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#The Boeing has Plan B

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April 25 2014


The Boeing has an action plan in case of problems with Russian deliveries due to aggravating the situation in Ukraine, however none of the actions have been taken by the Company so far. It will be difficult for this aircraft Company to replace 40% titanium source.

The Boeing is keeping an eye out for political events regarding Russian-Ukrainian relations as the Company has suppliers and purchasers in the both countries. However, for now,  the company hasn’t faced any supply shortfall, according to QI reports of the aircraft producer.

The Boeing has contingency action plan in case «unlikely but possible events» could occur, Chief Executive Officer James McNerney said answering the questions regarding Russian titanium supply shortfall.

This is standard information for investors stating that the situation in all regions of the Company’s interests is under its control, the  Boeing representative in Russia and CIS countries says. The Company has no difficulties with deliveries from Russia, no supply shortfall so far and the Company is taking no actions to replace the source, he assures refusing to disclose the reserve plan details.

In Russia the Boeing is cooperating with VSMPO-AVISMA with its controlling stack owned by Rostekhnologii state corporation. «Issues should be settled as they come in», Rostekhnologii representative says. According to him, cooperation with the Boeing continues in routine mode. About 40% of titanium consumed by the  Boeing is supplied by VSMPO-AVISMA.

In 2013 VSMPO-AVISMA produced 28.9 thou. tons of titanium products, the Corporation provides 40% of the aircraft maker’s requirements for titanium. In 2007 Ural Boeing Manufacturing joint venture was created by the Boeing and VSMPO-AVISMA in Sverdlovsk region. The facility is involved in machining titanium die forgings under several  Boeing models, In November 2013 the JV declared of intention to start the second US $200M facility.

The Boeing & VSMPO-AVISMA integration is quite intebsive, therefore it won’t be simple to find the source replacement, VTB Capital analyst Vadim Astapovich says. The way events will develop in case of supply interruption depends also on inventories of titanium raw materials and finished products available at the Boeing’s warehouses. Embargo on titanium deliveries will lead to its price advance on the global market, which is unprofitable for everybody inclusive of the USA and EU, Mr. Astapovich indicates.

On Thursday, US President Barak Obama declared of new sanctions against Russia, however no restrictions to titanium supplies or technical cooperation were mentioned in the list of Western sanctions against Russia. 


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