http://www.metalcenternews.com RSS feeds for Metal Center News 60 http://www.metalcenternews.com/Editorial/CurrentIssue/October2012/tabid/5838/articleType/ArticleView/articleId/8612/Spotlight-on-Technology-ELT.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5838&ModuleID=14039&ArticleID=8612 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=8612&PortalID=51&TabID=5838 http://www.metalcenternews.com/Editorial/CurrentIssue/October2012/tabid/5838/articleType/ArticleView/articleId/8612/Spotlight-on-Technology-ELT.aspx Roller Leveler on Steroids Engineers at Herr-Voss Stamco have designed a roller leveler with Enhanced Leveling Technology, which they claim produces stay-flat steel comparable to a stretcher leveler, but at a much lower capital cost. By Tim Triplett, Editor-in-Chief High-tech cutting machines such as lasers, plasmas and water-jets have become commonplace in job shops all over the country, producing parts with amazing accuracy at lightning speeds. That is, of course, if the material they start with is flat. Most steel is anything but, unfortunately. A piece of plate may look as flat as a tabletop, but still have “coil memory” from being rolled, cooled and coiled at the mill. Internally, a host of differential strains still compete with one another. They hold each other in place until the material is cut, then the released stresses cause the metal to deform. Steel that bends and twists during the cutting process can ruin cut parts and do serious damage to a CNC-controlled cutting head as it travels over the surface of the sheet. As customers’ cries grow louder for steel sheet that arrives flat and stays flat after cutting, processors have a decision to make: invest in new leveling technology or risk getting left behind. Until recently, that decision boiled down to two options: install a temper mill or a stretcher leveler. Herr-Voss Stamco, Callery, Pa., now offers a third choice, its ELT or Enhanced Leveling Technology. Taylor Steel, Stoney Creek, Ontario, was the first to install the new Herr-Voss ELT system in November 2011. The decision to invest in the untested technology was driven by growing customer demands for stress-free steel, says Randy Smith, Taylor vice president of operations. “We felt ELT was a technology that would provide us with the stay-flat product we needed.” Taylor Steel is a major distributor and value-added processor of carbon flat-roll with five plants in Stoney Creek and one plant in Lordstown, Ohio. It serves the automotive, construction and appliance markets, among others. Taylor was able to retrofit one cut-to-length line for enhanced leveling at its Stoney Creek Plant No. 1 in a process that was fairly simple, Smith says. The ELT unit was installed at the end of the line, requiring only the addition of some conveyors and relocation of the stacker. Today, steel coils pass through a standard roller leveler at the front of the line, then through a shear that cuts them to length, just as before. Then the blanks are conveyed individually through the ELT before being stacked for packaging and shipment. Each “enhanced” sheet is free of the trapped internal stresses that might cause it to bend or twist after cutting, Smith says. Taylor spent considerable time working out the bugs and testing samples for flatness before passing product on to customers. After nearly a year of experience with the machine, Smith and his crew have found the ELT works best on light-gauge carbon steel up to 3/8ths inch thick. The addition of the ELT did not affect the speed of the line, which has an annual processing capacity of 50,000 to 60,000 tons. Smith is particularly impressed with Herr-Voss Stamco’s intuitive approach to the controls. The system is easy to operate and has built-in logic that records job histories so it can automatically duplicate settings for repeat customers. “The ELT has allowed us to compete with people that are supplying stretcher leveled product,” he adds. How the technology works The ELT is the product of three years of R&D and makes Herr-Voss Stamco a player in the market for equipment that produces stay-flat steel. For years, the ultimate leveling technology was the temper mill, which flattens the material by compressing it between two work rolls under enormous pressure. Temper mills are still widely used today, with about 25 in operation in North America. They are very costly, however, and only practical for fairly large companies. Thus makers of stretch leveling technology saw a market opportunity. Stretcher levelers relieve the internal stresses in the steel sheet by gripping and stretching the material past its yield point. Stretcher leveling has been around for over 50 years, but companies such as Red Bud Industries and Leveltek have introduced refinements that allow heavier-gauge materials to be leveled, as well as steel in coil form. Stretcher levelers are roughly half the cost of temper mills. “Stretcher leveling is a great process, but it does have its limitations,” says Wes Dias, ELT product manager at Herr-Voss Stamco. For one, it must stop and start as it stretches each section of coil. This stop-start process reduces the throughput of the processing line. For another, it has a