Aerospace Titanium - The Long and Winding Road

Adventures can take you on long roads with many twists and turns.?These twists and turns can reveal opportunity or adversity, which are often unforeseen.??In some cases, what happens can completely alter the journey and send you on another path.?A similar situation confronts those involved with aerospace titanium.?We can picture the desired destination, but with many unknowns, the path will undoubtedly require continuous course corrections and the end point may look different than we originally thought.?

The main driver for aerospace titanium demand is the aircraft build rates.?Covid 19 hit the commercial aerospace industry especially hard and overall air travel is still well below 2019 levels.??Consequently, the build rates for both Airbus and Boeing are significantly lower than they were pre-pandemic.?Before Boeing suspended the production of the 737 MAX after the second crash in 2019, Boeing and Airbus were producing 137 large commercial aircraft per month.?Now, they are producing about 88/month.

Going forward, both Boeing and Airbus have ambitious hopes for increasing production rates especially for the 737 MAX and A320 NEO aircraft.?Airbus has stated that it wants to get to 65 A320s/month by the middle of 2023 and possibly increase that rate even more in 2024 and 2025.?Boeing is behind schedule due to the 737 MAX crisis but plans to increase production of the 737 to 31 in early 2022 and up to 42 by the end of 2022.?There are certainly questions as to whether the supply chain can support this rapid increase due to ongoing labor shortages and relatively weak current demand for aerospace components.

While the optimism from Boeing and Airbus is encouraging, the question becomes what does this mean for titanium? ?To answer this question, we have to consider the current inventory levels within the system and the overall titanium content of the individual airplanes.?

As mentioned before, both Boeing and Airbus were producing about 137 aircraft/month prior to Covid.?In reality, the system had already been producing at a rate of 157 aircraft/month as Boeing reduced production by 20 planes/month after the second 737 MAX crash in 2019.?So the entire supply chain was geared up for this unprecedented aircraft production rate and then Covid hit.?Aircraft production basically halted in March/April of 2020 and then it gradually resumed in stages throughout the remainder of 2020.

The problem was with the material already in the pipeline.?With lead-times well over 1 year in some cases, and all available capacity being utilized, a tremendous amount of titanium was in the production backlog in early 2020.?When aircraft production stopped and then resumed at significantly reduced rates, a lot of titanium was already in process.?As a result, metal continued to flow into 2021 despite a glut of metal brought on by the rate cuts.?

Some estimates have upwards of 2 year's worth of raw titanium and titanium products sitting at various stopping points in the supply chain.

Consequently, there is a tremendous amount of inventory in the aircraft production system and the reduced build rates make it uncertain when a more equalized environment will be reached.?Some estimates have upwards of 2 year's worth of raw titanium and titanium products sitting at various stopping points in the supply chain.?Even with the ambitious aircraft build rates planned for 2023-2024, titanium production may not get into a more normal cadence until some time after those rates are realized.?To their credit, Boeing and Airbus have tried to help suppliers but this is unsustainable for this to continue in the long term.?

The other question is the titanium content of the individual planes and the demand for those aircraft.?The good news is that production rates for the A320 and 737 MAX are increasing as domestic air traffic rebounds.?These smaller, single-aisle aircraft are mostly used in domestic routes and shorter international routes.?The bad news for titanium is that these are smaller aircraft and also have lower titanium content.?However, with the sheer number of aircraft being made, these models still consume a decent amount of titanium.

The real pain point comes as it pertains to widebody aircraft.?International air traffic drives the widebody market and the international travel market is still down by a substantial amount.?With varying travel restrictions across countries, international travel is at about 15% of 2019 levels.?As a result, the demand for widebody aircraft (A350, A330, 787, and 777) has declined dramatically.?

Combined with the inventory situation described before, this is another headwind for aerospace titanium.?The A350 and 787 are large aircraft and are about 15% titanium by weight.?Prior to Covid, Airbus was producing 10 A350s/month and Boeing was producing 14 787s/month.?Currently, five A350s/month and less than two 787s/month are being produced.?This is compounded by the problems Boeing has been having with the 787 of which not one has been delivered since May of 2021.?So an inventory overhang combined with a drastically reduced production rate means that it could be even longer until new titanium is needed for these aircraft.?

To complicate matters further, titanium and the aerospace industry still remain at the mercy of the Covid monster.

A similar situation holds for the 777 and the A330 although not as pronounced.?These are very large aircraft and are comprised of anywhere from 10-12% titanium.?Prior to Covid, Airbus was making 3.5 planes/month and Boeing was making 5 777s/month.?Currently both Boeing and Airbus are making 2/month of both of these models.?Further headwinds are possible as the first delivery of the 777X is not scheduled to happen until 2023 after initially slated for 2021.?Things could continue to change with this class of aircraft as the trend is to use smaller planes for a lot of the routes flown by the A330/777.?How this plays out when the pandemic subsides remains to be seen.?

To complicate matters further, titanium and the aerospace industry still remain at the mercy of the Covid monster.?The virus continues to affect just about everything in our lives and this includes travel.?With new variants and infection resurgences, countries are constantly adjusting travel restrictions that dramatically affect the international travel market and to a lesser extent, the domestic travel market.?Various rules about testing and vaccinations also act as a drag on international travel.?A final question remains as to how business travel, which is a huge component of international air traffic, will look when the pandemic is over given the ubiquity and cost effectiveness of virtual meetings.?

So the journey these past 2 years has been a challenging one for aerospace titanium.?Everyone involved in the aerospace industry has struggled through the worst crisis in our history.?The good news is that the largest segment of the commercial aircraft market, narrowbody aircraft, is recovering nicely now.?As for aerospace titanium, the industry can focus on recovery as it has stabilized with the single-aisle production rate increases.?However, the widebody aircraft market remains a challenging one and one that may lead to a return to the pre-pandemic halcyon days if, and when, it recovers.?Until that time, the journey will traverse on a long and winding road.??