Michael Holland Manager

Size: px
Start display at page:

Download "Michael Holland Manager"

Transcription

1 AEROSPACE INDUSTRY DYNAMICS Implications for the Titanium Market Presented by: Michael Holland Manager TITANIUM 211 San Diego, CA October 2-3, 211

2 AEROSPACE INDUSTRY DYNAMICS IMPLICATIONS FOR THE TITANIUM MARKET Agenda Aerospace Production Outlook Titanium Demand Outlook Key Trends 1

3 AEROSPACE PRODUCTION OUTLOOK Oil Prices Are Approaching the High Levels of the 28 Price Spike Annual Average Fuel Costs 1978 to present (cents per gallon) Current: 3+% of airline expenses Summer 211 price 22: 11% of airline expenses Source: Air Transport Association, IATA 2

4 AEROSPACE PRODUCTION OUTLOOK Annual Aircraft Production Climbs from 4,2 to Over 5, Units By 217 Units Aggregate Production Market , By Market Segment Market, CAGR Military Fixed Wing, -4.5% Business & Gen Aviation; 5.2% Rotary Wing; % Air Transport; 3.4% Total CAGR = 2.1%

5 AEROSPACE PRODUCTION OUTLOOK Air Transport Production Will Increase from 1,2 to Over 1,8 By 221, Led By Boeing and Airbus Units Air Transport Production Market *, By OEM Other Embraer Bombardier Boeing Airbus Total CAGR = 3.4% * Drop in production rates from 214 to 216 is due to a change in orders, shifting from legacy aircraft to next generation see following page 4

6 AEROSPACE PRODUCTION OUTLOOK There Will Be a Fundamental Shift from Legacy Aircraft to Next Generation Aircraft, Occurring Mid-Decade Air Transport Production Market , Narrowbody Vs. Widebody Narrowbody (Units) Widebody (Units) A32 A32 NEO B737NG B737RE C919 C-Series MS A33 A35 A38 B748 B767 B777 B777X B787 Why the fall in production rates? High fuel prices (3%) mean that airlines will defer orders for legacy aircraft Aggregate production rates will fall in the transition this is also the experience of past re-enginings of the B737 in the mid-198s and late 199s 5

7 AEROSPACE PRODUCTION OUTLOOK Business Aviation Production Will Recover and Reach 1,6 Units in the Latter Part of the Decade Units Business & General Aviation Production Market , (Turbine-Powered Only) OTHER GULFSTREAM BEECH BOMBARDIER EMBRAER CESSNA

8 AEROSPACE PRODUCTION OUTLOOK Rotary Wing Production Should Remain Relatively Flat Over the Decade, With Initial Growth Spurred By the Military Units Rotary Wing Production Market , By OEM OTHER ROBINSON BELL AGUSTA SIKORSKY EUROCOPTER

9 AEROSPACE PRODUCTION OUTLOOK Military Fixed-Wing Production Will Decrease Readily, Yet Strong JSF Production (Lockheed) Will Help to Mitigate the Decline Units 6 Military Fixed Wing Production Market , By OEM OTHER KAI NORTHROP RAYTHEON BOEING LOCKHEED

10 AEROSPACE PRODUCTION OUTLOOK Annual Aero-Engine Production Should Exceed 1, Units By 221, Including Production Units and Spares Units Aero-Engine Production Market *, By OEM OEM, CAGR Other; -4.% Rolls Royce/ 3.7% CFM; 2.3% General Electric; -1.% Pratt & Whitney; 7.3% Total CAGR = 2.1% * Includes Spares

11 AEROSPACE INDUSTRY DYNAMICS IMPLICATIONS FOR THE TITANIUM MARKET Agenda Aerospace Production Outlook Titanium Demand Outlook Key Trends 1

12 TITANIUM DEMAND OUTLOOK Total Aerospace Material Demand in Buy Weight is 1.14B Pounds, Led By the Air Transport Sector Air Transport 73% Military 12% 21 Aerospace Raw Material Buy Weight* (Fundamental Mill Demand) Rotary Wing 5% Total 1.14B lbs. Bus. & Gen. Aviation 1% Air transport is nearly three-quarters of the total demand Military fixed wing is the second largest category, which includes platforms such as the Boeing tanker program (KC-46A) and the Joint Strike Fighter * Maintenance, repair and overhaul (MRO) included in total * * Includes air transport aircraft used as VIP transport, contributing roughly 12% to the total 11