larger footprint and requires more space than the ELT. Herr-Voss Stamco considered developing its own stretcher leveler, but after careful study decided “there has to be a more elegant solution,” Dias recalls. As one of the market’s leading providers of corrective roller levelers, the company opted to build on its core strength and design a roller leveler with enhanced leveling features. “We decided to look at bending the material in the same manner as a roller leveler, but to do it in a very severe and precise fashion, with monitors measuring all the work going into the metal,” Dias says. Like most temper and stretcher level lines, cut-to-length lines using the ELT also incorporate a conventional leveler. The coil first passes through the standard corrective roller leveler to remove most of the defects, such as crossbow, center buckle or edge wave. Then it is cut into blanks and each blank passes through the ELT for final enhanced leveling before moving on to the stacker. The enhancing process is dependent on feedback from the rolls. Sensors inside the system are very sensitive. That’s why it was designed to level discrete plate rather than coil, so its measurements of the bending process are not distorted by energy needed to convey the coil through the system, Dias explains. “We needed to be able to measure, monitor and calculate how much work is being put into the material in this ELT process. To accomplish that, you need to be able to isolate that specific work. So it has to be corrective leveled first and then enhanced.” More than just a different spin on roller leveling, the sophisticated controls of the ELT make it truly innovative, Dias maintains. “We monitor the torque on each and every roll as the material hits it. By measuring how much power is being consumed by the drive, in excess of what it takes to turn over the motor, the gearbox, the spindles and the work rolls, we can identify how much energy was put into a piece of material. Through a calculation based on the material thickness, yield and width, the patent-pending Advanced Enhancing Meter provides immediate feedback to the operator, showing him the bandwidth in which he needs to keep the material to be sure it has been 100 percent enhanced.” Except for the sophisticated controls, the ELT looks much like a conventional leveler. The configuration of the work rolls is basically the same. One fundamental difference is the heavy-duty construction of the entire machine. “We have created such a rigid assembly that there is virtually no deflection. The machine does not breathe or grow as the material passes through it, despite the remarkable separating forces trying to push the machine apart. This works the entire width and length of the material incrementally as it passes through with much greater bending force than corrective leveling,” Dias says. The ELT can be operated in a conventional leveling mode as well as the enhanced leveling mode. It is designed to handle carbon steel, stainless steel and aluminum sheet from 1/8th- to ½-inch thick. So far, the ELT is in operation in three locations: Herr-Voss Stamco’s headquarters, Taylor Steel and Samuel, Son & Co. Ltd., Mississauga, Ont. Two other ELTs are under assembly. Their price tag is around $2 million. “At about half the cost of a stretcher leveler, the Herr-Voss Stamco ELT will make high-tech leveling accessible to service centers and processors of all sizes,” says Kip Mostowy, Herr-Voss Stamco president and CEO. “In our opinion, we can actually provide a catalyst to the growth of the market by adding a lower-cost option to obtain a superior material, just like the stretcher levelers did to temper mills.” Wed, 07 Nov 2012 21:18:00 GMT f1397696-738c-4295-afcd-943feb885714:8612 http://www.metalcenternews.com/Editorial/CurrentIssue/October2012/tabid/5838/articleType/ArticleView/articleId/8610/MSCI-Economic-Summit.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5838&ModuleID=14039&ArticleID=8610 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=8610&PortalID=51&TabID=5838 http://www.metalcenternews.com/Editorial/CurrentIssue/October2012/tabid/5838/articleType/ArticleView/articleId/8610/MSCI-Economic-Summit.aspx Market’s Just ‘Muddling Along’ Experts at last month’s MSCI forecast summit offered a muted outlook for a U.S. economy that continues to disappoint. By Tim Triplett, Editor-in-Chief The economy has “muddled along” in the past year, managing to avoid a double-dip recession but showing no strong growth. Inflation remains under control, but the nation’s huge unemployment problem has seen little improvement. “The good news is the U.S. economy is probably the strongest in the world right now,” said William Strauss, senior economist and economic advisor with the Federal Reserve Bank of Chicago. “The bad news is the U.S. economy is probably the strongest in the world right now.” In other words, weakness in the world economy is a concern to the U.S., as well, especially as American companies look to increase their exports. Since the Great Recession technically ended in June 2009, U.S. GDP has continued to disappoint, Strauss told the crowd of steel executives Sept. 11 at the Metals Service Center Institute’s economic summit