Recent Posts

Specialty Materials: The PCC-SPMC Restructuring Effort Is Creating Quite A Nickel-Alloy Mess

We are hearing a lot of noise in the nickel-based alloys channel. Over the past few weeks, industry contacts: expressed new concerns about premium alloy supply shortages; have become even more frustrated with the domestic suppliers, notably PCP; and told us to brace for a crazy period of industry headlines and M&A. Our focus shifted to new PCP insights and confirmation of internal restructuring efforts. Continue reading

Read More »
9:08 PM

Specialty Materials: Filling In The Research Holes; Channel Focus On Titanium Supply Holes

You bet your afterburners the Tier4 Research team skipped a week of vacation for more time to explore the specialty materials channel and analyze unexpected data points. Our objective was filling holes left from last week, confirming contact expectations, and achieving a better understanding of possible supply scenarios or reason(s) behind a possible merger. We came away from a several contact discussions more convinced that changes are imminent within the titanium industry that should lead to a restart of idled upstream capacity located in the US. Now, we wait for the release of potential headlines (or game changing events)… Continue reading

Read More »
7:46 AM

Aerospace: Airbus Provides New Production Schedule To Major Suppliers

We expect minimal supply chain fallout following the production audible called by Airbus last week. Adjustments to the master schedule appear to be fairly modest, while more importantly, the management team is holding to its aggressive long-term single-aisle aircraft production strategy. We also believe lost A320 volume could be partially offset by upward movement in wide-body build rates given recently collected channel intel. Bottomline, the updated Airbus production forecasts account for: the conservative corporate guidance; details included in the aircraft program update; and other updates/commentary offered by aerospace industry bellwethers. Continue reading

Read More »
2:34 AM

Specialty Materials: Titanium Prices Moving Higher But Rising Input Costs Could Limit Margin Opportunity

We are focused on the visible titanium channel strength and recent surge in spot prices for all semi-finished and finished mill product groups. The combination of volume strength, higher price points and favorable contract resets should facilitate solid top-line growth for this business and the premium alloys group. That said, we see incremental margin risk associated with upward titanium scrap price movement and preliminary outlook for CY23 sponge contracts. Our analysis of the titanium market data suggests ATI Incorporated (ATI) may need to reconsider restarting one of the idled sponge-making facilities. Continue reading

Read More »
5:32 AM

Aerospace: Airbus Is Sticking With Its Aggressive Aircraft Production Strategy

Airbus recently sent updated commercial aircraft product schedules to all major suppliers that may contain information likely to become a much-needed catalyst for the aerospace peer group. Contrary to the negative quarterly updates issued by companies levered to aerospace or other industries, the Airbus outlook appears to be holding (for the year and beyond). Surprisingly, the management team refrained from lowering build rate targets to account for macro weakness or global supply chain bottlenecks Continue reading

Read More »
6:48 AM

Specialty Materials: Highlighting Unexpected Titanium Market Strength

We updated our titanium market forecasts to account for better-than-expected survey results and positive macro events. Changes to the model include: upward global demand growth revisions for CY22; increased spot market pricing assumptions; and expected market share gains for titanium suppliers based in North America. Bottom-line, titanium could become a bright spot for the highly-levered names ahead of expectations, potential driving accelerated top-line growth for peers like Allegheny Technologies (ATI) and Howmet Aerospace (HWM). Continue reading

Read More »
5:21 AM

Specialty Materials: The Premium Alloy Market Thrusters Kicked In…

Companies levered to premium alloy and specialty stainless production/fabrication look increasingly likely to meet/beat near-term expectations on top-line growth strength and margin expansion. This morning, we highlight the incremental channel strength evident for key product groups, like nickel-based alloys, which should drive results for the specialty materials peer group over the next few quarters, simultaneously setting up longer-term opportunities associated with contract renewals (at higher price levels). Continue reading

Read More »
4:38 AM

Specialty Materials: Boeing Moves Away From Russian-Based Titanium Supply

Recent channel intelligence involving a formal Boeing Company (BA) decision to sever ties with Russian titanium supplier, VSMPO-Avisma, should be considered a positive development for the specialty materials group. Presumably, all three domestic producers will eventually become beneficiaries of the redistribution of titanium mill supply contracts and associated forging services. Beyond the direct revenue benefit, the eventual confirmation of this unexpected industry event could also serve as the next major spot market catalyst. Continue reading

