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Aircraft, engine backlogs lift aerospace metals

Keywords: Tags  aerospace, Sterne Agee, titanium, aluminum, nickel, Boeing, Airbus, Peter Arment Josh W. Sullivan


LOS ANGELES — Backlogs for airliners and engines are providing a "momentum lift" to aerospace metals, according to some industry analysts.

With backlogs at Chicago-based Boeing Co. and Toulouse, France-based Airbus SAS at more than 10,000 aircraft and engine backlogs at more than 20,000—with higher indicated future engine requirements for nickel-based superalloys and titanium—"demand for aerospace-grade materials continues to have strong tailwinds," Peter Arment, Josh W. Sullivan, Asher Carey and Carter B. Worth, analysts at Birmingham, Ala.-based investment company Sterne Agee Group Inc., said in a report.

The titanium market in particular "looks very interesting, given its three-year downturn that has now bottomed and begun to turn up," the analysts said, citing Boeing’s growing supply relationship in Russia, "which is now under a lot of scrutiny given the geopolitical risks," presumably referring to the company’s expanding business with Russian producer VSMPO-Avisma Corp. as well as the ongoing political troubles over Ukraine.

"We believe this bodes well for domestic producers," the analysts said, noting that Portland, Ore.-based Precision Castparts Corp., parent of producer Titanium Metals Corp. and one of the aerospace industry’s largest supply chain participants, has "already aggressively grown its share for future volumes."

Surcharges on standard aerospace 6-aluminum/4-vanadium bar and flat products have risen 16.6 percent to $4.98 per pound in the third quarter from $4.27 in the second quarter, the analysts noted—presumably referring to the July 1 increase by Pittsburgh-based Allegheny Technologies Inc.’s ATI Specialty Materials unit, formerly known as ATI Allvac (amm.com, July 1).

Nickel has "broken out of its three-year price slump" following the implementation of Indonesia’s ore export ban earlier this year, while prices on the London Metal Exchange have rallied nearly 40 percent year to date, the analysts said.

Aluminum pricing, although down nearly 30 percent from its previous peak in April 2011, is up 15 percent on the LME since its recent trough in late March and up 10 percent for the year, the analysts said.


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