Production Ramp-Up for Boeing 787 to Drive Titanium and Composites Growth

April 21, 2011

Boeing‘s (BA) 787 is on track to be certified by year-end, and as the company seeks to fulfill the current backlog of more than 800 planes, demand for titanium and composites is expected to significantly increase, says Dr. Avinash Kant, Vice President and Senior Research Analyst at D.A. Davidson & Co.

“Industry sources indicate that there is still roughly 40 million pounds of titanium inventory worldwide, a majority of it at Boeing,” Kant said. “If the B787 certification process continues to be on track and deliveries start to take place from the third quarter of 2011 onward, as projected by Boeing currently, we would expect a strong ramp in demand in 2012.”

Kant has “buy” ratings on RTI International Metals (RTI), Titanium Metals (TIE) and Hexcel (HXL), all of which are levered to increased Boeing production, especially of its B787, and he expects demand for the materials to stay solid for the next few years.

“Boeing has been producing the 787 at a three-plane-per-month run rate right now. Once certified, the company has stated that it will ramp to a 10-plane-per-month run rate over the next two to three years,” Kant said. “As RTI, TIE and HXL all have a $1.5 million and higher content in each B787 plane, the ramp in production rate of this plane is expected to be a significant growth driver for these companies.”