Few would say that semiconductor shortages have hampered auto production. Earlier this year, automakers temporarily shut down factories, reducing production.
According to Toyota, it would cut global vehicle production by 40% in September due to the shortage. Globally, the market has lost some 2 million vehicles due to a shortage of chips.
As a result, the demand for automotive aluminum has taken a hit this year. While producers lost in this high-end sector, consumers in the broader industrial landscape had one less source of galloping demand, sucking up valuable supplies in what has been the worst market for buyers of semi-finished products in memory. -finished in aluminum.
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Upturn in demand for aluminum in the aerospace industry?
Had the other favored aluminum smelter industry, aerospace, operated at pre-pandemic levels, those same buyers would have faced even more constraints.
But lockdowns and even more extensive international travel restrictions burst the bubble that had seen elongated order books and strong construction programs stretch to the end of the decade.
The two Airbus and Boeing have seen construction programs cut to half of pre-pandemic levels. As deliveries to airlines accelerate, international air travel is still far from ânormalâ. That’s true, even for a notoriously cyclical business.
So when Airbus announced its intention to aggressively increase its production rates, alarm bells began ringing along the supply chain.
On the demand side, large leasing companies Avolon and AerCap are reported in the Financial Times as raising concerns directly to Guillaume Faury, CEO of Airbus, and allegedly copied the CEOs of aircraft engine manufacturers, including Saffron and General Electric.
Airbus said in May that suppliers should be ready to ramp up production of its most popular A320 single-aisle aircraft. He said production would increase to a firm rate of 64 jets per month by the second quarter of 2023. That’s higher than the rate of 60 the company delivered before the coronavirus. In addition, it is higher than the 45 targeted for the fourth quarter of 2021.
He is now exploring “scenarios” of rates that could reach 70 per month in early 2024 and 75 by 2025. These rates would even be much higher than pre-pandemic levels. These rates would put a strain on aircraft engine manufacturers. However, they would also put a strain on aluminum rolling mills, as well as the rest of the supply chain.
Supply chain impacts
The Financial Times points out that the aerospace supply chain has been affected much more by the virtual halt in production during the pandemic than Airbus or even 737Max hit Boeing. Such an aggressive ramp-up will itself lead to shortages and failures.
Avolon and AerCap fear that such a wave of new aircraft entering the market may not be justified by revised demand projections. As such, the glut will lead to a devaluation of the values ââof the existing fleet.
For aluminum consumers – at least outside the aerospace market – concern that a resurgence of the auto industry next year, followed by an equally aggressive ramp-up in aerospace demand may soon after, the roller coaster we have seen this year in terms of pricing and extended deliveries will continue.
At some point, both industries would return to some semblance of normalcy. However, we might not have expected their respective returns to be so quick or to follow each other so closely.
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