in Schaumburg, Ill. Unlike past post-recession periods when the economy surged, the last year has seen growth of only about 2.3 percent—near trend but not nearly enough to add jobs. Pointing to the Chicago Fed’s National Activity Index, Strauss noted that the economy continues to underperform. [Editor’s note: The index’s three-month moving average released Sept. 24 showed a decrease to -0.47 in August—its lowest level since June 2011 and its sixth consecutive reading below zero, indicating that growth in national economic activity is below its historical trend.] “The third quarter is not looking very strong. Growth is continuing, albeit not at a level the economy is capable of.” One symptom of the economy’s weakness is the high level of excess reserves held by the banking sector. “That is not how banks operate. They tend to lend out all their excess reserves,” Strauss noted. Conservative lending by the banks reflects their uncertainty about the economy. Another headwind to economic growth is the rise in the personal savings rate. With so many people concerned about their jobs and their futures, they are saving more and spending less, which in the short term deprives the economy of much needed fuel. “There is a risk the savings rate will rise even higher,” Strauss added. Of major concern is the slow recovery of the housing sector. Experts project about 750,000 single-family home starts this year and 890,000 next year—about half what would normally be needed just due to demographics and the number of new people seeking homes. Consumer behavior has changed in housing, as more individuals share space or move back in with their folks to economize. “Young people saw their families and friends get burned by the housing crunch and may not be as anxious to buy their own house,” Strauss noted. Housing now represents just 2 percent of GDP, down from a historical level over 4 percent. While homebuilding may see double-digit growth, it will still be years before it can take up the slack in the market. Construction of multi-family housing, which is more steel intensive, may benefit from the trend, Strauss added. Commenting on specific sectors, Strauss pointed to positives in energy, especially the nation’s vast reserves of natural gas. “Natural gas is a wave we should be able to ride,” he said. “The U.S. has become the low-cost energy producer in the world.” Manufacturing has recovered about 77 percent of its lost output. Industrial output is growing at a 5.1 percent rate, but is slowing, and Strauss doubts it can sustain growth levels on its own. “Future growth in manufacturing has to be led by growth in the economy,” he said. The auto industry remains a relative bright spot, with 2012 sales forecast at 14.3 million vehicles and 2013 sales at 14.8 million. But the growth rate in auto sales also is slowing from levels of the past few years, he said. U.S. monetary policy remains very aggressive. The Federal Funds rate is expected to remain at historic lows until the end of 2014. “We have the pedal to the metal in terms of federal monetary policy,” Strauss said, adding that policymakers are keeping a close watch to make sure the economy does not suffer a speeding ticket in the form of inflation. Inflation is not an immediate concern at 1.8 percent in 2012 and 2.1 percent in 2013. The economy has added 1.8 million jobs in the past 12 months, and about 4.0 million since the recession ended, but still has a long way to go to replace the 8.7 million lost in the downturn. At the current pace, taking into account population growth and new employees entering the workforce, it could take 16 years for the labor market to recover, Strauss said. Even with another year of an improving economy, the nation’s unemployment rate at year-end 2013 will still be around 7.8 percent, a level the economist characterized as “horrible.” Leading forecasters expect GDP growth for 2012 to limp in at 1.8 percent, followed by 2.4 percent in 2013. “This trend rate of growth is very disappointing in light of what should have occurred compared to past recessions,” Strauss said. While the Fed expects the economy to continue expanding at a rate near trend with little near-term risk of inflation, the manufacturing sector is likely to slow unless growth gains some real steam—not what the metals executives were hoping to hear. [“The third quarter is not looking very strong. Growth is continuing, albeit not at a level the economy is capable of.” William Strauss, Federal Reserve Bank of Chicago] Industrial Sector Shows Signs of Slowing “The U.S. is the best house in a lousy neighborhood,” said Eli Lustgarten, senior analyst with Longbow Research, Cleveland, Ohio, describing the United States’ relatively strong position in a weak global economy. Lustgarten offered his forecast on the economy and the heavy equipment market to MSCI forecast summit attendees Sept. 11. The industrial sector has led the U.S. recovery, he said, but there are signs manufacturing’s momentum is waning. Industrial production is expected to be flat at around 2.9 percent next year. “Companies are taking a wait-and-see attitude in the second half, which will add to slowing industrial production,” he said. Overall, the