Rhenium trader strikes it rich as demand soars
August 21, 2008
By Michael Janofsky and Chanyaporn Chanjaroen
For more than a decade, Anthony Lipmann led a life of trading metals such as indium, dysprosium and strontium while feeding his passion for the arts with singing lessons and the theatre.
Nowadays, Lipmann is fighting off approaches from hedge funds battered by credit and equity markets that are eyeing his success in rhenium, a rare metal that helps jet engines save fuel.
In three years, rhenium's price has jumped almost eightfold as airlines seek to rein in oil costs, enabling Lipmann's firm to triple its profit.
"I get calls from hedge funds every day," says Lipmann.
"I merely quake at the words 'hedge fund'. We're like hedgehogs with their needles up when they come round. This is so arcane, what we do; they'll never get in."
Lipmann, who once wrote a biography of a Hollywood costumier and says he got into the rhenium business by chance, is hardly the only trader taking advantage of metal prices rising on increased demand from countries such as China, India and Brazil.
Even after falling from record highs earlier this year, copper has gained more than fourfold and aluminium has more than doubled since 2003.
Rhenium, an element found with deposits of copper and molybdenum, traded at $11 100 (R85 824) a kilogram last month, compared with $1 478 in June 2005, Lipmann says.
The grayish metal, with the chemical symbol Re, is ranked 75 on the periodic table of elements, between tungsten and osmium. It was the last naturally occurring element to be discovered, in 1925, according to the US Geological Survey.
In the fiscal year to July, rhenium accounted for 60 percent of the £16.84 million (R242 million at yesterday's exchange rate) revenue of Lipmann's firm, Lipmann Walton, compared with about 40 percent the previous year. Over the same time, profit more than tripled to £1 million, says Lipmann.
"Anthony has specialised in rhenium for a long, long time now," says Martin Hayes, the chief correspondent for MinorMetals.com, a unit of UK-based FastMarkets. "Other traders get involved occasionally with rhenium, but they're not as consistently involved. His price is deemed to be the most accurate."
The amount of the metal that is produced globally is "too small to become tradeable" on any exchange, says Hayes.
World production of rhenium rose to 49.5 tons last year from 47.2 tons in 2006, according to the US Geological Survey. More than 90 percent comes from Chile, Kazakhstan and the US, where processors have special equipment to capture the metal, says Michael Magyar, a US Geological Survey commodities specialist.
Rhenium's price is unlikely to fall until more such machinery is installed, he says.
He adds that for now, "as many as seven tons of rhenium a year are lost" because of a lack of suitable equipment. In addition, Poland's KGHM Ecoren, the world's fourth-largest rhenium producer, said earlier this month that it was cutting its annual output estimate by 10 percent because of delays in installing new technology.
All of that helps Lipmann maintain his influence in the market at a time when airlines demand more efficient engines. Rhenium's high melting point enables jet engines to run hotter and burn fuel more effectively.
For more than 20 years, engine makers have used turbine blades with a rhenium content of 3 percent.
Jack Lifton, a Michigan-based consultant to investors who specialise in minor metals, says new engines for commercial aircraft may contain as much as 6 percent rhenium.
Magyar adds that for its next generation of fighter jets, the US is also planning to use engines with a higher concentration of rhenium.
Deborah Case, the spokesperson for the jet engine unit at General Electric (GE), provided a company document that says GE is exploring alternatives to rhenium because of its price surge.
While engine firms negotiate purchases of the element directly with producers, increased demand for aircraft reduces supplies to the open market. That is pushing up prices for companies that use it for products such as rocket thrusters, turbine blades for power plants and lead-free fuel.
The limited volume of rhenium that is traded on the open market can make prices hard to assess, says Lipmann.
"Sometimes I'm wrong, when I quote it too low or too high," he adds.
"But that's the way to feel the market. When you make a mistake, it's a sacrificial mistake, then you know where the market is now and then you make more money."
Lipmann has traded metals his entire career after graduating from Oxford University in 1978 with a degree in English literature and "no conception of a job whatsoever". His father was a metals trader, creating Lipmann Walton in 1953.
After Oxford, he worked at five different firms before reviving Lipmann Walton in 1993.
He took one break, in the mid-1980s, to write a biography of Ernst Dryden, an Austrian clothing designer and commercial artist who left Europe in the early 1930s for Hollywood.
Dryden died in Los Angeles in 1938, aged 50. He had been the lover of Lipmann's great aunt, Helene, who was born in Vienna in 1900 and died in 1976.
Lipmann found a trove of Dryden's work in her attic.
Lipmann takes weekly singing lessons, puts poetry to music and attends theatre regularly. He says he favours Shakespeare and other British artists, such as composer Ralph Vaughan Williams and poet Wilfred Owen.
Once, before a private audience, Lipmann performed The Elements, a song by American Tom Lehrer, which replaces the lyrics of a Gilbert and Sullivan tune with all the known elements.
In 1989, while working for the London-based firm now known as Wogen, he began seeking business in former eastern bloc states as the Soviet Union was collapsing.
In Poland, he approached Impexmetal, which controlled metal exports under the communist regime.
The company offered him supplies of ammonium perrhenate, which contains the rhenium produced in refining.
"They asked me whether I could sell it for them. I didn't know what to do with it."
A colleague told him that a Japanese firm might be interested. That led to his first rhenium trades: 5 kilograms to 10kg a month to Japan's Sumitomo Metal Mining, at $1 200 a kilogram.
During the 1990s, the price of rhenium fell to less than $300 a kilogram. Among Lipmann's customers was one in Los Angeles who bought a ton a month. One day, the buyer, whom Lipmann declines to identify, refused to take delivery.
"Suddenly I became a proud owner of one ton of rhenium," he says, recalling that it took more than 18 months to sell.
Ultimately, the prices of fuel rose and demand for more efficient jet engines changed his fortunes.
"That's how I began at the threshold of a new industry. "In a way, everything came from making a mistake."
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