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Boeing titanium buy still at minimum: ATI

Keywords: Tags  titanium, ATI, Allegheny Technologies, Boeing, Precision Castparts, VSMPO-Avisma, Richard J. Harshman, Ladish CFM International

LOS ANGELES — Boeing Co. is still buying titanium at its contracted minimum rate from Allegheny Technologies Inc. (ATI), but the head of ATI believes the aerospace giant is drawing closer to increasing its requirements.

"I think that with each passing month and with each passing quarter, as they continue to ramp up the (production) rate they continue to eat into" their titanium inventory, ATI chairman, president and chief executive officer Richard J. Harshman said about Boeing, according to a transcript of ATI’s second-quarter earnings conference call.

Harshman acknowledged that Chicago-based Boeing is "not at this point in time above the minimum take-or-pay" level of buying titanium, but said ATI is closer to moving above contracted minimums with Boeing "than we’ve ever been," although he gave no forecast of when that’s likely to occur.

Boeing’s titanium inventory appears to have remained high longer than most outsiders had forecast.

Pittsburgh-based ATI, primarily through its Monroe, N.C.-based ATI Allvac Inc. unit, is one of three suppliers of mill product to Boeing Commercial Airplanes under the program of long-term purchase agreements initiated by the Boeing subsidiary in the late 1990s. The others are Precision Castparts Corp.’s Titanium Metals Corp. and Russia’s VSMPO-Avisma Corp.

Meanwhile, Harshman said ATI is "just at the very beginning" of tapping into new aircraft engine markets for its titanium investment casings, including the Leading Edge Aviation Propulsion (LEAP) high-bypass turbofan produced by CFM International, a joint venture of General Electric Co. and Snecma SA of France, as well as other engines.

He said the programs ATI has won are in first-article production and the company will begin to see some of that early growth in 2014, with others beginning to "kick in" in 2015 and 2016.

ATI’s most prominent involvement in investment castings is its Cudahy, Wis.-based Ladish Co. operation, which it purchased in 2011 for $778 million.

Harshman estimated that ATI has about $2.7 million in business on each Boeing 787, including airframe and jet engine parts produced from titanium and other alloys. This includes forgings, castings and net shapes and "certain conservative assumptions" for mill products, he said.

For the 787’s main rival, the A350—built by Europe’s Airbus SAS—Harshman said ATI has "significant content" on the Rolls-Royce Trent XWB jet engine, while it’s also "working on many opportunities to improve our position with Airbus on its supply chain."

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