F
Superalloy Case Study

BACKGROUND

This case study examines the status of the superalloy industry in the United States and abroad today. It is based on data gathered in personal interviews1 and from other sources.2 In particular, this case study examines companies in the United States that melt and produce superalloy materials, that cast parts from superalloys, or that use superalloys. It also identifies other entities conducting superalloy R&D in the United States and superalloy R&D operations outside the United States. For the purpose of this study, superalloys are defined as alloys based primarily on

1  

Private discussions were held with the following individuals between March and October 2004: Rodney Boyer, The Boeing Company; Peter Bridenbaugh, Alcoa and Precision Castparts; John DeBarbadillo, Special Metals; Anthony Giamei, Pratt & Whitney; Richard Kennedy, Allvac; Dwayne Klarstrom, Haynes Stellite; Gernant Maurer, Cartech and Special Metals; Donald Muzyka, Special Metals; Fred Pettit, University of Pittsburgh; David Poirier, University of Arizona and SMPC; John Radovich, Purdue University; John Tunderman, INCO and Haynes Stellite; James Williams, GE and Ohio State University; and Frank Zanner, Sandia National Laboratories and the Special Materials Processing Consortium (SMPC).

2  

SEC filings by companies; a white paper by the Specialty Steel Industry of North America, submitted as congressional testimony in September 2004; and proceedings of the Seven Springs conferences, sponsored by The Minerals, Metals and Materials Society, 1978–2004.



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Globalization of Materials R&D: Time for a National Strategy F Superalloy Case Study BACKGROUND This case study examines the status of the superalloy industry in the United States and abroad today. It is based on data gathered in personal interviews1 and from other sources.2 In particular, this case study examines companies in the United States that melt and produce superalloy materials, that cast parts from superalloys, or that use superalloys. It also identifies other entities conducting superalloy R&D in the United States and superalloy R&D operations outside the United States. For the purpose of this study, superalloys are defined as alloys based primarily on 1   Private discussions were held with the following individuals between March and October 2004: Rodney Boyer, The Boeing Company; Peter Bridenbaugh, Alcoa and Precision Castparts; John DeBarbadillo, Special Metals; Anthony Giamei, Pratt & Whitney; Richard Kennedy, Allvac; Dwayne Klarstrom, Haynes Stellite; Gernant Maurer, Cartech and Special Metals; Donald Muzyka, Special Metals; Fred Pettit, University of Pittsburgh; David Poirier, University of Arizona and SMPC; John Radovich, Purdue University; John Tunderman, INCO and Haynes Stellite; James Williams, GE and Ohio State University; and Frank Zanner, Sandia National Laboratories and the Special Materials Processing Consortium (SMPC). 2   SEC filings by companies; a white paper by the Specialty Steel Industry of North America, submitted as congressional testimony in September 2004; and proceedings of the Seven Springs conferences, sponsored by The Minerals, Metals and Materials Society, 1978–2004.

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Globalization of Materials R&D: Time for a National Strategy nickel and cobalt that have very useful properties at elevated temperatures and/or in corrosive environments. The superalloy industry serves a limited market, albeit with critically important products. Superalloys find application in the aerospace industry as the primary enabling material in the hot end of jet engines with both rotating and static components and in auxiliary power units for aircraft. They are also used in land-based industrial gas turbines, in petrochemical refining facilities where elevated temperatures prevail, in chemical plants where corrosive conditions exist for which normal stainless steels are not useful, and in sour oil and gas wells. The principal cost element in the production of superalloys is the cost of the nickel or cobalt. Since none of the worldwide producers of superalloy products produces nickel, all have to buy their raw material on the open market and from the same primary or secondary (scrap) suppliers. Maintaining a competitive position therefore relies on managing operating costs and maintaining a competitive lead in state-of-the-art technology, both of which require continuing R&D on new and constantly evolving compositions and processing technologies. The three industries that consume the most superalloy products are the aerospace industry—principally jet engines—the land-based turbine business, and the chemical process industry. Each is facing challenges that could threaten superalloy R&D in the United States. Increased international competition and globalization might threaten the aerospace industry, which has been the source of high-value exports for the United States. The land-based turbine business has grown significantly in the past decade but may be self-limiting because the rising cost of the natural gas used to generate electricity—for instance, the price of gas tripled in 2004—decreases the incentive to add natural-gas-based electricity generation to the power grid. The chemical process industry has not been investing in the United States in recent years, and if that trend continues, the market for the superalloy products that it consumes in plant construction and maintenance will shrink, putting further downward pressure on costs and profits. COMPANIES MELTING AND PRODUCING SUPERALLOY MATERIALS IN THE UNITED STATES Special Metals Based principally in New Hartford, New York, Special Metals Corporation (SMC) makes forged bar products—particularly for rotating parts of jet engines—and flat-rolled nickel-base alloys. SMC became a public company in 1961 and then became private once again in 1987, when it was purchased by a French company, Albert and Duval. In 1997, SMC went public once again. In 2002, after two succes-

