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Agenda Castle Metals Overview Aluminum Market Dynamics Aluminum - - PDF document
Agenda Castle Metals Overview Aluminum Market Dynamics Aluminum - - PDF document
The Aerospace & Defense Forum 2/07/2013 Aerospace & Defense Forum How to Avoid Being a Casualty of a Raw Material Shortage Agenda Castle Metals Overview Aluminum Market Dynamics Aluminum Pinch Point Analysis
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A.M. Castle & Co.
- A. M. Castle & Co. (NYSE:CAS) is the
Foremost Provider of Exotic Alloys and Specialty Products, Services, and Supply Chain Solutions. W i d L di Di t ib t We are recognized as a Leading Distributor
- f Alloy Steels, Stainless Steels, Nickel
Alloys, Aluminum, Titanium, Cast Iron, Brass, Copper, and Plastic, as well as a Global Resource for Complex Supply Chain Solutions.
A.M. Castle & Co.
Operating in Locations throughout North America, Europe and Asia, we work with International OEMs to better serve their Multi-Location Production Requirements and Delivery Needs. We also focus on Metals Processing and
- ther Value-Added Services to better meet
the ‘Unique Requirements’ of Industries such as Aerospace, Defense, Oil and Gas, Power Generation and Heavy Equipment.
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- A. M. Castle & Co. Companies and
Subsidiaries
Castle Metals Aerospace H-A Industries
- A. M. Castle Metals UK Limited
A M Castle Metals China Limited A.M. Castle Metals China, Limited Oliver Steel Plate, Co. Total Plastics, Inc. Kreher Steel Wire Company, LLC.
Aerospace Partners:
AIRBUS (UK/FR/GR) Alenia Agusta BAE Systems BF Goodrich BOEING Bombardier Cessna EADS U S A & Europe Lockheed Martin LMI McCann Aerospace Mikuni Heavy Ind. Mitsubishi Heavy Ind. Monitor-Stellex Nordam Northrop Grumman O’Gara Hess EADS U.S.A. & Europe Embraer Fuji Heavy Ind. GAMESA Gulfstream Israel Aircraft Ind. Kaman Kawasaki Heavy Ind. Korean Aerospace Latecoere O Gara Hess PZL Robinson Helicopter Sikorsky SONACA Thayer Triumph Group United Defense Versaform Vought
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Airline and MRO
Aero Mexico Air Canada Air France Air India Air New Zealand HAECO / TAECO LAN Chile Lufthansa Mexicana Quantas British Airways Coopesa EADS Sogerma GAMECO South African Airways ST Aerospace TAP Air Portugal Timco United Airlines
Castle Metals Aerospace Applications: F-35 Fighter
Visual Courtesy of ALCOA
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Castle Metals Aerospace Applications: Commercial Aircraft
Visual Courtesy of Kaiser Aluminum
Aluminum Market Dynamics
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Aerospace Aluminum Sheet & Plate “At a Glance”
Four North American Producers
- f Hard Alloy “A&D”
Aluminum Plate Products Boeing & Airbus both have Multi- Year Fixed/Firm Aluminum Plate Contracts with all Kaiser, Aleris, Alcoa & Constellium Four Producers
Aluminum Industry “Demand Drivers” What to Watch for:
Planned Production Outages / Production Capacity Constraints Labor Issues (Expiration of Contracts) Current and Future Price of Aluminum Ingot (Contango or Backwardation) (Contango or Backwardation) Aerospace = 4% of Global Aluminum Production – Other ‘End Use’ Markets have a major impact on A&D Production
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Market Forces: Capacity Increase And Investment
- Competing Industries / Companies For Mill Capacity In Hard Alloy
Heat Treat Aluminum Sheet, Plate And Extrusions Include:
- Airbus/EADS
- BCA/BDS
- Space And Satellite (United Launch Alliance, SpaceX)
- Aircraft Cargo / Freight Container Converters
- 5th Generation Fighter Aircraft (JSF)
- There Has Been Considerable Increase In Capacity For Heat Treat
Sheet And Plate In The Last 6 Years.
- Kaiser: $140 Million In 2007
- Aleris: $30 Million In 2011
- Alcoa: Capital Investment not Disclosed by Individual Location
Potential “Pinch Points” in Aluminum Extrusion Supply Chain
The majority of A&D Aluminum Extrusions are produced by three Mills: Alcoa Pimalco, Kaiser Alexco, and UAC Both Alexco and Pimalco have multiple ‘Presses’ within the same Container size. – Should one press go down, it would mean a i th k di ti til T li maximum three week disruption until Tooling could be produced for other press to run extrusions. – Therefore, not only is there duplicate presses of similar sizes within the current vendors; there are multiple sources for Aluminum Extrusions.
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Potential “Pinch Points” in Aluminum Extrusion Supply Chain
Alcoa has recently announced a cutback in Smelter Production because of the low price of Aluminum Ingot. There are additional “Private” Ingot inventories, trading positions for EFT Ingot Funds. There is “Low risk” of disruption to “A&D” customers b d I il bili based on Ingot availability. 2013 is expected to see Global Demand for Aluminum Ingot increase - not to shortage levels, but expect 3%-5% increase in pricing.
