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Aerospace aluminum's skyrocketing: the aerospace industry is flying high and bringing its metals suppliers along for the ride.

Article Excerpt
WITH STRENGTH ON ALL AEROSPACE fronts--commercial and military aircraft alike--demand for lightweight aluminum and other specialty alloys should remain robust through 2007 and perhaps well beyond. The main concern for aircraft manufacturers is how hard they have to scramble to get enough material for their production lines, and how high a price they must pay.

Metals suppliers also are scrambling to meet the needs of their customers. In some cases, mills are even investing in new production capacity. Despite these efforts, supplies of aerospace metals, including aluminum, titanium and nickel-based superalloys, are expected to remain very tight for at least the next 12 to 18 months.

"These are the good times," says David Napier, manager of the economic data service at the Aerospace Industries Association of America in Arlington, Va., who asserts that the industry is at the beginning of a major upturn. "Once the aircraft cycle starts, it tends to go on for eight to 10 years, and I think this one will be prolonged," agrees industry analyst Lloyd O'Carroll, vice president and chief economist with BB&T Capital Markets in Richmond, Va.

It is very unusual that both commercial and military aerospace markets spike simultaneously, says Richard Aboulafia, president of the Teal Group in Fairfax, Va. Each is being propelled by a very different set of drivers--defense by world events such as the Iraq and Afghanistan wars, and commercial by strong passenger and freight traffic.

"Last year was the first year that passenger travel growth exceeded the previous record levels set in 2000," completing a recovery from the Sept. 11, 2001, terrorist attacks, says Peter Conte, spokesman for Boeing Commercial Airplane in Seattle.

The increase in passenger miles continues to be significant, adds John Walsh, president of Walsh Aviation, Annapolis, Md. Air travel increased 12 percent in 2004, another 7 percent this year, and is likely to maintain that trend.

Passenger demand and enthusiasm for new aircraft designs--such as the Boeing 787 Dreamliner and the Airbus A380 and A350--have kept commercial airplane orders and build rates at surprising levels, especially in light of the severe financial problems faced by many U.S. airlines. It is primarily air carriers outside of the United States that have responded to the increased passenger travels by adding to their fleets, opening new routes and increasing the frequency of flights, notes Boeing's Conte.

Airbus reported 417 orders for new aircraft in just the first nine months of this year, a 30 percent increase over the 320 orders it received in full-year 2004. Boeing reported an even more impressive increase, with 647 orders through mid-October, more than double its 277 total orders last year.

Foreign carriers have the means to purchase new aircraft, Aboulafia says. Worldwide, airlines are expected to lose $8 billion this year. Those in the United States alone are projected to lose $9 billion, which means airlines in the rest of the world will actually earn $1 billion.

And it isn't as if U.S. airlines aren't buying any planes. While so-called legacy airlines are facing bankruptcy reorganizations, new low-cost carriers such as Southwest Airlines and its imitators...

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