Superalloys entered the metals lexicon shortly after World War II. The largest class of superalloys is the nickel-based group, although aerospace metals now also describes iron-based, cobalt-based, titanium-based and aluminum-based alloys. After a cyclical slippage in buying late last decade, purchasing of these alloys perked up in 2000 and 2001; in fact, it was stronger than expected last year, rising 21% to 148 million lb. However, a buying slump this year is expected to be steep—and back to the same 106 million lb as 1999—because commercial jetliner production is contracting sharply.

Plenty of material available

There also is a small yet active group of processing distributors who provide spot buyers and some contract buyers with superalloys. Most of the manufacturers sell under long-term contracts to end-market users, a supply relationship that is significant because new superalloys often are developed in close collaboration between the manufacturer and the end-customer. In the past, favorable long-term market forecasts for aircraft purchases and estimates of strong demand growth for superalloys in aircraft engines led to major investments in production facilities in the U.S. and Europe. However, some of the long-term investment projects have been deferred in a response to the terrorism crisis, but a substantial number already have been completed.

Since high-performance nickel-based superalloy production uses many of the same processes as stainless steel manufacturing, several large industry participants are diversified stainless steel enterprises. The balance of the industry is comprised of a number of smaller manufacturers that specialize in specific alloy types and/or product forms.

The high-performance superalloy industry is characterized by high capital investment and high fixed costs. So, since profitability is significantly affected by changes in production volume, mills try to maintain output at high levels even when demand slips. In effect, this is contributed to the recent bankruptcy reorganization of Special Metals in New Hartford, N.Y., which is the only company that specializes in both the production of high-performance superalloys and downstream value-added mill products.

Purchasing slows drastically

There is a diverse group of worldwide end-user markets for the superalloys, including aerospace, land-based gas turbine power generation, environmental control, marine engineering, fossil-fuel power generation, thermal processing, electronics, chemical and petrochemical processing, petroleum refining and exploration, automotive and consumer products.

The largest end-market clearly is aviation/aerospace where the metals are used to make turbine disks, casings, blades and vanes, ring components, ducting, thermal protection and fasteners. However, there has been a steady decrease in sales to the commercial aviation market since the airliner terrorist attacks of last Sept. 11. The aerospace industry's own gloomy forecast explains why superalloys demand is headed down 27% this year. David H. Napier, director of the Aerospace Research Center in Washington, says that aviation sales to nongovernment customers will drop 16% this year while sales to nondefense federal agencies will decline 7% and military aircraft sales will rise just 9.5%. Napier says that shipments of completed civil aircraft in 2002 will fall 22%, and estimates only 375 jetliners will be shipped. Shipments of civil helicopters also are projected to also decline a sharp 20%.

The economic slowdown has been most evident in the slack demand from most of the other markets—especially from makers of land-based gas turbine cogeneration facilities, transfer piping and process furnaces used in hydrocarbon cracking and industrial processing furnaces. Also, the automotive industry has backed off plans to boost use 6%/year through 2010 to make turbochargers for diesel engines to improve overall efficiency.

It's a buyers market, for now

Superalloys are expensive and pricing can be volatile and influenced by the cost of key raw materials or market supply and demand conditions. Most sales are through conventional purchase orders or one-year supply contracts. However, the mills believe long-term firm price or indexed price contracts will continue to be a significant part of the superalloy industry because the end-users of some key products, primarily jet engine manufacturers, require the ability to quote firm prices on products deliverable in the future. Spot prices continue to weaken, though, "because aero demand is dead and there is no forecast for improvement in nonaero markets," according to the materials manger of a major fabricator in New Jersey.