Aluminum facing global competitive issues

By Staff -- Purchasing, 12/8/2000

World primary aluminum consumption will grow at a 3.8% compound average rate to 29.5 million tons in 2005 from 23.5 million metric tons in 1999, forecasts AME Mineral Economics, reflecting expanded demand from aerospace in North America and Europe and housing construction in Asia. Aluminum demand from the aircraft industry, especially, "will again soar after half a decade of bumping along the bottom,"

However, the Sydney, Australia, research house believes a lack of sufficient capacity and volatility in pricing will keep aluminum at a disadvantage in the continuing scramble for market share against steel and plastics:

"Competition between materials is intensifying and aluminum faces a growing threat of substitution from steel and plastic in motor-vehicle transportation and packaging applications."

The AME study adds that "aluminum will not lose share in its existing transportation applications, neither will it experience the heady growth rates from further penetration in the sector it enjoyed in the past."

AME researchers are bullish on the long-term pricing outlook, forecasting that primary aluminum metal prices will increase from 71¢/lb in 2000 to 95¢, adding that "prices will continue to be volatile, which is a disadvantage for primary aluminum in a commercial environment of intense substitute competition."

The pricing warning comes from a belief that the world may be short of necessary capacity by 2005. The AME forecasters expect smelter production from known capacity additions to rise 4 million metric tons (16%) to 28.5 million metric tons of total production annually by 2005. However, the study says that will leave the global marketplace a million metric tons of capacity below the projected demand level.

The study adds it doesn't look as if there will be enough secondary aluminum capacity to offset the shortfall. Annual growth of secondary aluminum production averaged 4.7% over most of the 1990s, but "over the past two years, growth in the secondary sector has slowed almost to zero," the AME report says.

Aviation to boost long-term titanium demand

The next generation of big commercial aircraft to be built by Boeing and Airbus Industrie is likely to need huge amounts of titanium because the aircrafts under development are huge. The planned 747XX and A3XX mega-airliners being planned will use more titanium than the Boeing 777, currently the airline industry's single biggest consumer of the metal, says Jonathan M. Schofield, chairman of the U.S. arm of Airbus.

In a speech at the International Titanium Association's recent annual conference in New Orleans, he suggests that the number of commercial aircraft in operation will grow by 9,000 by 2019 from 10,000 planes today. With airline travel expected to grow at an average annual rate of 5% over the next two decades, Schofield is convinced "the airlines will have to have a new generation of aircraft larger and more economic than anything flying today."

So, Schofield projects that 1,245 of the "very large aircraft"-planes with more than 500 seats-will be in operation by 2019. "That's going to require a lot of titanium," he says, because the larger the aircraft, the greater the requirement for weight savings in certain applications which will boost the chances of titanium replacing aluminum and superalloys.