Two key supply and demand trends in aerospace manufacturing today: global outsourcing of the manufacturing supply chain and surging demand for specialty metals, such as titanium and nickel.
Two weeks ago, I was offered an invitation to visit a major production site for specialty alloys in Monroe, North Carolina. My host was Allegheny Technologies Inc. (ATI), a company that stands at a unique nexus of both the supply-side outsourcing and demand-side metals issues.
How important is the specialty metals business to the aerospace industry? Let’s put it this way: If you had invested $1 in ATI in 2002, it be worth more than $15 today. And the good times are not over. Titanium demand is projected to grow by more than 500% within the next 20 years.
I profiled ATI’s unique growth strategy, which categorically rejects the globalized supply chain fetish, in this week’s issue of Flight International.
Ironman’s titanium dream
By Stephen Trimble
Companies at the bottom of the aerospace supply chain areunder more pressure than ever to operate like the manufacturers at the top.Simply making a small piece of a much larger whole is not good enough any more.The lower-tier supplier must find ways to “add value” to theproduction process.
In the speciality metals business, that means firms eithermove upstream to produce the raw material or downstream to machine the milledproduct. Pittsburgh-based Allegheny Technologies (ATI), striving to keep pace amidfuriously rising demand for its titanium- and nickel-based products, hasembarked on a strategy to add value in both directions – while pointedlyrejecting the aerospace industry’s embrace of globalised and outsourced supplychains.
ATI is reorganising to form a dedicated aerospace division,spending $900 million to increase industrial capacity in the
Bucking the outsourcing and globalisation bandwagon, ATI’sgrowth strategy is focused on increasing its own manufacturing capacity withinUS borders.
Rather than pushing more work to subcontractors, ATI hopesto capture a massive tide of demand for speciality metals with a tightly woveninternal network that spans operations from milling to melting to machining.
The goal is to win market share from competitors – the
“There is unprecedented opportunity in the aerospacebusiness,” says Pat Hassey, ATI chief executive.
Kevin Michaels, a principal of the Michigan-basedAeroStrategy consulting firm, says ATI’s strategy mirrors a recent trend amongspeciality metals producers to expand beyond melting operations into millingsponge and machining ingots into finished products. The goal is to “getmore integrated so they can move upstream into sponge but downstream intomachining”, Michaels says.
Emphasising ATI’s US-based titanium milling capacity also isa smart move, Michaels adds, as the company’s secure sourcing claim can be acompetitive discriminator in an industry dominated by Russian suppliers.
As titanium demand is projected to skyrocket by 500% in thenext 20 years, the new division will try within the next decade to boost thecompany’s share of revenues from aerospace firms from 31% to 40%.
The new ATI Aerospace division will be formally unveiled atthe Farnborough air show in July. The core of the aerospace unit will be ATIAllvac’s growing titanium and nickel melting centre in
ATI’s capacity for producing titanium sponge in the
ATI’s total production capacity for titanium sponge shouldrise to an annual rate of 21 million kg (46 million lb) by the end of 2009, orroughly enough to fill approximately one-eighth of projected worldwide demandfor the metal by 2013.
Titanium demand in the aerospace sector is largely driven bythe shift towards greater use of carbon composites instead of aluminium inaerostructures. The chemical properties of composites make then corrode fasterwhen fastened to sheets of aluminium, forcing airframers to rely more ontitanium and other special alloys.
Meanwhile, ATI’s niche capacity for producinghigh-performance nickel-based alloys is critical for the current generation ofjet engines, and will become even more essential as future propulsion systemsburn at even hotter temperatures to improve fuel efficiency.
The company’s next move in the jet engine market is tointroduce a nickel-based alloy called 718-Plus, which can survive hot sectiontemperatures up to 700 degrees-Celsius, or nearly 40 degrees hotter than ATI’scurrent standard for jet engine alloys.