An American Airlines Boeing 787-9 Dreamliner.
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There is a lot of lightweight, ultrastrong titanium metal in modern jet planes. Titanium cuts weight and improves fuel efficiency. That’s the good news.
The bad news is that Russia is a big supplier of titanium. That might become an issue for Boeing (ticker: BA) shares depending on how long the Russia-Ukraine conflict rages, how long sanctions are in place against Russia, and how long it takes other titanium suppliers to ramp up production.
Monday, The Wall Street Journal reported that while Boeing has suspended parts of its business in Russia, Boeing’s relationship with titanium supplier VSMPO AVISMA remains up in the air. Boeing didn’t immediately respond to a request for comment about its VSMPO relationship.
The stock may be taking a hit because of the fear about titanium. Boeing stock was down about 1.7% in premarket trading. Stock markets are set to open in the red though. S&P 500 and Dow Jones Industrial Average futures were down about 0.6% and 0.7%, respectively.
Russia is the third-largest producer of titanium globally, according to the U.S. Geological Survey, accounting for between 15% and 20% of total output. China is the largest producer, at more than half, while Japan is the second-largest.
A halt to titanium exports from Russia could constrain plane production. But the titanium situation looks manageable for now.
Boeing is getting about one third of its titanium from Russia, a company spokesman confirmed with Barron’s in an emailed statement, adding “our inventory and diversity of titanium sources provide sufficient supply for airplane production.”
Titanium inventory on hand helps. So does Boeing’s inventory of undelivered planes. The company has built but not yet delivered hundreds of 737 MAX jets and 787 jets.
MAX deliveries were stopped between March 2019 and November 2020 after two deadly crashes inside of five months led global aviation regulators to ground the jet. Boeing is still working through its backlog of undelivered MAX planes. And 787 jets aren’t being delivered right now while the company works on quality issues discovered in its manufacturing process.
Cowen analyst Cai von Rumohr went so far as to say the availability of titanium isn’t a near-term concern for the stock given the inventory situation. Boeing has “also been diversifying supply sources since the 2014 Crimea takeover,” wrote von Rumohr in a Monday research report.
He rates Boeing shares at Buy, but he reset his price target to $230 a share from $265 to account for near-term headwinds. The Russia-Ukraine war is on the list. It has sent oil prices surging and has the potential to hurt any recovery in international air travel. He just isn’t as worried about titanium supplies.
Overall, 75% of analysts covering Boeing stock rate the shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%. The average analyst price target for Boeing shares is $261.
Coming into Monday trading, Boeing stock was down about 10% year to date, while the S&P 500 was down 9%.
Write to Al Root at [email protected]