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Globalization of Materials R&D: Time for a National Strategy sive expansions—in 1998, it purchased Wiggin Alloys in the United Kingdom and INCO Alloys International3—it filed for Chapter 11 bankruptcy protection. SMC recently emerged from Chapter 11 and is owned by a group of banks. Before and during the bankruptcy, SMC cut spending and reduced the R&D workforce, from 50–60 persons in the mid-1990s to about 5 engineers in 2004. Allvac A subsidiary of Allegheny Technologies, Allvac is based in Monroe, North Carolina. A company that has had some financial difficulties, Allvac is primarily a producer of forged bar products for the rotating parts of jet engines and land-based turbines. The company’s U.K. operation, Allvac Ltd. (formerly Sheffield Forgemasters) is a production facility and does no R&D. Between 1990 and 1998 Allvac increased R&D staff from 20 to 30. Since 1998, it has cut staff to 14, only 7 of them engineers. Recently, Allvac shifted its focus from customer technical service and process improvements to new product development work. This alloy research has been funded by the USAF Metals Supportability Initiative, which led to the improved alloy 718+. The National Institute of Standards and Technology (NIST) and the Defense Advanced Research Projects Agency (DARPA) are supporting research into new processing technology. Carpenter Technology (Cartech) With perhaps a broader-based product line than either SMC or Allvac, Cartech—based in Reading, Pennsylvania—has continued to improve the melting and casting processes. It produces superalloy bar products and is financially stable, but it is primarily a producer of stainless steels and tool steels. Cartech has cut back on R&D staff, from about 40 people in the 1990s to 20 today, 10 of whom are engineers but do virtually no new alloy development. Haynes International Originally called Haynes Stellite, this Kokomo, Indiana, company was first owned by Union Carbide Corporation, then by Cabot Corporation, before becoming privately held by the Blackstone Group in 1989. The company is highly leveraged, with over $100 million in negative equity and a very large debt in the 3   Until 1983, when International Nickel Company (INCO) closed its Sterling Forest, New York, laboratory, it was the primary developer of nickel-base superalloy compositions. When it closed, INCO employed about 350 people at its laboratory.

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Globalization of Materials R&D: Time for a National Strategy form of publicly held debentures. It is a producer of nickel- and cobalt-based alloys in the form of plate and sheet at its Kokomo plant and of tubular products at its Mississippi plant. Its principal competitors in the United States are Allegheny Technologies and SMC. Outside the United States, its largest competitor is Krupp VDM, in Germany. Haynes has a larger customer base than SMC or Allvac since it primarily produces corrosion-resistant alloys for the petrochemical and basic chemicals industries. However, the petrochemical industry has not built a new refinery in the United States for over 25 years, limiting the market somewhat to replacement products. From 1980 to 2004, Haynes’s R&D workforce decreased from 125 to 32, 12 of them engineers. R&D spending was reduced from $3.7 million in 2002 to an annualized rate of $2.4 million in 2004. Haynes continues to develop cobalt-based C288 alloy for jet engines, as well as new corrosion-resistant alloys such as G35 and C22HS, and it holds patents for five alloys of commercial value. Allegheny Technology A flat-rolled producer of primarily stainless steels, Allegheny Technology produces some superalloys, such as C276, at its plant in Brackenridge, Pennsylvania. It has cut back on its R&D activity in the past several years. COMPANIES CASTING PARTS FROM SUPERALLOYS Howmet A wholly owned subsidiary of Alcoa, Howmet continues to produce investment-cast turbine blades and continues to do process research. Cannon-Muskegon Cannon-Muskegon became a wholly owned subsidiary of SPS Technology in 2001, which in turn was purchased by Precision Castparts in 2004. It obtains funding for its R&D from the French company Snecma and is involved in R&D with GE through a GE-Snecma partnership in engine development.4 4   GE works with Snecma (France) in a joint venture called CFM International. In 2005 the Safran Group was formed following the merger of Snecma with Sagem. Sagem, a high-technology group, is the second largest French telecommunication company and the third largest European electronics company. The Snecma-Sagem merger resulted in the privatization of Snecma.

