In a market as opaque as rhenium, the announcement (Pratt & Whitney’s website, Sept 4th 2014) that they made a deal to buy $690 mln of rhenium from the world’s largest producer was historic and, in a very rare way, surprisingly visible.
We now know that the world’s largest producer, Molymet of Chile, has entered a new long term supply agreement. We know the value of the contract but we do not know the period or price. But, what we do know is actually quite a lot to go on. One way of un-packing the deal is to input the present price of rhenium – at $3000 per kg – and see what this tells us. At this price, it would mean that PW bought 230mt of rhenium. As Molymet, in 2013, exported no more than 21.5mt of rhenium (90% in metal form), this suggests that PW has bought either a) all Molymet’s present output for 10 years or b) about half its output for 20 years (assuming that output and exports in last few years have been a similar figure). Either way, it is a lot of rhenium and in this famously inelastic market a stunningly important deal for both parties.
Out of a rough annual world primary supply of 45mt, it tells us that either 51% or 25% per year is spoken for. So what about other end users – GE Aviation, GE Medical, GE IGT, Rolls-Royce, other small engine manufacturers, not to speak of catalyst makers and even other new users of rhenium which we understand are on the horizon. Well, they are going to have to fight over the remainder. In a wider sense, the deal also tells us a couple of things about rhenium’s usefulness, previously left to argument and conjecture.
GE for example had been in the forefront of a counter-view, prevalent since 2008 when rhenium touched $12,500 per kg, citing that Reduction, Re-Use and Recycling would limit rhenium demand. GE then also made much of the potential for CMCs (Ceramic Matrix Composites) to replace traditional nickel base alloy for the hot section of the engine where rhenium had hitherto been seen as un-substitutable. On the evidence of this order, PW at least is acting as if they are prepared to admit that traditional single crystal alloys containing 3% or 6% rhenium remains the technology of choice for the hot section of their gas turbine engines.
In fact it tells us that perhaps what has been happening since 2008 was not an attempt to discard rhenium’s use, but merely to ration it. Yes, it has been possible, in engineering terms, to get away with the use of less rhenium or no rhenium in some alloys within the HPT (High Pressure Turbine) for lower thrust engines on the wing of high frequency planes – this loss of fuel efficiency was compensated for in other ways. What is clearer now is that in larger engines, and in the military, this is not an option. It surely stands to reason that a plane in every way as revolutionary as either the F35 or the Boeing 787, which a while back got approval to fly from pole to pole entailing ETOPS approval to fly for five and a half hours at low altitude on one engine, won’t be in the business of skimping on materials.
Furthermore, over the last few years there were some downsides to CMCs, not so much to do with performance, but for testing. While it is possible to see into the heart of a metal blade with ultrasound to test for cracks, this methodology cannot be used on CMCs. Nonetheless, a robust replacement method has not been found.
A brief look at the world supply of rhenium further emphasizes the significance of the deal and shows that PW appears to have decided that absolute certainty of supply was needed as they entered a period in which both military and civil engine order books were full. Interestingly, for rhenium observers, is the fact that the supply side of rhenium has changed very little in the last ten years in terms of the total quantity of primary rhenium available. The above Dunkin’ Donut Chart (or Krispy Kreme, if you prefer), shows how the rest of the market is made up of only three other large producers – Freeport McMoran (Climax) USA, KGHM OF Poland and, to a lesser extent, LS Nikko of South Korea. Climax is largely sold out forward and LS Nikko is dependent on Rhenium recovered from incoming South American copper concentrates recovered at their Onsan smelter in South Korea, and produce only APR (Ammonium Perrhenate) and no rhenium pellets. Only KGHM has the potential, (as mentioned at the MMTA Conference in London in April this year) to increase from the present 7mt to about 10mt, but they too are thought to be committed largely to Rolls-Royce Plc satisfying Europe’s demand for rhenium. Left out of the Donut is the Kazakhstan (refurbishment of the Dheskasgan Smelter means no present production of rhenium) and Kennecott of Utah, USA, whose $650 mln investment in their MAP (Molybdenum Autoclave Process), at one point expected to produce 3mt per year rhenium, was mothballed.
Only two aspects of the market provide hope for the hungry – the continued better recovery and recycling of rhenium from spent blades and casting scrap and, in a new development, promises that Codelco (the world’s largest copper producer) will build a new molybdenum roaster in Mejillones with a rhenium circuit and which, after numerous delays, is scheduled to produce the first rhenium in 2016. There again, much of the rhenium will come from Mo concs originating from Chuquicamata which presently go to Molymet.
All in all, for those inclined to sleep on the subject of rhenium, this order is one of the biggest wake-up calls in a long time.
Published on MetalPrices 19.09.14