Aerospace malaise travels up the supply chain

Suppliers of ferro-titanium are being forced to delay or cancel deliveries to airline-parts manufacturers as falling demand for aircraft carriers travels up the supply chain.

A number of producers and traders in Europe have received requests for cancellations or delays to aerospace metals such as chromium, molybdenum ingot, titanium of varying grades, hafnium and rhenium that were due to be delivered on long-term contracts in the past two weeks. One ferro-titanium producer in the UK said it had been forced to delay some deliveries until at least the third quarter, with some delayed until October.

New spot enquiries for most aerospace related metals have collapsed in recent weeks.

The demand shock in the aerospace industry because of the Covid-19 pandemic has hit most aerospace metals. Imports of cobalt into the EU fell to 332t in March, down from 556t in March 2019 and 623t in February this year.

Downstream manufacturers have started to put pressure on their suppliers. This week, Rolls Royce, which makes aircraft engines, sent a letter to suppliers requesting a 5-15pc price reduction after revealing a week earlier that it would potentially cut 9,000 jobs worldwide.

Further upstream, Timet, a UK titanium goods producer said it may cut more than 200 jobs in Swansea and Birmingham last week. Other ferro-titanium producers in the UK, including Westbrook Resources and FE Mottram, have already cut production, which has kept prices in balance.

Argus assessed western grade ferro-titanium at $4.10-4.30/kg and Russian grade material at $3.90-4.10/kg, stable since 16 April.

A full aerospace sector recovery looks unlikely this year. In the UK, aerospace production output was 2.3pc lower in the first quarter of 2020 compared with January-March 2019, and the service and repair sector was 7.2pc smaller in the first quarter 2020 than in 2019. Overall production for the combined sector shrank by 4.8pc UK aerospace trade body ADS group estimates. It also estimates that there have been more than 370 aircraft order cancellations globally in the first four months of 2020.

Some countries are starting to open their borders for the revival of the domestic tourism industry, which is good news for aerospace suppliers, but there are varying levels of restrictions across the world.

Spain will allow tourists from 1 July. Ryanair, one of Europe's largest budget carriers, will start to operate 40pc of its regular schedule from July onwards. But as Europe and Asia emerge from lockdowns, other regions are still struggling with coronavirus. While regional recoveries may lead to a rebound in demand for parts and repairs for existing aircraft, the demand for metals from new aircraft will take much longer to recover.

By Thomas Kavanagh