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Globalization of Materials R&D: Time for a National Strategy Precision Castparts Based in Portland, Oregon, Precision Castparts now owns Cannon-Muskegon, Wyman-Gordon, and Western Australia Special Alloys (WASA), making it a dominant producer of superalloy finished parts using both the investment casting and forging routes. Precision Castparts does not do any alloy development research but does work to improve productivity and processes. It supplies some of its materials from WASA (see below). It is also investing in investment casting facilities in China. COMPANIES USING SUPERALLOYS GE Continuing to conduct and support R&D, GE Engines has taken over the R&D that was done at the GE corporate research lab in the past. GE has a joint venture with Snecma (France), CFM International, and suppliers of materials such as Cannon-Muskegon. It is the most active entity in the United States in superalloy research. It is also moving more investment overseas, particularly to China, where it has its 5-5-5 program: $5 billion in investment, $5 billion in sales, by 2005. Pratt & Whitney Pratt & Whitney has cut back drastically on the number of staff involved in superalloy R&D. It is concentrating on commercial engines, and much of the work of technical personnel in the materials area focuses on solving supplier quality problems. Rolls-Royce Formerly GMC’s Allison Turbine Division in Indianapolis, Indiana, the now Rolls-Royce-owned facility continues to have its R&D directed largely out of the United Kingdom. Honeywell Honeywell—located in Phoenix, Arizona, and formerly known as Garrett Air Research and Allied Signal—did materials research in the past but in recent years cut back and is essentially doing none now. It makes smaller jet engines for helicopters and regional jets and auxiliary power units for aircraft.

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Globalization of Materials R&D: Time for a National Strategy Solar Turbines Solar Turbines, the San Diego, California, producer of land-based turbines, has reduced its alloy development activities dramatically. Today, Solar relies almost exclusively on suppliers for new alloys and parts. Ladish Corporation A Milwaukee forger of superalloys, Ladish evaluates new materials and models hot working processes but has only a few materials engineers doing a little R&D. Wyman-Gordon A forger of superalloys, Wyman-Gordon evaluates new materials. It is now owned by Precision Castparts, but even before it was purchased, it had essentially eliminated R&D. OTHER ENTITIES CONDUCTING SUPERALLOY R&D IN THE UNITED STATES Special Metals Processing Consortium A consortium of 13 production companies, Special Metals Processing Consortium (SMPC) was formed by the U.S. superalloys industry in 1989 to solve generic preproduction problems in the production of refined superalloy vacuum arc remelt (VAR) and electroslag remelt (ESR) ingots for rotating turbine parts. SMPC’s research on fundamental solidification processes during ESR and VAR remelting has helped solve some difficult problems common to all that one company would have found difficult to solve on its own. SMPC has cooperated with the Liquid Metals Processing (LMP) Laboratory at Sandia National Laboratories (SNL). Over the past 5 years, the number of companies supporting SMPC has dwindled to six or seven through bankruptcy, financial losses, and/or mergers. Government support was obtained from SNL and the Federal Aviation Administration in the past, but SNL intends to close the LMP Laboratory in 2005 and SMPC will no longer have use of the laboratory. FAA funding for SMPC in the past matched member contributions of $50,000 per member per year; it was made available on a year-to-year basis through specific appropriations in the annual FAA budget. Funding dwindled to $10,000 per member in the early 2000s, and the number of participants decreased as well. Although funding for 2004–2005 was once again at $50,000 per member, in real

