Zacks Industry Outlook Highlights: Ford Motor, General Motors, Alcoa and RTI International Metals
For Immediate Release
Chicago, IL – September 02, 2015 – Today, Zacks Equity Research discusses the Industrial Metals, part 2, including Ford Motor Co. (F), General Motors Company (GM), Alcoa (AA) and RTI International Metals, Inc. (RTI).
Industry: Industrial Metals, part 2
Link: https://www.zacks.com/commentary/55214/factors-that-will-help-industrial-metals-amid-crisis
Industrial metals are the building blocks of an economy. At present, even though concerns over China’s future growth has added an element of uncertainly to the outlook, there are plenty of reasons to be optimistic about the industrial metals industry’s long-term outlook.
Here we discuss some of the key reasons and what investors in the industrial metals sector can look forward to in the coming months and years:
Strong Demand in Automotive & Aerospace
On the demand side, aluminum consumption is expected to improve on a global basis, spurred by the automotive and packaging industries -- the key end markets. The automobile market is becoming increasingly aluminum-intensive, given the metal's recyclability and light-weight properties. Automakers consumed a record amount of aluminum last year as plummeting prices and technological breakthroughs made it a viable alternative to steel.
The global push to improve fuel efficiency in vehicles is expected to more than double the demand for aluminum in the auto industry by 2025. Major automakers like Ford Motor Co. (F), General Motors Company (GM) and Fiat Chrysler Automobiles N.V. are expected to become the biggest users of aluminum in the next decade.
The airline industry is also expected to boost demand for the metal. To capitalize on the lucrative aerospace market, in November last year, Alcoa (AA) acquired U.K.-based leading jet engine components maker Firth Rixson, a significant milestone in its portfolio transformation strategy. This transaction will reinforce the company’s aerospace business and add a broad spectrum of high-growth, value-added jet engine components. Alcoa’s $1.1 billion agreement to supply key parts (including forgings) for Pratt & Whitney engines also underscores its continued efforts to profitably grow its aerospace business.
In March, Alcoa acquired TITAL, a leading provider of titanium and aluminum structural castings for aircraft engines and airframes. The acquisition has enabled the company to expand its titanium casting capabilities in Europe, with strong customer relationships. TITAL’s titanium revenues are expected to increase by 70% over the next five years. Roughly 70% of TITAL’s revenues are likely to come from commercial aerospace sales in 2019.
Also in March, Alcoa agreed to buy titanium and specialty metal products supplier RTI International Metals, Inc. (RTI), which will broaden the former’s titanium offerings and add advanced technologies and materials to its portfolio. In addition, the company launched an expanded wheels manufacturing plant in Hungary to meet the growing demand for its proprietary lightweight wheels in Europe. Alcoa’s automotive expansion in Tennessee is also progressing as planned with customer qualifications already taking place. Moreover, Alcoa has announced plans to invest in aerospace technology at its Whitehall, MI facility.
Alcoa expects global aerospace sales to increase 8% to 9% year over year in 2015 on the back of strong demand for large commercial aircraft, regional jets and jet engines. The company anticipates that global automotive production will increase in the range of 2% to 4%, with a 1% to 4% rise in North America.
Following China, which accounts for over 40% of the global aluminum consumption, India appears promising given its current low level of aluminum consumption and high urban population growth. With demand being strong and the industry pulling the reins on supply, the aluminum market is likely to witness supply deficits for a prolonged period, thereby creating a supportive backdrop for high aluminum prices.
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FORD MOTOR CO (F): Free Stock Analysis Report
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ALCOA INC (AA): Free Stock Analysis Report
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