From sanctions to tariffs, aerospace manufacturers are "flying blind" when it comes to understanding the risks of the raw material supply chain. With the global aerospace industry consuming 1.7 billion pounds of raw materials across all levels of the supply chain, aerospace analyst and regular Aviation Week columnist Kevin Michaels discusses this all-encompassing issue with Supply Dynamics' CEO, Trevor Stansbury in the Aviation Week editorial "Threats Loom For Aerospace Raw Material Supplies."
CLICK TO READ THE FULL ARTICLE [pdf]
Booming Demand, Tariffs, Geopolitics & Raw Material Supply
Michaels observes that "there are many worries as the commercial aerospace supply chain ramps up to unprecedented production rates. Can aeroengine OEMs fix their new-engine teething problems? Can interior suppliers step up? Is there enough forging and casting capacity? Yet uncertainty of raw material supply could be the largest threat of all due to booming demand, tariffs, and geopolitics."
With the Trump administration tariff on steel and aluminum serving as the catalyst, raw material supply uncertainty emerged in March of this year followed quickly by April sanctions against Oleg Deripaska, aluminum producer Rusal's largest shareholder. With increased aerospace production and defense spending leading to increased steel and aluminum demand, OEMs and subtier suppliers down the supply chain feel the strain on raw material prices. Potential threats include:
- A major mill is no longer taking orders for 2018 while others are utilizing "price in effect" meaning the price of aluminum is variable on an order.
- Aluminum mills considering the option to cap the volume it will sell to a customer - this hasn't happened since the mid-2000s
- Russia has indicated it may cut off supply of titanium of which Boeing depends on for 35% of its titanium supply
Published on
May 31, 2018