Titanium Demand in the Jet Engine Market

Titanium Demand in the Jet Engine Market

Titanium Demand in the
Jet Engine Market
Tom Williams
President ATI Allvac
President,
October 8, 2007
2020 Ashcraft Avenue • PO Box 5030 • Monroe, NC 28111-5030 • (704)-289-4511 • Fax (704) 289-4018 • www.Allvac.com
© Copyright, Allvac 2007
October 8, 2007
This presentation contains forward-looking statements.
Actual results may differ materially from results
anticipated in the forward
forward-looking
looking statements.
statements These and
additional risk factors are described from time to time in
the Company’s filings with the Securities and Exchange
Commission including its Report on Form 10-K for the
Commission,
year ended December 31, 2006.
2
October 8, 2007
Commercial Aerospace
Trends and Market Drivers
5,000
Commercial Aerospace Key Drivers
• Traffic (RPMs)
250
History
4,500
Forecast
200
4,000
3,500
Passenger Miles
3,000
Freight Miles
150
2,500
100
2,000
1 500
1,500
1,000
50
500
0
0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Freigh
ht Ton-Miles (Billions)
Revenue P
Passenger Miles (Billions)
Commercial Aerospace
Forecast
• Airline profitability
• Capacity
C
it (ASM
(ASMs))
• Fuel costs
• International carriers
• Growth of low-cost carriers
• Fleet size and make-up
Commercial CAGR 5 %
Source: International Civil Aviation Organization (ICAO)
Return to Historical Growth Rate
3
October 8, 2007
Airline Industry Drivers
T ffi and
dP
Profits
fit
Revenue Passenger Miles Traffic
60
2003
2007
Yields recovering.
Retesting recent highs
13.5
55
13
50
12 5
12.5
¢/RPM
Rev
venue Passenger Miles (Billions)
2001
2005
Airlines Passenger Yield
14
45
40
12
11.5
ICAO
11
35
Traffic
ff is
strong
30
10.5
10
25
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
Load Factor
85%
Planes
are full
Quarterly Profits of U.S. Carriers
2003
2007
2 000
2,000
Dollars (Millions)
2001
2005
Load
d Factor
75%
65%
1,000
0
(1 000)
(1,000)
(2,000)
(3,000)
Source: U.S. Bureau of Transportation Statistics.
Covers 90 U.S. airlines. Domestic flights only
Yield data is a 6 carrier samlpe from ATA
U.S. Carriers Profitable
2Q07
1Q07
4Q06
3Q06
2Q06
1Q06
4Q05
3Q05
2Q05
1Q05
4Q04
3Q04
2Q04
1Q04
Dec
4Q03
Nov
3Q03
Oct
2Q03
Sept
1Q03
Aug
4Q02
July
3Q02
June
2Q02
May
1Q02
Apr
4Q01
Mar
3Q01
Feb
2Q01
Jan
1Q01
(4 000)
(4,000)
55%
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October 8, 2007
Defense
Trends and Market Drivers
DoD Procurement Forecast
New Weapon Systems
Defense Market Key Drivers
• Defense budget
160
140
• Air supremacy; aging fighter fleet
$ Billions
120
• Demand for transports
100
80
• War on terrorism
60
• Spares demand; missiles
40
20
• Nuclear threat – N. Korea, Iran
FY04
FY05
FY06
FY07
FY08
FY09
FY10
12% CAGR
Source: Bank of America Research – Defense Budget FY06-FY13,
Core + Supplemental. 6/7/2007
Near--term Growth
Near
5
October 8, 2007
Jet Engines & Aero-derivative Gas Turbines
Trends and Market Drivers
Aero & Aero-derivative Engine Forecast
4,000
3,500
Aero-derivative Engines Deliveries
Military Jet Engines Deliveries
Commercial Jet Engines Deliveries
History
Forecast
• Improving commercial engine builds
• 2007 forecast + 8%
3,000
Engines
Jet Engine Key Drivers
• 787 starts in 2008, A350 XWB in 2013
2,500
• GEnx, Trent 1000, Trent XWB
2,000
• A380 deliveries begin in Oct 2007
1,500
• GP7200,
GP7200 T
Trentt 900
1,000
• Larger, high efficiency engines
500
• F35 JSF beginning
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Airline Monitor, Forecast International
SPARES NOT INCLUDED
Increasing Build Rates
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October 8, 2007
Titanium Consumption in Jet Engines
Titanium Consumption in Jet Engines
3.0
M etal Demand Index
History Forecast
2.5
2.0
Applications
1.5
Fan & compressor cases, disks,
blisks, impellers, blades, vanes,
and fasteners
1.0
0.5
0.0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Sources: Airline Monitor,, Forecast International,, Allvac database
SPARES NOT INCLUDED
Case
Impeller
Blades
Compressor rotor
Reaching New Highs
Fan disc & blades
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October 8, 2007
Summary - Titanium in Jet Engines
Demand remains strong
– High
g build rates
– Larger engines
– Spares - commercial and military
Consumption growing because of:
Titanium’s unique benefits
Strong Growth in Titanium Consumption
8
ATI Strategic Investments… So Far
In Support of Market Demand
October 8, 2007
$925 million of strategic capital projects
Forging Capacity
Albany, OR
8 million lbs capacity
Ti sponge
Rowley, UT
24 million lbs capacity Ti
sponge start up 2008
Press forge
Albany, OR
Albany, OR
8 million lbs capacity
Ti sponge
4 million lbs capacity
Ti sponge
Nickel-based Alloy
Plate finishing
expansion
PAM III
VAR/ESR
2006
Rotary forge
Specialty Plate
20% melt capacity
expansion
2007
PAM IV
2008
2009
Pl
Planned
d completion
l i year
Investing for the Future
9