Aerospace Supply Chain & Raw Material Outlook

Transcription

1 Aerospace Supply Chain & Raw Material Outlook Presented by: Dr. Kevin Michaels Global Managing Director Aviation Consulting & Services ICF SH&E SpeedNews 4 th Aerospace Raw Materials & Manufacturers Supply Chain Conference March 3, 2014 Beverly Hills, California 1

2 Agenda Aerospace Demand Outlook Aerospace Supply Chain Trends 2

3 AEROSPACE DEMAND OUTLOOK Total aircraft production in 2013 is 4,731 units; air transport aircraft account for 60% of value Military Rotary Wing 16% Military Fixed Wing 10% By Units 4, Aircraft Production by Market Air Transport 32% B&GA 13% Military Rotary Wing 11% Civil Rotary Wing 3% By Value $162B B&GA 21% Military Fixed Wing 13% Air Transport 60% Civil Rotary Wing 21% Source: ICF SH&E analysis 3

4 AEROSPACE DEMAND OUTLOOK There are several key changes to ICF s production forecast for important platforms Platform Year Over Year Changes In ICF Forecast Notable Aircraft Unit Production Total Production Difference Comments B A EMB-170/ A C Near-term production rates raised; reduced dip with new model Near-term production rates raised; reduced dip with neo introduction Mid-decade production rates raised due to recent sales (and PIP) Increased production rates; orders strong in light of 787 competition Delays to program & reduced program outlook ARJ Delays in flight test and certifictation MRJ -73 Further delays to program Source: ICF 4

5 AEROSPACE DEMAND OUTLOOK Annual production value is expected to reach $200B, with unit production approaching 6,000 aircraft by 2023 Aircraft Production By Market Segment # Aircraft 7,000 6,000 5,000 4,000 Type, CAGR Military Fixed Wing, (0.5%) Military Rotary Wing, 0.5% BGA, 6.1% $B USD* $250 $200 $150 Type, CAGR Civil Rotary Wing, 0.5% Military Rotary Wing, 0.9% BGA, 5.7% 3,000 2,000 1, Civil Rotary Wing, 0.2% Air Transport, 2.2% Total CAGR = 2.3% $100 $50 $ Military Fixed Wing, 0.1% Air Transport, 2.2% Total CAGR = 2.3% Source: ICF SH&E analysis * Constant 2013 US$ 5

6 AEROSPACE DEMAND OUTLOOK Aggregate aerospace raw material demand is 1.44B pounds Titanium Alloys 11% Steel Alloys 22% 2013 Aircraft Raw Material Demand By Material Type (buy weight) Super Alloys 9% Other 6% Total 1.44 B lbs Composites 4% Aluminum Alloys 48% Aluminum alloys are nearly half of all total demand Steel alloys & titanium also are large driver of demand due to their high buy to fly ratios Composites are relatively small part of total demand at just 4% due to their lightness of weight and their relatively low buy to fly ratio Source: ICF SH&E 6

7 AEROSPACE DEMAND OUTLOOK Boeing and Airbus aircraft account for nearly 70% of raw material demand 2013 Aircraft Raw Material Demand By OEM (buy weight) Rolls-Royce 3% Bombardier 3% CFM Intl 4% General Electric 5% Embraer 2% Lockheed 2% PRATT & WHITNEY 2% Other 12% Total 1.44 B lbs Boeing 37% Boeing and Airbus aircraft models comprise 67% of demand GE is the next largest consumer 7% when including its share of CFM Airbus 30% Source: ICF SH&E Analysis 7

8 AEROSPACE DEMAND OUTLOOK The total aerospace raw material market is worth about $11 billion Super Alloys 15% Composites 19% 2013 Aircraft Raw Material Value By Material Type Steel Alloys 10% Total $10.9B Other 3% Aluminum Alloys 27% Titanium Alloys 26% Aluminum and titanium are the largest material markets by value both are worth ~$2.9B With 787 production ramping up, and A350 long-lead items under production, composites are the third largest category at $2.0B The value of superalloys is $1.7B, driven by aeroengine production Source: ICF SH&E 8