Potential “Pinch Points” in Aluminum Extrusion Supply Chain
There is low risk of supply interruption due to unplanned ‘Mill Outage’ at either Alcoa Pimalco or Kaiser Alexco. There is Low Risk of Supply Interruption due to Constricted Supply of Aluminum Billet or pp y Ingot in Current Market or at Increased Commercial Build Rates into 2015
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“Pinch Points” in Aluminum Extrusion Supply Chain
Large ‘Press’ items currently are a “Pinch Point” in the Supply Chain. (Container Size greater than 8”) Two Major Suppliers: Alcoa – Lafayette and UAC Both ‘experiencing’ Extended Lead times at Current Run Rates. Current Lead-times of 26 to 50 weeks depending on Extrusion Alloy & Size.
“Pinch Points” in Aluminum Sheet & Plate Supply Chain:
Unique Alloys & Tempers High Value Added Alloys: Example = 2219 & 2014 (Primary Space/Satellite Alloys) Non Standard sizes (Std = 36”, 48”, 60” or 72” wide & 120” or 144-1/2” long) 72 wide & 120 or 144 1/2 long) Additional Testing: Example = “USI Testing” Over-size Product: Widths greater than 96” and Lengths greater than 288”
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“Pinch Points” in Aluminum & Titanium Tubing Supply Chain
Few Producers & Few Distributors make for concerns in this part of Supply Chain Haynes International, Sandvik, & Fine Tubes are the major Aerospace Titanium Tubing Producers (Lead Time = 60 weeks +) ( ) Kaiser Chandler, Alcoa Lafayette, & ALunna are the major Aerospace Aluminum Tubing Producers (Lead Time = 12 to 30 weeks)
Titanium Market Dynamics
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Breakdown of Consumption: Major ‘End Use’ Market
Commercial Aerospace = 45% General Industrial = 35% Military and Defense = 10% Medical and Commercial = 8% Other = 2% Three Variables Driving Titanium Supply & Demand
Realization of the Capacity Expansion Plans by Titanium Suppliers, including American and Chinese Producers The Boeing 787 Build Rate and Demand from other Titanium “Intensive” Aircraft Continued Chinese Economic Growth and Chinese consumption of Steel, Titanium and other Metals that are related to World Titanium Demand and Supply Conditions
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Sponge Capacity
Sponge Capacity
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total 263 343 461 527 507 515 528 528 549 570 570
Global Titanium Industry Macro Model
2010 2011 2012 2013 E 2014 E 2015 E Commercial Aerospace 60 71 102 105 108 112 General Industrial 67 82 93 98 98 97 Military & Defense 26 30 31 31 31 33
Total Western World Consumption
y Consumer and Global 15 25 30 35 50 40 (1) Project Finished Mill Demand 168 208 256 269 287 282 Consumption Growth 14% 24% 23% 5% 7% ‐2%
Data courtesy of Cleveland Research
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Global Titanium Consumption
150 175 200 225 250 275 300 325
Volumes By Sector
25 50 75 100 125 150
Commercial Aerospace General Industrial
Source: ITA, Industry Sources, CRC est.
Aerospace Titanium Consumption
Aerospace Titanium Consumption
Est 1991 to 2015E
55 60 65 70 75 80 85 90 95 100 105 110 115
mm of pounds
5 10 15 20 25 30 35 40 45 50 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 E 2 1 1 E 2 1 2 E 2 1 3 E 2 1 4 E 2 1 5 E Source: Industry Sources: ITA; CRC est
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The ‘Big’ Consumers
Boeing 787
– 30 MM pounds annual demand at 10 per month rate
JSF
– 8 MM pounds annual over the next 3 years
Ai b Airbus
– Represents 10% of Ti industry volumes – A380 consumes 4-5 MM pounds over the next 3 years
The ‘Big’ Consumers
737
– 9 MM pounds of demand at 38 per month: Estimated @ 2013 production rate – Going to 42 per month in Late 2013/2014
“Next Gen” 737 Next Gen 737
– Potentially 4-5x more Ti content than legacy 737 – Moving up Boeing priority list, possibly by 2020
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Potential “Pinch Points” in Titanium Extrusion Supply Chain
Political Unrest in Countries with largest Ti Mines: Russia and South Africa. (Possible but highly unlikely) Unplanned Production outages at Major Processors/Converters – Possible but impact from one processor outage would affect “Spot” market pricing but would have limited long term impact on North American supply 55 60% of World Supply comes from Recycled Ti – 55-60% of World Supply comes from Recycled Ti (Scrap) From North American Aerospace perspective, there are two extruders who are “tooled” for Ti Extrusions: Thus, we conclude that there is “Low Risk” of Potential Disruption in Ti Extrusions
Potential “Pinch Points” in Titanium Sheet Supply Chain
We conclude that there is “Slight Risk” of Potential Disruption in Supply due to Unplanned Production Outages at the mills. There is “Low Risk” of shortage on the Billet and Sponge side. There is a slight risk due to Commercial Build rate g increases, but new “Sponge Mine” capacity has been announced. If this new capacity comes on line in 2013/2014 as planned, the market will have suitable capacity for new demand.
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Best Case: Supply Side
No Unscheduled Down-time at Producers.
– Aluminum or Titanium
No Labor issues at Mines or Smelters Rate Increases ‘slide’ due to Continued Production issues Production issues Business Jet Market returns at manageable pace “Space” Industry ‘Levels’ demand
Worse Case: Supply Side
Economy ‘Heats’ and other Higher Consuming Aluminum Industries increase usage:
– Automotive Industry continues “Light-weighting”, using HT Aluminum Sheet for Body Panels – Class 8 Trucks Production Returns/Increases – Truck Trailer Production Returns/Increases – Building & Construction Returns/Increases – Civil Unrest = Creates Need for Aluminum Armor Plate
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