outlook for U.S. heavy equipment is positive for the next three to five years, he said, driven primarily by energy, agriculture and a recovery of construction. The U.S. has several factors in its favor. Recent global weather issues have lowered crop yields, dramatically raising commodity prices and giving farmers the capital to upgrade their equipment. New sources of low-cost natural gas have made the U.S. a net exporter of energy. New-home construction could hit 1.6 million units in the next several years, still well below the 2 million peak of the past, but a twofold improvement from 2009. And the move to shorten global supply chains and regionalize manufacturing is bringing production back home. “The reshoring/nearshoring phenomenon is real, enhancing a renaissance of American manufacturing,” Lustgarten said. Meanwhile, economic and political uncertainty weigh heavily on the market. “If we can survive the next 18 months, the U.S. has a very favorable three- to five-year economic outlook,” he added. [“If we can survive the next 18 months, the U.S. has a very favorable three- to five-year economic outlook.” Eli Lustgarten, Longbow Research] Rest of the Decade Looks Promising for Auto The auto industry experienced the worst downturn in modern history during the Great Recession, but that collapse in vehicle sales has created pent-up demand that could fuel the auto sector for the rest of the decade, said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc., Richmond Hill, Ontario, who spoke at MSCI’s Forecast 2013 summit. Future vehicle demand is a function of three factors, he explained: ownership, usage and durability. In 2007, vehicle ownership in the U.S. topped 100 percent, meaning there were more vehicles than drivers. Due to the economic downturn, ownership has declined to less than 96 percent. That 4-5 percent decline represents 8-9 million vehicles that were not replaced. Ownership growth in Canada and Mexico has offset some of the decline in the U.S., but it remains to be seen when Americans will return to prior ownership levels, DesRosiers said. Societal changes are working against more vehicle ownership, including social media such as Facebook and Twitter that allow people to socialize without driving to visit. But the impact of this trend is often overblown, he said. “The biggest reason youths don’t drive is they don’t have jobs.” Demographics and the increase in the driving age population will stem the decline in ownership, he added. “North American vehicle ownership levels are likely to remain stable for the next decade.” Vehicle usage is also showing the effects of the economy. The average annual miles traveled is around 13,000 today, down from 13,300. While that may seem like a small change, it translates into nearly 40 billion untraveled miles when multiplied by the enormous number of cars and light trucks on the nation’s highways. The weaker the economy and the higher the price of gas, the fewer miles people drive, and thus the longer their vehicles last. The auto industry’s focus on quality over the past few decades has added enormously to vehicles’ durability and useful lifespan. In the 1960s, people typically had to replace their car at around 90,000 miles. Today, vehicles can easily travel twice that distance before they wear out. Nevertheless, DesRosiers is bullish on prospects for the auto industry, pointing to forecasts for North American light vehicle production of 15.6 million units this year and 16.4 million in 2013—a major rebound from the 8.7 million during the recession in 2009. The market should return to previous peak production levels by 2016. “The bad news is behind us. Vehicle demand will be positive in the second half of this decade,” he said. Massive investment in U.S. production facilities by the traditional import brands means that more vehicles will be made here and fewer imported—good news for domestic suppliers of metals and other materials. The market will be evenly split between Detroit nameplates and the New Domestics by 2015-16 with about 8 million vehicles each, DesRosiers said. Where should metals suppliers position themselves to serve this growing demand? Mexico and the southern U.S. will be the big winners. “Canada and the U.S. North are vulnerable and will participate in less of the upside, although they will still be positive in unit growth,” he added. Wed, 07 Nov 2012 21:08:00 GMT f1397696-738c-4295-afcd-943feb885714:8610 http://www.metalcenternews.com/Editorial/CurrentIssue/October2012/tabid/5838/articleType/ArticleView/articleId/8607/Aluminum-Outlook.