9 AEROSPACE DEMAND OUTLOOK Over the next decade aluminum demand will remain solid while composites & titanium will grow significantly Million lbs 1, Aerospace Raw Material Demand By Material (buy weight) 1,600 1,400 1,200 1, CAGR Composites; 5.9% Other; 1.2% Titanium Alloys; 4.4% Super Alloys; 1.9% Steel Alloys; 0.3% Aluminum Alloys; - 0.2% Total CAGR 1.1% Source: ICF SH&E 9

10 Agenda Aerospace Demand Outlook Aerospace Supply Chain Trends 10

11 SUPPLY CHAIN TRENDS There are several important aerospace trends that are shaping aerospace supply chains Additive Manufacturing Right Shoring Growing capital market interest OEM Vertical Integration Key Aerospace Supply Chain Trends OEMs Push For Cost Reduction Supply Chain Transparency & Control Advanced Aeroengines Source: ICF SH&E 11

12 SUPPLY CHAIN TRENDS RIGHTSHORING Shifting manufacturing economics underpin increased interest in manufacturing onshoring Manufacturing Outsourcing Cost Index % of US Cost Companies Intentions To Change Manufacturing Source Worldwide, % of Capacity 80% 70% Move Between High Cost Countries Reshore Move Between Low Cost Countries Offshore Source: The Economist January Note: data is for general manufacturing and is not aerospace-specific 60% 50% 40% 30% 20% 10% 0%

13 SUPPLY CHAIN TRENDS RIGHTSHORING The southeast U.S. and Singapore are now two popular locations for aerospace manufacturing investments Southeast U.S. Singapore The southeast U.S. is benefitting from a wide variety of investments Manufacturing & some engineering investments from airframe & engine OEMs, as well as airframe suppliers Singapore is becoming a new manufacturing hub in Southeast Asia Investments include range of high-tech manufacturing, MRO, and engineering Source: ICF SH&E 13

14 SUPPLY CHAIN TRENDS RIGHTSHORING Rightshoring is the new aerospace investment mantra Global Aerospace Manufacturing Clusters Established Clusters Emerging Clusters Source: ICF SH&E * Note Russia is emerging for Western certificated equipment 14

15 SUPPLY CHAIN TRENDS COST REDUCTION OEMs are utilizing a variety of cost reduction initiatives New commercial terms Initiative Activity Unilateral price reductions and revised terms No fly lists for suppliers that don t participate Part redesigns Value engineering Material substitution New processes Shift to lower cost process Leverage new processes Capture revert Where possible, capture revert from suppliers Work with supply chain integrators to close loop on material Source: ICF SH&E 15

16 SUPPLY CHAIN TRENDS COST REDUCTION and cost reduction will be important as aircraft OEMs target double-digit profitability Major aircraft OEMs are driving for double-digit profitability One initiative is to secure concessions from suppliers to ensure access to future programs OEMs are also expanding their influence and role in the aftermarket The implication is downward margin pressure on suppliers 16

17 SUPPLY CHAIN TRENDS ADVANCED AEROENGINES The push to deploy advanced technology underpins recent re-engining decisions more are likely G2 E-jet 777-X A330 neo? In January 2013 Embraer selected Pratt s GTF for is G2 E-Jets Boeing announced the B777-X with GE9X aeroengines in November 2013; the fourth re-engine program in the last three years Future re-engining possibilities include the A330 and A380 Our enabling technology is now three times more valuable than it was a decade ago. Engine OEM Executive Photo credits: Embraer, Boeing, Airbus 17

18 SUPPLY CHAIN TRENDS - ADVANCED AEROENGINES however aeroengine material trends are encroaching on titanium s sweet spot in aeroengines CFM LEAP-X Winning Materials Composites Powder Metals Advanced super alloys Titanium Aluminide Composite fan and fan cases increasingly popular Titanium s sweet spot in aeroengines Nickel alloy moving forward in the High Pressure Compressor module Source: CFM 18

