Pentagon assesses China's impact on metals used in military systems.Skyrocketing demand in China for metals is helping drive up the prices of steel and aluminum for the production of U.S. weapons systems, leading to longer lead times for materials, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the Office of Industrial Policy at the Department of Defense. Chinese Chinese, subfamily of the Sino-Tibetan family of languages (see Sino-Tibetan languages), which is also sometimes grouped with the Tai, or Thai, languages in a Sinitic subfamily of the Sino-Tibetan language stock. demand for titanium titanium (tītā`nēəm, tĭ–) [from Titan], metallic chemical element; symbol Ti; at. no. 22; at. wt. 47.88; m.p. 1,675°C;; b.p. 3,260°C;; sp. gr. 4.54 at 20°C;; valence +2, +3, or +4. remains small (about 5 percent of the world's total) and, although growing at 70 percent per year, is not the reason prices of titanium doubled in both 2004 and 2005. Throughout most of the '90s, China was consuming about the same amount of steel as the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. - 100 million metric tons (Transparent Optical Networking Services) A marketing term for providing dark fiber to a customer. The customer is responsible for generating the transmission signal and interpreting it at the other end. See dark fiber. per year. But China now stands alone in the world in first place by a long shot, consuming 274 million metric tons, more than United States and Japanese Japanese (jăp'ənēz`), language of uncertain origin that is spoken by more than 125 million people, most of whom live in Japan. There are also many speakers of Japanese in the Ryukyu Islands, Korea, Taiwan, parts of the United States, and consumption combined. China consumes 39 percent of the world's steel, and has become a net exporter of the metal. DOD's Office of Industrial Policy (IP) doesn't does·n't Contraction of does not. expect prices of steel to continue soaring soaring: see flight; glider. soaring or gliding Sport of flying a glider or sailplane. The craft is towed behind a powered airplane to an altitude of about 2,000 ft (600 m) and then released. . The reason: China is adding capacity and the production from that capacity will soon find its way onto the world markets. "Given China's competitive advantages (specifically, favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. exchange rates and low labor costs), and also the fact that analysts expect that the prices for steel will continue to decrease the next five years, U.S. steel The United States Steel Corporation (NYSE: X) is an integrated steel producer with major production operations in the United States and Central Europe. The company is the world's seventh-largest steel producer ranked by sales (see list of steel producers). suppliers may be facing a challenging future," says the Pentagon's Industrial Policy shop in an assessment of the impact China is having on steel, aluminum and titanium prices and availability. Growth in the Chinese market for steel continues to be robust, almost doubling from 1999 to 2003 and increasing by 15 percent in 2004. "As U.S. and non-U non-U adj. Chiefly British Not characteristic of the upper class, especially in language usage. [non- + U2. .S. firms outsource outsource verb To assign specific work to a 3rd party for a specific length of time at an set price and service level Managed care To use outside labor to perform functions–billing and collections, accounting, janitorial services, ER manufacturing (especially automobiles No invention has so transformed the landscape of the United States as the automobile, and no other country has so thoroughly adopted the automobile as its favorite means of transportation. ) to China for lower-cost labor, metals demand also shifts to China," says the report. "In 2003-2004, world steel demand growth outpaced production and prices rose accordingly. In response to elevated demand, steelmakers around the world have expanded capacity. This phenomenon is most apparent in China." Driving demand in China is the surge See power surge. SURGE - Sorter, Updater, Report Generator, Etc. IBM 704, 1959. Sammet 1969, p.8. of construction of apartment buildings and infrastructure, which accounted for over half of Chinese steel consumption in 2004. "The construction boom is far from over, however," says the IP office. "The majority of people in China still live in small, low-quality residences, and many analysts expect that as incomes rise, the demand for new, more spacious housing will be strong for years to come." The second largest consumer of steel in China (18 to 25 percent) is in the production of machinery. "Steel required for machinery grew by a factor of 22 from 1998 to 2002, fueled both by increasing demand for machines to produce goods in