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5838&ModuleID=14039&ArticleID=8607 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=8607&PortalID=51&TabID=5838 http://www.metalcenternews.com/Editorial/CurrentIssue/October2012/tabid/5838/articleType/ArticleView/articleId/8607/Aluminum-Outlook.aspx Second-Half Slowdown Makes Suppliers Skittish Though 2012 started off with a bang for aluminum, activity has slowed considerably in the second half. Long-term prospects for aluminum producers and distributors remain bullish, however. By Dan Markham, Senior Editor Following a strong first half, producers and distributors of aluminum report waning momentum in the second half as the market faces several strong headwinds, including the disappointing economic recovery in the United States, the fiscal crisis in Europe, a slowdown in China and uncertainty over the upcoming presidential election. All told, they point to a supply chain that is understandably skittish. “The last couple of years have been that way. The first half of the year is really a gung-ho, ‘let’s get this recession behind us’ thing. Typically when we’ve had a recession, the next couple of years were boom times. But in 2010 and 2011, when we got into summertime, it just tanked on us,” says Keith Harvey, senior vice president of sales and marketing for Kaiser Aluminum, Foothill Ranch, Calif. “Orders have slowed,” agrees Jeff Henderson, director of marketing and business development for Sapa Extrusions-North America, Rosemont, Ill. “We’re seeing that across the business, in all markets.” Service centers report the same easing. David Pace, executive vice president and chief operating officer for Industrial Metal Supply, Sun Valley, Calif., says every quarter in 2012 has been worse than the previous one. “There’s a lot of weak consumer confidence driving this. All of the things you read in the paper, such as the fiscal cliff, are impacting demand.” Aluminum prices reflect the downtrend. The cash price for aluminum on the London Metal Exchange peaked in early March around $2,300 per metric ton, then declined steadily until August, when it bottomed out around $1,800 per ton. Since then, it has rebounded significantly to nearly $2,100 at the end of September. Despite the slowing in the second-half, the aluminum industry is on track to finish the year with gains over 2011. Sales are up this year in most of aluminum’s major end markets, executives report. And the data backs that up. The Davenport Quarterly Aluminum Outlook forecasts that U.S. aluminum shipments will increase by 8.1 percent year-over-year, to more than 22 billion pounds. (That number was adjusted downward from the previous quarter, when the analysis firm expected 22.4 billion pounds to be shipped this year.) Davenport’s Lloyd O’Carroll projects a further 3.8 percent shipment gain in 2013. Service center aluminum shipments were up 3.1 percent through August, compared to the same period last year, according to the Rolling Meadows, Ill.-based Metals Service Center Institute. Distributor inventories were up over August 2011, but down slightly from the previous month, averaging about 2.8 months of supply on hand. “Inventories are pretty much in alignment, and people are just being cautious,” Harvey says. “Barring unforeseen disaster, 2013 could be a really good breakout year.” 2012 looked like one, with its gangbusters first quarter. Leading the way was the aerospace market, a chief driver of aluminum demand. Aluminum shipments to the aerospace sector are forecast to grow by nearly 16 percent this year and another 9 percent in 2013, according to Davenport & Co. (See aerospace article on page 16.) The resurgence of the automotive industry also has taken aluminum along for the ride. North America’s car and light truck builders have been busy throughout the year and are expected to produce more than 14 million vehicles in 2012—a dramatic comeback from less than 9 million in 2009. “Automotive has been showing steady double-digit improvement year over year. Next year may not be up quite 10 percent when we’re done, but it will be close,” says Henderson at Sapa. Aluminum continues to gain a larger share of the automotive market—often at the expense of steel—as carmakers strive to lighten vehicles and improve fuel efficiency. New government fuel economy standards that call for a doubling of the average miles per gallon by 2025 have brought a new urgency to the automotive materials race. “If we take a forward view of the market, we talk about 25 percent compound annual growth,” says Brad Soultz, vice president of global specialties for Novelis Inc., Atlanta. “The growth could be much bigger one year over the next, but based on the engineering we know is under way, 25 percent on a level basis is quite solid.” And the aluminum industry is gearing up to meet that demand. Novelis has a major expansion project under way in Oswego, N.Y., that will increase its annual production of aluminum sheet for automotive use to 250,000 tons, five times its current capacity. The expansion is to be complete by mid-2013. Six months later, Alcoa will put the finishing touches on a $300 million investment at its Davenport, Iowa, facility that will allow it to tap into the growing demand for automotive aluminum. Automakers in Europe, and even emerging economies, also are moving toward greater use of aluminum parts. “The same regulatory and consumer drivers that have pushed European and North American customers to this will certainly be in place in China, as well,” says Soultz, whose company has broken ground on a new production facility near Shanghai. The transportation market for aluminum extends beyond automotive, and there the story is more mixed. Truck/trailer, an industry where aluminum has even greater market share, has not been as strong. Expectations were very high for the sector