19 SUPPLY CHAIN TRENDS - ADVANCED AEROENGINES Supply chain transparency and control is growing in importance Customers (driven by OEMs) demanding increased visibility into supply chain This contributes to the use of latest technology (physical control centers and software) for 'early alerts' There is also growing use of data analytics Sub-tier suppliers are being asked to provide utilization and ramp-up plans 19

20 SUPPLY CHAIN TRENDS VERTICAL INTEGRATION Some OEMs are trending towards greater vertical integration; Boeing is a notable example Selected Examples of Boeing Vertical Integration 777X Wing Production Acquires Alenia s fuselage assembly facility Horizontal Stabilizer Nacelle design & production Source: ICF SH&E analysis 20

21 SUPPLY CHAIN TRENDS VERTICAL INTEGRATION GE is also vertically integrating for strategic technologies Selected Examples of Vertical Integration - GEnx Acquired Morris Technologies for additive manufacturing capability Acquired Avio LPTs Gearboxes Will make ceramic matrix composite blades, vanes, seals CFAN JV with SAFRAN makes composite fan blades Source: ICF SH&E analysis Established JV with Parker to make fuel nozzles via additive manufacturing 21

22 SUPPLY CHAIN TRENDS ADDITIVE MANUFACTURING Additive manufacturing represents a potential step-change in cost and part design capability Traditional Subtractive Manufacturing Additive Manufacturing Additive manufacturing (AM) builds up parts with material deposition, rather than removing material through machining There are many types of additive manufacturing processes and little industry standardization Sources: University of Exeter 22

23 SUPPLY CHAIN TRENDS ADDITIVE MANUFACTURING Several OEMs are trialing additive manufacturing on a range of production and aftermarket parts Examples of Additive Manufacturing Adoption GKN is using AM on aerostructures for Falcon 5X Driver is cost reduction Boeing is currently using AM for polymer ducting on F-18 & 787 Part consolidation & cost driver GE using AM for Leap-X fuel nozzles (and other potential applications) Performance is main driver of adoption Source: ICF SH&E analysis, GKN, GE Aviation, Airbus, Boeing 23

24 SUPPLY CHAIN TRENDS - ADDITIVE MANUFACTURING A long term trend to watch is the penetration of additive manufacturing and its impact on buy-to-fly ratios Ti Wing Beam Concept (China Northwest Polytechnical Univ. The industry aggregate buy-to-fly ratio based on subtractive manufacturing is ~6:1; for some parts it is >15:1 In contrast, the buy to fly ratio for additive manufacturing is very low Early application of AM will be in unmanned systems, experimental aircraft, space, and military sustainment In the long term, AM will impact mainstream aerospace production and raw material demand Sources: RapidReady, China Northwest Polytechnical University 24

25 Thanks and Questions Kevin Michaels Vice President Global Managing Director Aviation Consulting & Services

26 ICF SH&E Is One Of The World s Largest And Most Experienced Aviation And Aerospace Consultancies Airports Airlines Aerospace & MRO Asset Advisory Safety & Security 50 years in business (founded 1963) 85 professional staff Dedicated exclusively to aerospace and aviation Recruited from the industry Specialized, focused expertise and proprietary knowledge Broad functional capabilities More than 6,000 private sector and public sector assignments Backed by parent company ICF International ($841M revenue) Global presence six major offices Ann Arbor Boston New York London Singapore Beijing 26

27 ICF international is a leading global consulting firm serving government and commercial clients Energy, Environment, and Infrastructure Health, Social Programs, and Consumer/Financial Public Safety and Defense $937M Revenues 4,500 Employees ICFI NASDAQ One of ICF's founders and its first president was a Tuskegee Airman. C.D. "Lucky" Lester flew more than 90 missions and earned the Distinguished Flying Cross. In 1969, "Lucky" and three DoD analysts founded the organization that is now ICF International. ICF International icfi.com 27