Safran boosts titanium stocks, shores up supply chain
By Tim Hepher
PARIS, Feb 24 (Reuters) - French jet engine maker Safran SAF.PA said on Thursday it had enough titanium reserves for several months after increasing stocks of the metal since the start of the year as Western aerospace companies brace for fallout from the Ukraine crisis.
Safran, which uses titanium to make landing gear for long-haul jetliners as well as some aero engine parts, depends on Russia for less than half its requirements, although Russia's VSMPO-AVISMA VSMO.MM corporation remains its largest single supplier.
"We have been watching this situation for several weeks and have decided since the start of the year to increase our stocks of titanium especially through distributors in Germany," Chief Executive Olivier Andries told reporters.
The French company - which together with General Electric GE.N co-owns the world's largest jet engine manufacturer by units sold, CFM International - is also looking to diversify its sources of the metal.
Separately, Boston-based General Electric said it is not concerned about titanium supplies as its current inventory levels are comfortable. The company is also counting on a diversified supply base to address any shortfall.
"We have a lot of diversity in our sourcing across metals, including titanium," a GE spokesperson said.
British engine maker Rolls-Royce RR.L said it was ramping up titanium supplies from outside Russia.
Western aerospace companies that rely heavily on long-term supply contracts with VSMPO-AVISMA have been increasing buffer stocks in case the metal is thrust into a potential trade war between Russia and the West, experts have said .
Industry dependence on Russian supplies of the lightweight but strong metal adds a new strategic dimension to problems already clogging the global supply chain in the wake of the pandemic.
Safran's boss spelled out the security implications of its decision to buy French supplier Aubert & Duval from mining firm Eramet ERMT.PA , in a joint move with Airbus AIR.PA and investment firm Tikehau Ace Capital this week.
The superalloys group is the only Western supplier outside the United States capable of "elaborating" or developing new alloys needed to operate at ever-higher temperatures in an engine for a future Franco-German-led fighter, Andries said.
"For us it was fundamental to preserve these capabilities," he said.
A&D also represents an alternative source of metal forgings which are currently in short supply. Output of the parts is dominated by companies in the United States where Andries said the aerospace industry's supply chain pressures are "most acute".
The A&D purchase does not mean Safran is shifting its overall strategy towards greater vertical integration in which manufacturers buy their own suppliers, but Safran stands ready to step in when strategic interests are at stake, Andries added.
Announcing 2021 results earlier, Safran said it did not exclude further bolt-on acquisitions.
Reporting by Tim Hepher. Additional reporting by Rajesh Kumar Singh in Chicago and Paul Sandle in London. Editing by Sudip Kar-Gupta, Jane Merriman and Richard Pullin
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