entering 2012, but the market has taken a tumble in recent months, executives report. “One of the disappointments for the year in the transportation space would be Class A trailers and trucks,” Henderson says. “The slowdown in that market was a little unexpected and a little premature.” Sales to the market still remain above 2011 levels, however. The flipside to the underperforming truck/trailer market is construction, a perennial laggard since the recession. “We’ve seen improvement in building and construction, both residential and commercial. That’s been encouraging,” says Henderson. Even the areas most ravaged by the mortgage crisis are starting to trend positive. Greg Weekes of Eastern Metal Supply, a Florida-based distributor, says “housing is showing signs, albeit breathing through a straw. We’re seeing some signs of recovery in Florida.” Even if it’s not robust growth, that construction may finally be moving in the right direction is what’s important, particularly considering the outsized role it plays in the entire economy, experts say. Strong growth in residential construction foretells better fortunes for a host of related manufacturing segments. “I don’t see anything but continued growth at some level,” says John Mitchell, vice president of sales, marketing and development for Lincolnshire, Ill.-based Nichols Aluminum. “I’m not going to say we’ll get back to 1.5 million housing starts, but we’re certainly going to move in that direction over the next 2-5 years. Whatever it takes to get there, it will all be a plus from today.” Henderson believes the real breakthrough in housing will happen when the unemployment figures drop a bit further. Getting below the 8.0 percent threshold may provide the positive reinforcement the economy needs. “I think psychologically, if the unemployment number starts with a 7, it may have some impact on buying decisions in the retail space,” he says. Sales to other aluminum markets are flat to up slightly for the year, including energy, electronics and general industrial. “Our markets are basic precision sheet metal shops, truck trailer and the recreational boat segment. All of them are at least fairly steady to maybe a slight bump upward,” says Sandy Nosler, president of Pacific Metals Co., Portland, Ore. Aluminum is not a major player in the energy market, though it does have a small piece of the solar business. Henderson thinks that market may be primed for a big year in 2013. Federal incentives for certain solar applications are set to expire at the end of next year. Companies looking to take advantage of the breaks before the expiration date must do so within the next 14 months. “Wind power saw the effect of that [expiring government tax breaks] this year. They had a very strong year as people tried to beat the deadline. We could see the same kind of run-up in solar next year,” he says. Though electronics is not a major market for aluminum, the trend toward smaller and lighter devices favors nonferrous alloys. “If you look at electronics, everything is hand held,” notes Pace at Industrial Metal Supply. “It doesn’t require much material, but the market is gravitating toward aluminum.” “New consumer products are being launched on a regular basis with more and more aluminum,” Soultz agrees. “There’s quite a lot of excitement from Novelis’ perspective on how aluminum will continue to grow its position in electronics.” Aluminum can become a more dominant player in many markets, if it does a better job of marketing its inherent advantages, Henderson says. “We still have to do a better job as an industry to promote the use of aluminum and the engineering of products with extrusions. This is paying great dividends in areas like automotive and solar. It helps that we have the best story, because we keep winning even with our relatively modest attempts.” While aluminum’s long-term outlook may be positive, short-term questions remain. Among them is the continued overhang of material in LME warehouses around the world, currently inaccessible to the market. “At some point in time, when the financial deals that tie it up become less attractive, it could have a significant impact on the market,” says Mitchell at Nichols Aluminum. Nathan Kahn, president of Empire Resources, Fort Lee, N.J., believes the industry is somewhat protected from any serious disruption if these currently untapped stocks are loosed on the market. “As long as interest rates stay low, it’s unlikely that metal is going to leave the warehouses. If interest rates start inching back up, maybe the financial deals will be less attractive to the investment community, but that would also imply the economy was getting better.” Kahn says the persistent price gap between Midwest premium and the LME is confounding, and contributing to some uncertainty in the market. “That just adds to the consumers’ unwillingness to invest in stock at prices they feel are a bit high.” To Harvey, this uncertainty is all that stands between the industry and a genuine boom market. “Fear itself is our biggest enemy right now. If we can get where the future is a little more certain and we’re on fair footing and ready to compete, the future bodes well for us.” Wed, 07 Nov 2012 20:57:00 GMT f1397696-738c-4295-afcd-943feb885714:8607 http://www.metalcenternews.com/Editorial/CurrentIssue/October2012/tabid/5838/articleType/ArticleView/articleId/8605/Aerospace-Metals-Market.aspx#Comments 0 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=5838&ModuleID=14039&ArticleID=8605 http://www.metalcenternews.com/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=8605&PortalID=51&TabID=5838 http://www.metalcenternews.com/Editorial/CurrentIssue/October2012/tabid/5838/articleType/ArticleView/articleId/8605/Aerospace-Metals-Market.aspx ‘Up, Up and Away!’ The outlook for air travel, and production of new aircraft, promises a robust market for suppliers of aerospace materials for at least the next decade. By Myra Pinkham, Contributing Editor It’s an exciting time to serve the commercial aerospace industry, metals suppliers agree. With orders for new aircraft backlogged for seven to eight years, many industry observers are optimistic that demand will stay “up, up and away” for some time to come. But nothing is absolutely certain, warns industry analyst Richard Aboulafia, vice president of the Teal Group, Fairfax, Va. Calling the commercial aerospace industry possibly the strongest segment in both the domestic and global economies, he notes that a bubble may be forming—one that could burst if some unforeseen economic calamity causes widespread cancellation of promised aircraft orders. “There could be a real danger,” he says. Others are far more optimistic, not just about the near term but even the more distant future. With industry forecasts of about 10 percent compound annual growth for the commercial aerospace sector in the next several years, “even the bears have become bullish,” says James Callan, president of Castle Metals Aerospace, Oakbrook, Ill. During his company’s second-quarter earnings conference call in July, Klaus Kleinfeld, chairman and chief executive officer of Alcoa Inc., called the 8,300 unit commercial aircraft backlog “pretty amazing.” While the rate of new orders has slowed slightly in the second half, along with most economic activity, the backlogs at both major airframe manufacturers--Boeing Commercial Airplanes and Airbus Industrie—have not diminished. Demand for both single-aisle and twin-aisle aircraft will continue to be strong for some time, says Keith Harvey, senior vice president of aerospace and distribution sales and marketing for Kaiser Aluminum Corp., Foothill Ranch, Calif. So far, 2012 has been an “up, up and away year” for aerospace metals suppliers, says Bob Mraz, vice president of sales and marketing for TW Metals Inc., Exton, Pa. “We have been able to sell just about all the aerospace grade metal we could get our hands on.” That activity is not expected to ease anytime soon. Aboulafia forecasts a few more years of modest growth until the arrival of the next generation narrow body aircraft in 2016-17, at which time demand for metals is likely to accelerate. “There could be a little dip between 2015 and 2016 with airlines waiting for the new generation aircraft before they place new orders, but material suppliers won’t feel that dip in growth until 2014,” he says. Even then, the change will be slight. “Even with the dip, builds will be higher than the numbers we are seeing today,” Aboulafia predicts. Economic growth in India, China, elsewhere in Asia, the Middle East, South America and Africa has spawned increased flying by the public in the third world. Industry forecasts call for air traffic to increase globally at a compound annual rate of 4-5 percent through 2030. “There has been a lot of discussion of an aerospace super cycle driven by the growth of wealth in developing nations,” says Mark Kamon, senior vice president commercial for the specialty alloy operations of Carpenter Technology Corp., Wyomissing, Pa. Carriers in the developed world, many of which are flying an older, less fuel efficient fleet, also have been buying more aircraft, partly because of the rising cost of jet fuel. “No one is forecasting oil prices to go much lower than $100 per barrel in the near future,” notes Harvey. Aboulafia says there has been a “run out” of certain “offending aircraft” such as the MD-800 and the DC-9, with their older, fuel-guzzling engines. Newer generation aircraft, with the latest jet engine technology, tend to be more efficient, greener and quieter. Lloyd O’Carroll, senior vice president for research at Davenport & Co., Richmond, Va., writes in the latest Davenport Quarterly Aluminum Outlook report that he expects global deliveries of aircraft to rise 12.5 percent to 1,310 planes this year and another 9.5 percent to 1,435 planes in 2013. Pointing to a trend that favors metal suppliers, he expects wide body aircraft orders to grow faster than narrow bodies, with twin-aisle planes likely to grow about 20 percent per year from 2011 to 2016, compared to only 6 percent for single-aisle planes. Aluminum shipments to the aerospace market will increase 16 percent this year, to 660 million pounds, and another 9 percent next year, to 719 million pounds, O’Carroll predicts. Shipments of other aerospace metals, including titanium, nickel-based alloys and high-performance stainless steels are also on