Operational Impacts & Raw Material Supplies

While the availability of raw materials can impact all of us on an everyday basis, what kind of larger, industry-wide impacts can tight supplies have?

In the case of the aerospace industry, the shortage of certain materials can be significantly influenced not only by new product lines from private industry like Boeing and Airbus, but also by government and military projects.

It may take years for the aluminum market to respond to some of the factors that have created shortages of 7075. 17-4 stainless steel is in similar short supply. Those factors include current contracts Boeing and Airbus have in place to support the development of new domestic passenger jetliners, increased demand from China, India and other developing countries, and industry issues, including the shutdown of smelters and high energy prices.

Add to these factors the production of the U.S. military Joint Strike Fighter (JSF), the next-generation fighter aircraft scheduled to begin replacing existing planes, including the Air Force F-16, the Navy F/A-18 and the Marine Harrier in 2008. The JSF program is valued at $200 billion, and will be the largest Department of Defense procurement program in history.

If there is good news given current and upcoming market pressures, it is that the JSF, along with the newest airliners from Boeing and Airbus, use more composites than ever, and less aluminum. However, once Lockheed Martin and other vendors, including Northrop Grumman, BAE, Pratt & Whitney General Electric, involved with the JSF contract begin seeking 7075 for their projects, that defense usage will take priority over all other uses.

There are those who are surprised that the U.S. government has not already stepped in to take action in an attempt to remedy the current aluminum supply shortage. That may yet happen but the biggest variable will be whether defense projects are held up due to lack of 7075. Whether the government gets involved, or how soon, is largely dependent on how the market responds to current and future demand for aluminum and other materials.

Necessity being the mother of invention, it's likely that new material will become available, and mills will find a way to step up their output to meet the demand of the defense industry, as well as the aerospace industry and other domestic users. It will take time, and there will certainly be price impacts, which will be impacted by energy markets, which have previously been the key to plant shutdowns in the Pacific northwest.

The thought of demand for energy and aluminum being so intertwined, and subsequently driving each of these commodities into upward-spiraling price increases, is not pleasant. However, it is something that the aluminum industry, the aerospace industry, and other aluminum users, need to make contingency plans for.

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