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Mixed Emotions About Defense Market Growth

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No matter who wins the presidential election in November, government military spending will almost surely increase, say the experts. It’s a sad commentary on the state of global affairs, but a positive for suppliers of metal products to the defense industries.

Heightened political tensions in Asia and the Middle East, and atrocities by radical terrorists around the globe, have brought a new sense of urgency to government spending on security. Countries large and small are poised to increase their defense budgets, including the United States, which already accounts for about 39 percent of all military spending worldwide.

After declining from 2008 through 2015, the total U.S. Department of Defense budget was increased by about $13 billion in fiscal year 2016, according to Deloitte’s Global Aerospace and Defense Sector Outlook. The analysts at Deloitte believe U.S. defense spending is now entering a long-term, albeit slow paced, growth cycle. By some estimates, spending on U.S. military programs will increase by 2-3 percent annually for the foreseeable future. Demand for metals used by military contractors will only intensify as threats to the U.S. seem more imminent.

Much of the spending on the latest innovations will involve high-tech electronics or alternative materials such as those used in fighter jets and drones, not necessarily steel and aluminum for new ships, planes and tanks. On the other hand, some of the spending by foreign nations will be used to acquire materials and technologies from American companies.

What’s the biggest market for brass today? Bullets. And not just for the military. Violence in the headlines, from street gangs to terrorist bombers, has prompted millions of private citizens to arm themselves for their personal protection.

Defense spending is not just about security, it’s also about politics, of course, especially in an election year. The aerospace and defense industries account for 10 percent of all U.S. manufacturing output and 1.8 percent of total GDP. They support 1.7 million good jobs. Both candidates are working hard to convince voters they will put more Americans to work and will keep all Americans secure.

Fair or not, the next president’s legacy will be determined by his or her ability to make the nation safer. “Both parties recognize the value of strengthening our nation’s defense, realizing that our biggest enemy is the one we don’t see,” says Jerry Bashir of Falcon Aerospace. “Not by choice but by circumstances, either candidate will likely spend more on defense than the current administration.”

See the full story on the market for defense metals in the October issue of Metal Center News.