the rise. Boeing has stated its intention to work down its titanium inventories, which got out of line with the three-year delay of its 787 Dreamliner—an aircraft seen critical to titanium demand given its high composite content. “Their burn rate has been going at a faster pace and should get into balance by the end of the year,” says Bill Sales, senior vice president of nonferrous operations for Reliance Steel & Aluminum Co., Los Angeles. Global titanium mill product shipments into the commercial aerospace market are expected to grow at a compound annual rate of 8.4 percent from 2011-2016, including a projected 16.0 percent increase this year and 12.8 percent in 2013, says Richard Leone, a spokesman for RTI International Metals Inc., Niles, Ohio. Weight savings is a big factor, he says, adding that the combination of titanium and composites is a good solution. “Titanium demand tends to grow along with the use of composites because they expand and contract at the same rate, and because they don’t corrode or erode each other [like aluminum].” To what degree aircraft designers will substitute composite materials for metals remains up in the air, Sales says. “Using composites has been more challenging than was originally thought. Also, aluminum mills have been working to reclaim the share they lost by developing new alloys, including aluminum lithium.” Alcoa, for one, recently announced the successful commercialization of a suite of third-generation aluminum lithium alloys, and its R&D continues. “We view composites as the great motivator,” says Alcoa spokesman Kevin Lowery. “The competition helped us to step up the game and to show that we [aluminum] can lower the weight, save fuel and keep costs level. We have seen that as a great opportunity.” Christophe Villemin, president of global aerospace for Paris-based Constellium, says his company also continues to refine its AIRWARE portfolio of aluminum lithium products, including three new ones: AIRWARE I-GAUGE (a thick, low-density alloy plate), AIRWARE I-FORM (a highly formable sheet product) and AIRWARE I-CORE (a high-strength extruded product) introduced at the Farnborough International Airshow in July. Demand for nickel-based alloys and superalloys for jet engines also has been solid, say the experts. “With jet engines becoming more fuel efficient and having more complex, hot-running designs, the need for nickel-based superalloys, which are used because of their strength and heat-resistance properties, have been growing,” notes Carpenter’s Kamon. High-end stainless steels also have found increased application in landing gear and high-temperature uses, replacing parts with cadmium-based coatings. Due to the strength and fatigue resistance of high-end stainless steels, OEMs can use less metal in smaller diameters and lighter gauges for the same mission, Kamon notes. But Callan at Castle Metals does not expect any significant change in the aerospace materials mix, at least in the near term, given the long development time, including testing and approval, required by the aerospace industry. One key risk of moves by the airframe builders to accelerate delivery schedules, such as Boeing’s so-called surge line for 787 production in Everett, Wash., is the ability of the supply chain to ramp up to necessary levels, O’Carroll says. “Lead times—from demand forecasts submitted to aluminum suppliers to the final assembly lines at OEMs—can take up to 2.5 years,” Villemin notes. Both Boeing and Airbus have been focusing on the rate readiness of their suppliers, Harvey says. This includes making sure they have the proper logistics in place and the capacity to deliver products on a timely basis. Among its investments, Kaiser expects to complete a Phase 4 plate expansion at its Trentwood, Wash., rolling mill by year end. Alcoa has increased its capacity in key areas, including aluminum lithium production at its Kitts Green, UK, facility, and at its Upper Burrell, Pa., technology center. It also has broken ground on a greenfield aluminum lithium facility adjacent to its Lafayette, Ind., plant, which will be capable of casting round and rectangular ingot for rolled, extruded and forged applications. The new plant is due to come online by the end of 2014. Constellium has invested in a cast house dedicated to mass production of AIRWARE, as well as a pound stretcher at its Ravenswood, W.Va., facility. It also is in the process of obtaining aerospace qualification for its Sierre, Switzerland, plant and is reworking its manufacturing system to optimize its supply chain, Villemin says. Carpenter is building a new premium alloy facility in Limestone County, Ala., which will include remelting, forging and associated finishing and testing capabilities for the kind of alloys used in aerospace applications, Kamon says. Other producers also have upgraded their aerospace metals capacities and capabilities. “It’s an exciting time to be involved with the aerospace industry,” Callan says. “Even with the slowing of growth in the economy, the backlogs of commercial airliners will allow the aerospace industry to grow—and its metals suppliers to grow with it.” Wed, 07 Nov 2012 20:52:00 GMT f1397696-738c-4295-afcd-943feb885714:8605