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Globalization of Materials R&D: Time for a National Strategy terms current research support has been cut by more than one-half over the last 15 years. Nevertheless, the research resulted in the best control technology in the world for the production of large VAR ingots, and modeling has eliminated the burden of in-plant experimentation. Universities Each of the following American universities boasts a faculty member who has conducted research on some aspect of physical metallurgy or processing of superalloys in recent times: the University of Michigan, Lehigh University, Purdue University, the University of Arizona, the University of Texas, Ohio State University, Pennsylvania State University, the University of Tennessee, Michigan Tech, the University of Pittsburgh, the University of Florida, and Northwestern University. Government Laboratories NASA’s Glenn Research Center supports university research in superalloys. The Wright-Patterson facility of the Air Force Research Laboratory (AFRL) also supports university research, and the Ohio Aerospace Institute at the University of Dayton conducts testing for AFRL. Oak Ridge National Laboratory is primarily engaged in joining and coating research. SUPERALLOY RESEARCH AND DEVELOPMENT OUTSIDE THE UNITED STATES United Kingdom Virtually all superalloy research in the United Kingdom is funded by Rolls-Royce, which operates a superalloy research laboratory at Cambridge University. Rolls-Royce does not produce alloys but works with primary producers to develop new alloys. It is building a new facility where it will utilize superalloy powders in its next-generation engines. Other research centers in the United Kingdom are at Imperial College, Thermotech Ltd., the University of Southampton, the National Physical Laboratory, the University of Manchester, and Birmingham University. Germany and Switzerland Krupp VDM was once a developer of alloys, but it no longer has an R&D operation. Asea Brown Boveri sponsored R&D in the past but has cut back in recent years. Sulzer Metco is doing R&D on coating alloys. Superalloy research

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Globalization of Materials R&D: Time for a National Strategy continues at the government-supported Max Planck Institute in Aachen, the KFA Laboratory, the Fraunhofer Laboratory, the Technical University of Berlin, the Federal Institute of Materials Research and Testing, the Technical University of Braunschweig, the University of Applied Sciences (Osnabrueck), and the University of Erlangen-Nuremburg. Italy Acceria Foroni is a producer of nickel-based superalloys, primarily for the oil and gas industry in the form of casing and tubing, that invested over $200 million in new technology over the last 10 years. It is now investing in large-diameter (33-inch) VAR technology with a view to producing 718 alloy ingots for rotating parts. Acceria Foroni is regarded as a tough competitor in the marketplace. Japan Japan has been an active player in superalloy development for many years. Mitsubishi Materials has been and continues to be very active in both the laboratory and the plant. Daido Steel has an interest in superalloy technology and has an ongoing technical exchange with SMC. Hitachi Heavy Industries has eliminated R&D in its laboratory but continues R&D in its plant. Other organizations continuing superalloy R&D include IHI Heavy Industries, the National University for Materials Science, Nagoya University, the Nagoya Institute of Technology, the Tokyo Institute of Technology, and the National Aerospace Laboratory (High Temperature Materials Group). China Since the end of the Great Leap Forward, significant research has continued in China on superalloys. The main Chinese superalloy producers include the Fushun Specialty Steel Plant (part of Northeast Specialty Steel Group Company), the Shanghai No. 5 Steel Plant (part of BaoSteel), and the Great Wall Specialty Steel Plant. The main research institutes are the Central Iron and Steel Research Institute, the Beijing Institute of Aeronautic Materials, and the Institute of Metals Research. The main universities for superalloy research are University of Science and Technology Beijing, the Northwestern Polytechnic University, and Northeasten University. There are several plants forging and casting parts for aircraft engines in the different parts of China. The Shanghai No. 5 Steel Plant is a major superalloy production facility with a great deal of the latest and best equipment in the world and a research group said to employ 2,000 professionals. A new pilot plant to produce superalloy castings is being built in Chendu.

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Globalization of Materials R&D: Time for a National Strategy Sweden Demag DeLaval Industrial Machinery and Volvo Aero continue some superalloy research activities. Korea Korea is not an important player in the superalloy business, but R&D nonetheless is actively pursued at the Korean Institute of Machinery and Materials. Canada Research has been conducted at various universities (the University of British Columbia, the University of Manitoba, Ryerson University, Carleton University), at the National Research Council of Canada’s Institute for Aerospace Research, and at BWD Turbines. Australia Western Australia Special Alloys (WASA) was started by Pratt & Whitney, Wyman-Gordon, and the government of Western Australia to supply nickel-based alloy VIM-VAR ingots for forging, with the expected advantage of lower cost nickel from Australia. Pratt & Whitney sold its interest to Wyman-Gordon, which then was bought in 2004 by Precision Castparts. France DMMP, CEMES/CNRS, the Ecole National Supérieure des Mines, Albert and Duval, LMPM-ENSMA, Institute Laue Langevin, and Snecma all contribute research. Russia The Central Boiler and Turbine Institute is active in superalloy research. PUBLICATIONS Although not an accurate measure of commercial activity, which is for the most part closely guarded by producers, papers presented at the quadrennial Seven Springs Superalloy Conference, sponsored by The Minerals, Metals and Materials