China and by China's emergence as a major exporter of machine tools," notes the Industrial Policy office. Growing world demand for steel led to increased lead times in military programs. "In 2004, steel sheet lead times increased 86 percent (from 14 weeks to 26 weeks), steel plate 60 percent (from 20 weeks to 32 weeks), and steel bar 120 percent (from 10 weeks to 22 weeks)," notes the IP office. Lead times for aluminum products increased by similar amounts and, for titanium, lead times have increased by 40 percent for most products--from 30 weeks to 42 weeks. "If lead times continue to increase, DOD (1) (Dial On Demand) A feature that allows a device to automatically dial a telephone number. For example, an ISDN router with dial on demand will automatically dial up the ISP when it senses IP traffic destined for the Internet. weapons programs may be forced to start long lead parts procurements earlier than the current span of 12 months prior to start of final assembly," says the Industrial Policy office. "Increasing long lead span times could force the Department to adjust program funding across the Department--reducing weapons system deliveries, stretching-out programs and impacting logistics logistics In military science, all the activities of armed-force units in support of combat units, including transport, supply, communications, and medical aid. The term, first used by Henri Jomini, Alfred Thayer Mahan, and others, was adopted by the U.S. support." Any further price increases will drive up the cost of most military aircraft. "If aluminum prices were to increase by 25 percent, the largest unit price increase would be $1.45 million for the C-17 and result in a total increase buy cost of $61 million over 42 aircraft," says the Industrial Policy office. "If steel prices were to increase by 25 percent, the largest unit price increase would be $65,000 for the C-17 and result in a total increase buy cost of $2.7 million over 42 aircraft. Titanium prices increases may be more likely. A 25 percent titanium price increase for the F-22A would increase unit price by $637,000 and the total buy by $66 million over 104 aircraft." A 50 percent increase in the price of titanium would increase the cost of the F-22A program by $132.5 million. DOD consumes 16 percent of domestic titanium production, but commercial aerospace applications account for 40 percent of domestic titanium consumption. "DOD titanium demand likely will significantly increase over the next seven to 10 years as the F-22A, F-35 and other military aircraft are added to or replace the existing fleet," says the IP office. Higher prices are "retarding" the use of titanium in other
POTENTIAL NET INCREASES IN AIRCRAFT COSTS [THOUSANDS OF FY05 $)
Steel
10% 25% 50%
Aircraft Type Base increase increase increase
C-17
Base 261
Increase/Unit 25 65 130
Increase/Buy 2005-
2011 (42 aircraft) 1,095 2,737 5,474
F/A-18E/F
Base 27
Insrease/Unit 3 7 13
Increase/Buy 2005-
2011 (190 aircraft) 511 1,278 2,556
F/A-18G
Base 28
Increase/Unit 3 7 14
Increase/Bus 2005-
2011 (90 aircraft) 255 637 1,274
F-22A
Base 140
Increase/Unit 14 35 70
Increase/Bus 2005-
2011 (104 aircraft) 1,461 3,651 7,303
F-35 (CTOL)
Base 3
Increase/Unit 0.3 1 2
Increase/Bus 2005-
2011 (79 aircraft) 27 68 135
F-35 (CV/VSTOVL)
3ase 5
Increase/Unit 0.5 1 2
Increase/Bus 2005-
2011 (111 aircraft) 52 129 259
Aluminum
10% 25% 50%
Aircraft Type Base increase increase increase
C-17
Base 5,813
Increase/Unit 582 1,455 2,909
Increase/Buy 2005-
2011 (42 aircraft) 24,436 61,091 122,182
F/A-18E/F
Base 302
Insrease/Unit 30 75 151
Increase/Buy 2005-
2011 (190 aircraft) 5,735 14,339 28,677
F/A-18G
Base 318
Increase/Unit 32 79 159
Increase/Bus 2005-
2011 (90 aircraft) 2,860 7,149 14,298
F-22A
Base 521
Increase/Unit 52 130 260
Increase/Bus 2005-
2011 (104 aircraft) 5,414 13,536 27,072
F-35 (CTOL)
Base 238
Increase/Unit 24 60 119
Increase/Bus 2005-
2011 (79 aircraft) 1,881 4,703 9,405
F-35 (CV/VSTOVL)
3ase 245
Increase/Unit 24 61 122
Increase/Bus 2005-
2011 (111 aircraft) 2,719 6,796 13,593
Titanium
10% 25% 50%
Aircraft Type Base increase increase increase
C-17
Base 1,056
Increase/Unit 106 264 528
Increase/Buy 2005-
2011 (42 aircraft) 4,435 11,089 22,177
F/A-18E/F
Base 183
Insrease/Unit 18 46 92
Increase/Buy 2005-
2011 (190 aircraft) 3,483 8,707 17,414
F/A-18G
Base 193
Increase/Unit 19 48 96
Increase/Bus 2005-
2011 (90 aircraft) 1,736 4,340 8,681
F-22A
Base 2,547
Increase/Unit 255 637 1,274
Increase/Bus 2005-
2011 (104 aircraft) 26,491 66,227 132,454
F-35 (CTOL)
Base 162
Increase/Unit 16 40 81
Increase/Bus 2005-
2011 (79 aircraft) 1,279 3,198 6,395
F-35 (CV/VSTOVL)
3ase 233
Increase/Unit 23 58 116
Increase/Bus 2005-
2011 (111 aircraft) 2,583 6,456 12,913
Sources: 0USD(AT&L)/Defense Systems and Industrial Policy
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