraft
manufacturers such as Chicago-based Boeing Co. and Toulouse,
France-based Airbus SAS.
Given an expected
tight plate market in coming years, spot pricing for aerospace
plate could see a rebound and move "meaningfully above"
contract prices, reversing a trend in recent years of spot
prices hovering below contract prices, the analysts said.
"Prices could ... reach or exceed the (2006) peak if OEMs do
not push the plate mills for new expansions," they said.
build rates and increased aerospace aluminum plate consumption
are backlogs at Boeing and Airbus of 9,900 aircraft, or 8 years
of production, the analysts said. Also underpinning the bullish
forecasts are battery issues with the Boeing 787 being resolved
and the success of new Boeing and Airbus models at the Paris
Air Show in June, they said.
The new planes sport
wider bodies and therefore require more aluminum, with even
regional jets following the trend toward increased size,
Davenport analysts said. And while some new models may be more
composite- and titanium-intensive, they also contain
significant amounts of aluminum plate because of their bigger
size, they said.
aluminum-lithium alloys offer an alternative lightweighting
material to composites, which are costly and difficult to
fabricate, the analysts said. While expense for
aluminum-lithium alloysabout $50 per pound versus $3 to
$5 per pound for standard aerospace alloysis an issue,
the alloys offer weight reduction of up to 25 percent compared
with conventional 2000- and 7000-series aluminum alloys, they
The expected gains in aerospace aluminum consumption should
help aluminum producers such as Constellium NV, Paris; Kaiser
Aluminum Corp., Foothill Ranch, Calif.; and Alcoa Inc.,
Pittsburgh, OCarroll and Ockerman said.