Read More »
11:56 PM

Specialty Materials: A Closer Look At Titanium Market Share – With Updated Analysis

Industry contacts confirm increased dialogue between mills/fabricators and major aerospace companies concerned about titanium supply. Responding to a worsening Ukrainian situation and limited Russian supply visibility, OEMs and jet engine manufacturers are actively exploring alternative supply options for future demand. Redistribution of aerospace market share and renewed focus on M&A could trigger renewed investor interest. Continue reading

Read More »
5:01 AM

AERO: Notes From The Airbus Conference Call

Airbus reported 611 total aircraft deliveries for CY21 (+45 jets versus prior year totals), which the surpassed the full-year outlook of 600 on single-aisle demand strength. The full-year breakdown delivery breakdown was: 50 A220s; 483 A320s; 55 A350s; 18 A330s; and 5 A380s. Despite the outperformance, management provided a slightly conservative delivery forecast on 720 jets for CY22 (+18% y/y), Continue reading

Read More »
9:45 AM

Aerospace: The Tailwind May Be Closer Than Expected; Updated Aircraft Production Forecasts

The upstream aerospace supply group appears to be entering an accelerated top-line growth environment primarily driven by single-aisle aircraft parts/materials demand strength. Based on the updated commercial aircraft production forecasts applied to the OEMs, combined with modest inventory overhang adjustment, we now project +19-20% baseline aerospace-related sales growth for the tier-4 global supply chain in CY22 and +15-16% growth in CY23. We expect the material providers and forgers within our coverage universe to realize the benefits of the market tailwinds by 2H22 (if not earlier). Continue reading

Read More »
4:43 PM

Specialty Materials: A Tale Of Two Alloys – A Review Of Quarterly Survey Results And Market Trends

We collected several data points throughout the specialty materials survey process but could not confidently identify a main theme for this update report. Channel crosscurrents, a less-aggressive aerospace outlook, and modest erosion in contact sentiment could be interpreted as mixed-to-negative indicators for the entire peer group heading into the 4Q earnings period. We are not expecting many companies within our coverage universe to meet/beat near-term expectations, but there are still a few names worth holding through any period of market turbulence, including the upstream alloy producers that appear to be positioned to take market share in CY22. Continue reading

Read More »
4:37 AM

Aero Suppliers: The Global Supply Chain Could Be Facing More Bad 787 News

Indications from our latest aerospace channel checks suggests additional downside risk for global suppliers levered to the B787 aircraft program. Industry contacts now report growing demand headwinds associated with extended Dreamliner assembly lines halts and have started to reset 1H22 top-line expectations due to a slower-than-expected production recovery. This morning, we lowered estimates for the main companies in our coverage group to align with more conservative B787 build rate assumptions for CY22.formal issuance of strong LEAP jet engine production guidance. Both items should be considered bullish data points for the specialty materials and upstream aero supply peer groups, and the main drivers behind accelerated top-line growth and strong earnings contribution over the next 2-3 years. Continue reading

Read More »
9:57 AM

Aero Suppliers: Investors Not Ready To LEAP To The MAX Following Release Of Positive Headlines?

We are surprised by the subdued response to the major aerospace industry headlines that were issued yesterday, including the long-awaited recertification of the 737 MAX for Chinese airspace and the formal issuance of strong LEAP jet engine production guidance. Both items should be considered bullish data points for the specialty materials and upstream aero supply peer groups, and the main drivers behind accelerated top-line growth and strong earnings contribution over the next 2-3 years. Continue reading

Read More »
11:17 AM

Aerospace: Updating Our Macro Assumptions Ahead Of New Industry Catalysts

After taking a closer look at aerospace market drivers, listening to the commentary provided by OEMs and Tier-1 suppliers, and collecting early market intel from proprietary survey-work, we remain comfortable with the bullish outlook applied the coverage group. We anticipate the realization of accelerated aero-related sales growth in CY22 for companies levered to aluminum, composite materials, specialty materials, and forging services driven by unit volume strength, better pricing/mix, and distribution channel refill. In today’ s market update, We lowered the CY22 earnings outlook for Hexcel (HXL) to account lost 787 revenues in 1H22. Continue reading