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Globalization of Materials R&D: Time for a National Strategy Society, give some indication of worldwide activity in the field. First held in 1978, the conference has since then attracted a growing audience. A survey of the papers presented indicates that while the number of papers from the United States remained static at about 45 (in the face of a 50 percent decline in U.S. participating companies), the number of papers from overseas has steadily increased. In 2004 there were 66 from outside the country, so that less than 50 percent of the work presented at the conference is of U.S. origin, compared with over 85 percent in 1978. ISSUES AND CONCLUSIONS An examination of the current status of U.S. superalloy R&D shows that the workforce decreased significantly between 1994 and 2004—more than 50 percent in most companies and up to 100 percent in some. New or improved materials that are being developed are largely based on improvements to existing alloys or are for the chemical industry, where time to introduction is shorter. The biggest challenge for superalloy R&D is that it takes a long time to develop a new alloy, on the order of years, and takes even more years to get customer acceptance and large orders. Furthermore, because new alloys often replace existing products, this can mean a very low return on R&D investment. Therefore, faced with bottom-line considerations and the pressure for quarterly profit growth, companies often have little incentive to support R&D activities aimed at the development of new alloys or processes. An unusually large percentage of the papers at the 2004 Seven Springs Superalloy Conference were joint papers emanating from collaborative research, a sign that fewer companies can support research on their own and are turning to collaboration. While this is better than no research at all, it is symptomatic of the problems facing the industry. Another problem has been a decrease in U.S. government support for superalloy research, leaving companies to pick up the costs of ongoing activities or cut them out altogether. In addition, the time and money required to get a new material approved for aerospace use are a challenge, although DARPA’s Accelerated Insertion of Materials program has begun to address these issues. The lack of new products for the market is both a result of, and a cause of, continued financial weakness in the industry over the past two decades. Future growth, or even maintenance of the current status of the industry, will require patient management, conservative financing, and a stream of new products. There has been criticism that some international actors are not widely sharing the results of R&D, particularly in the area of process technology, where most of

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Globalization of Materials R&D: Time for a National Strategy the proprietary knowledge resides.5 Plugging the flow of information can hinder U.S. companies in their efforts to follow recent developments. The superalloy industry has evolved to the point that production facilities are now divisions or subsidiaries of larger companies. In the event of an economic slowdown or if their customer base continues to move offshore, companies that are still independent are likely to suffer financially. The use of offsets6 by superalloy customers—notable for deals involving companies such as GE, Pratt & Whitney, and Boeing—can result in offshore operations being established by U.S. companies in order to win contracts for their own products. These overseas operation could be in direct competition with U.S. operations. Much alloy development is now being done in foreign-government-supported laboratories overseas. Process improvement continues to be done on a limited basis in the United States and is the key to commercial U.S. success for the time being. However, as new alloys are developed elsewhere and U.S. process knowledge diffuses offshore, that competitive edge will disappear. As the manufacturing end of the industry moves overseas there is a risk that the ideas for research, which in the past largely came from working with customers, will move with it. The result may be a drying up of research ideas in American companies. In conclusion, it is clear that U.S. superalloy R&D declined significantly over the past decade, while Chinese and Japanese superalloy R&D is increasing. U.S. companies that are diversifying into offshore manufacturing will probably survive, and to the extent that they are privy to the knowledge generated in non-U.S. laboratories and plants, they will be able to stay competitive. The foreign superalloy industry is growing and is likely to develop technology that is equivalent to or better than the American technology. 5   It is noteworthy that no Italians participated in the 2004 Seven Springs conference, yet Acceria Foroni is a major force in the superalloy industry. 6   Offset obligations are incurred when an agency of a foreign government purchasing a military or commercial product requires that some reciprocal activity take place to help offset the import/ export imbalance in their country created by the purchase.