Superalloy Market Outlook AMM 6 th Aerospace Materials Conference Carpenter Technology Corporation Dan DeAntonio April 25, 2012
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Agenda Background Market Dynamics Superalloy Outlook
Carpenter Technology Established in 1889 In Reading, PA Continue to operate at original location Currently operate 21 manufacturing locations in 6 countries Global distribution network Currently expanding to support growth in major markets including aerospace. Premium melt expansion in Reading Acquisition of Latrobe Specialty Metals Greenfield site in Limestone County Alabama Forging and premium melting
Carpenter Technology The Early Years of Aviation Engine components for Wright Aeronautical Early 1900 s Engine components for Wright Whirlwind engine for the Spirit of St. Louis 1927
Market Dynamics What do the analysts say? Adam Pilarski - Avitas We are in a bubble Kevin Michaels - ICF SH&E Consolidation is re-shaping the industry Rich Aboulafia - Teal Group Production no longer linked with demand Heidi Woods - Morgan Stanley Under stress test analysis backlogs are fairly secure Ed Greenslet - The Airline Monitor Production rates not sustainable during model changeover Source: SpeedNews Conference March 2012
Market Dynamics Do we have a bubble? Increasing OEM build rates Some believe that the rates are too high Historically high backlogs Extended delivery times Aging fleets Retirement dynamics may be changing High fuel prices
Industry Data Large Commercial Aircraft Percent Years of production 50 40 30 20 10 Backlog as a % of Fleet Backlog as Years of production Deliveries as a % of fleet 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 0 Source: Airline Monitor Jan/Feb 2012
Market Dynamics Industry Happenings New platforms commercial aircraft Wide Body - 787, A350 Single Aisle - A320neo, 737MAX, C Series New engines PWA Geared Turbo Fan CFM Leap GE GEnx Rolls Royce Trent XWB New competitors Comac C919 Bombardier moving up into single aisle market Multiple new entrants in the regional jet market
Build Rate Projections 2,000 Some analysts predict a mid decade decline during model changeover 1,500 380 350 330 1,000 A320neo A320 787 500 777 737MAX 0 737 2012 2013 2014 2015 2016 2017 2018 Source: Airline Monitor
Build Rate Projections 2,000 Or maybe the transition will be smoother 1,500 380 350 330 1,000 A320neo A320 787 500 777 737MAX 0 737 2012 2013 2014 2015 2016 2017 2018 Source: Airline Monitor and internal estimates
Superalloy Outlook Ni-base high strength alloys Tons CAGR in excess of 5% 40,000 30,000 Engine material* 20,000 10,000 Fasteners 0 2013 2014 2015 2016 2017 2018 *Forecasts do not include blade/vane or combustor materials Based on new builds only. MRO requirements would be additive Source: Airline Monitor, AeroStrategy and internal estimates
Other Technology Drivers Reducing buy to fly ratio Larger cost savings for initial material purchase Additive manufacturing Focus on weldability Powder metal processes Near net forging technology Near net shape HIP PM components Improved Machining Technology Reduces cost for conventional manufacturing Reduces weight with better dimensional tolerance
Supply Chain Impacts What is steady state? Production rate ramp-ups on existing platforms New product introductions EIS delays Ramp up of production Supply chain stocking or de-stocking
Summary The short term future is bright New engines, new airframes, new market entrants Increasing production rates The longer term is less clear The next couple of years will help better define what will happen Yearly order levels Integrity of the OEM backlogs Right now we have many different opinions
Thank You Questions?