Read More »
5:39 AM

Specialty Materials: Highlights From Quarterly Channel Checks

Despite recent negative headlines regarding a disruption in 787 aircraft production, we are sticking with a bullish thesis on the specialty materials group following a review of better-than-expected quarterly survey results. Communications with industry contacts confirmed much stronger demand/pricing trends in 2Q21, improving channel sentiment and upward forecast revisions, approaching catalysts, and more manageable inventory situations. Key data points collected over the past few months suggest there is an upward bias to consensus forecasts (looking out 3-4 quarters), with emphasis placed on companies levered to jet engine OEM demand and the premium alloy product categories (nickel-based alloys, cobalt-alloys, and specialty stainless steel). Continue reading

Read More »
5:06 AM

Specialty Materials: Increasing Our Titanium Industry Demand Projections For The First Time In 2-3 Years

Now there are two reasons for all of us to be excited about the summer: (1) Top Gun 2 will be in your local theaters on July 2; and (2) there now seems to be a light at the end of the titanium tunnel! This week, we formally increased our five-year ti industry forecasts to fully account for an improving aerospace outlook and better-than-expected survey results in May. While the underlying demand environment remains depressed in 1H22, nearing the lowest point since 2003-2004, there are hints of stabilization… Continue reading

Read More »
5:07 AM

Aerospace: Suppliers Are Reacting To The New LEAP Production Targets

General Electric (GE) held a conference call with its major suppliers to review all details behind the newly implemented LEAP production schedule and to ensure supply chain alertness. Last week, the company effectively raised the CY22 production outlook to 360-370 engines to account for stronger single-aisle aircraft build rates. This was the third major scheduling adjustment announced by the aircraft OEMs and jet engine suppliers, which suggests an upward bias to CY22-23 expectations for the coverage group. Continue reading

Read More »
6:53 AM

The Titanium Snapshot (ATI, HAYN, CRS)

We are not picking up any new market intelligence this month to suggest there is an upward bias to earnings expectations for the specialty materials peer group. Last month, we raised near-term forecasts to reflect the better-than-expected nickel-based alloy and jet engine demand trends. However, we see few similarities in the titanium space as volume growth is holding in negative territory and contacts are still forecasting negative full-year growth. The main difference between this market and other alloys is the excess inventory held by the aero supply chain which could push the recovery starting point 6-9 months to the right (for companies levered to commercial airframe applications). Continue reading

Read More »
10:45 AM

Specialty Materials: Increasing Estimates On The Premium Alloy Suppliers Levered To Jet Engine

Positive data points and contact commentary collected during quarterly checks on the specialty materials group serves as the key catalyst behind the upward estimate revisions we applied to certain names within our coverage universe. Today, we raised estimates on Allegheny Tech (ATI) and Haynes International (HAYN) to reflect the upward bias associated with enhanced aerospace and turbine sales exposure. Continue reading

Read More »
10:31 AM

Aerospace: Submitting Our Industry Flight Plan For 2021

Ahead of the quarterly updates set to be released by several aerospace-levered companies over the next few weeks, and the swearing-in of President Joe Biden, we are submitting our Aerospace Flight Plan For 2021, broadly defined as an industry preview and data point refresher. The intention of this report is to provide a simple listing of industry headlines expected to materialize over the next twelve months that could sway investor sentiment or become a catalyst for estimate revisions on individual companies. We sat down over the weekend and updated our industry models to fully reflect our increasing conservative macro-outlook and to match some of the new data points provided by channel contacts. Continue reading

Read More »
1:04 PM

The Titanium Snapshot – December Update

Feedback coming out of the specialty materials channel supports the bearish call we are making on the global titanium market and selected companies within the specialty materials peer group. Bottomline, raw material providers, mill contacts, metal distributors, fabricators, and premium forgers are all voicing concerns about an extended period of end-demand weakness, a difficult CY21 environment, operating inefficiencies, and destabilized pricing environment.

Names within in our coverage universe with titanium leverage include Allegheny Technologies (ATI), Howmet Aerospace (HWM), Carpenter Technology (CRS) and Haynes International (HAYN). Continue reading

Read More »
2:10 PM

Aerospace: Airbus Is Not Budging On The A320

The Airbus management team appears to be sharing their production strategy and updated aircraft build schedules with suppliers this week, which includes an intention of holding the A320 rate steady at 40/month (well into 2021). Granted, there is lingering contact apprehension about the global airline operator willingness to accept these new jets (during the slow season), but today those comments were drowned out by the collective sound of channel relief. As we reported last week, […]

Read More »
3:35 PM
View All Reports