13 TITANIUM DEMAND OUTLOOK Current Titanium Content is Highest in Engines, Nacelle Systems, and Hardware 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Aircraft System Material Composition* Other Composites Super Alloys Titanium Alloys Steel Alloys Aluminum Alloys The systems with the highest titanium content are engines, nacelles, and hardware (i.e., fasteners) Titanium is also used in some aircraft components primarily for landing systems Maintenance, repair and overhaul (MRO) consumes titanium for certain engine parts (disks, blades, vanes, stators, seals) Calculated in terms of buy weight 12

14 TITANIUM DEMAND OUTLOOK Titanium Constitutes Nearly 1% of Total Aerospace Raw Material Demand 21 Aerospace Raw Material Buy Weight* (Fundamental Mill Demand) Aluminum alloys are half of the total demand Other 7% Aluminum Alloys 49% Composites 3% Super Alloys 9% Total 1.14B lbs. Titanium Alloys 1% Steel Alloys 22% Steel alloy and titanium increases in importance (relative to the percentage of fly weight, 17% and 8% respectively) due to relatively high buy to fly weights for the materials Composites is just 3% of total demand due to its low buy-to-fly ratio * Maintenance (MRO) included in total 13

15 TITANIUM DEMAND OUTLOOK The Total Aerospace Raw Material Market is Nearly $9 Billion; Titanium s Value Comprises 26%, or $2.2B Composites 13% 21 Aerospace Raw Material Value $ US Billions, By Aircraft Category Steel Alloys 11% Other 4% Total $8.7B Aluminum Alloys 26% Aluminum and titanium are the largest material markets by value both are worth ~$2.3B Super alloys is third largest category, with at total value of $1.7B Super Alloys 2% Titanium Alloys 26% Composites and steel alloys are the next largest categories at approximately $1B each 14

16 TITANIUM DEMAND OUTLOOK Aerospace Titanium Demand is Projected to Grow at an ~7% Annual Rate M LBs Aerospace Raw Material Buy Weight 21 22, By Commodity (Fundamental Mill Demand) Aluminum Alloys Super Alloys Steel Alloys Titanium Alloys Composites Other Aluminum demand will continue to remain strong with the production of the 737RE coming on line in 216 CFRP demand is anticipated to grow at 12% CAGR, followed by titanium alloys at 6.8% CAGR * Adjusted for inventory overhang ** Includes aluminum-lithium as a small subset Note composites increase at a lesser rate than metallics due to an extremely low buy to fly, typically less than 2 (where as metallics are 5-8 on average) 15

17 TITANIUM DEMAND OUTLOOK Titanium Demand Will Grow Fastest for Airframe Applications M LBs 25 Titanium Buy Weight Forecast , By System (Fundamental Mill Demand) 2 Type, CAGR MRO; 2.2% Engine; 2.8% Airframe; 8.7% Total CAGR = 6.8%

18 AEROSPACE INDUSTRY DYNAMICS IMPLICATIONS FOR THE TITANIUM MARKET Agenda Aerospace Production Outlook Titanium Demand Outlook Key Trends 17

19 KEY TRENDS The Decisions By Boeing and Airbus to Re-Engine Single Aisle Aircraft is Negative for Titanium Demand American s launch order for the B737 MAX coupled with the A32 NEO delays the introduction of hightitanium content single-aisle aircraft for at least a decade Delivery Forecast Production drop 737RE At the same time, there may be a drop in aggregate production rates as OEMs transition to new models mid-decade 4 737NG Implications For Titanium ~3K lbs Ti (buy weight) per 737 MAX vs. versus ~9K of Ti on a new white sheet using B787 materials Loss for Titanium and gain for Aluminum! 18

20 KEY TRENDS Production Rates of the Joint Strike Fighter, a Key Titanium Consumer, Are at Risk Budget pressures and production problems have placed the JSF program is under increased scrutiny; the probability of full production rates before 218 now unlikely JSF Delivery Forecast STOVL CTOL The STOVL variant faces increased risk of being cancelled There is also risk of decreased international orders given EU budget pressures Implications For Titanium JSF production rate projections have decreased considerably since 21 However, the JSF will comprise less than 2% of total aerospace Ti demand in

21 Key Messages Aircraft production rates are increasing because new, more fuel efficient aircraft are in demand Titanium Demand is increasing at 6.8% per year, driven by production increases as well as increased use of titanium in new aircraft Key Trends: Boeing 737MAX decision is a loss for Titanium JSF program in flux but risk to Titanium is minor Positive production rates will continue to drive Titanium demand 2 2

22 21