By Antonita Madonna Devotta

BANGALORE, Sept 1 (Reuters) - A handful of companies
supplying specialty alloys to the aerospace industry are seeing
resurgent demand as emerging markets help pull planemakers out
of a dizzying 2-year downturn.

Airbus and Boeing Co, as well as second-tier plane
manufacturers such as Bombardier and Lockheed Martin Corp, are
looking to increase output to meet new orders amid signs of
post-recession growth.

And that's good news for Allegheny Technologies Inc,
Carpenter Technology Corp and Titanium Metals Corp, which
supply the exotic alloys such as titanium, nickel, cobalt and
molybdenum that go into aircraft frames, seat tracks, engine
components and landing gear.

Most of these firms, and others such as A.M. Castle & Co,
RTI International Metals Inc, and Universal Stainless & Alloy
Products Inc, have beaten Wall Street profit estimates this
year and are set for healthy growth next year, according to
Thomson Reuters StarMine forecasts.

Allegheny, for example, which provided a titanium and
nickel superalloy for the Gemini 4 spacecraft in the 1960s, is
expected to more than double its earnings in 2011, boosted by
the advanced procurement contracts with planemakers for the
exotic, niche alloys that are difficult to get hold of at short
notice.

"We were expecting a dip (in aircraft production) in 2010
and 2011, but now it looks like 2011 might see some solid
growth," said William Chadwick, Director of Research for the
Aerospace Industries Association (AIA).

Aviation went into a nosedive after the global financial
market meltdown, with airlines declaring bankruptcy and new
plane orders dropping sharply -- though this was offset to some
extent by a healthy pre-crisis delivery backlog.

"The trend in building bigger planes will likely boost
metal usage, including titanium, significantly through 2015,"
analyst Lloyd O'Carroll of Davenport & Co said.

Airbus, the world's largest civil planemaker, said in late
July it would raise production of its A320 narrow-body planes
through the first quarter of 2012, reviving a plan from May
2007 for the most ambitious production schedule attempted in
civil aviation.

Boeing, which has again delayed delivery of its 787
Dreamliner, has stuck to its agreed supply schedule with parts
makers.

"The recovery is better than expected," added AIA's
Chadwick. "Everything is very optimistic considering where we
were a year or two ago ... we've revised (our forecasts)
upwards because the recovery is coming faster and much stronger
than we expected."

CARS AND HOUSES: NOT SO BRIGHT

The broader metals industry, however, faces likely
oversupply in the steel chain due to a relatively choppy
recovery in the autos sector, while construction markets remain
under pressure.

"The automotive recovery has been strong, but it's coming
off a very low base," said Leo Larkin, an analyst at S&P Equity
Research, noting the aerospace industry needs extra engineered,
and higher margin, alloys, while materials used in cars are
more commoditised.

The projected volume rebound in plane manufacturing should
boost titanium mills, forgers, fabricators and distributors,
with Allegheny, RTI and Titanium Metals poised for maximum
upside, said Davenport's O'Carroll.

Shares of the metals firms catering mainly to the
aerosopace sector have fared much better this year than those
with a broader portfolio or those that are auto focused.

Titanium Metals, for example, has risen around 40 percent
this year, while shares in AK Steel Holdings Corp and Insteel
Industries, which supply carbon steel to the autos and building
sectors, have shed around half their value.

"From a pure valuation standpoint, they may present a
better opportunity, but if you want something more aggressive
and a little more growth oriented ... you'd lean a bit more
towards the aerospace suppliers," said Larkin.
(Reporting by Antonita Madonna Devotta in Bangalore, Editing
by Ian Geoghegan)