A large fire at Precision Cast Parts' fastener facility in Jenkintown, PA apparently destroyed much of the 560,000 square-foot factory located about 10 miles north of Philadelphia on Monday. Thankfully, no serious injuries were reported, and all employees have been accounted for by the company. A shelter-in-place order was issued by local authorities due to concerns over air quality resulting from the fire.
Damage weakens the aircraft makers' supply chain
The good news about the employees' well-being aside, the event is another serious blow to the aerospace supply chain that has absorbed a seemingly never-ending series of blows over the past five years. Fasteners made at the Jenkintown plant, such as rivets and hi-locks, are one of the key commodity areas necessary for high-volume aircraft production, and they have been a historical pinch point for the industry.
Factors influencing new investments in the sector
You'd think that commodity areas that frequently experience shortages would be excellent investment opportunities for strategic players and opportunistic investors alike, and, to a certain extent, they are. Still, the barriers to entry are high and include challenging and lengthy customer quality certification requirements and an extremely high capital investment. Furthermore, like any capital-intensive, high-volume business, fastener plants need to be run at or near capacity to achieve the financial performance necessary to justify the investment. All these factors combine to create a situation where an industry has to experience a significantly insufficient capacity (which is forecasted to continue) in order for interested parties to take the leap and bring new capacity online.
Likely impacts on aircraft production
At Riveron, we estimate that the Jenkintown facility represents a material proportion of domestic aerospace grade fastener capacity, including a number of bespoke fasteners for which the facility has been the sole source. The supply chain and distribution channels likely have approximately 90 days worth of supply on hand, but, after that, we expect that aircraft production will be affected.
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