In 1991, when the Soviet Union broke up, Kazakhstan had an old stockpile of Rhenium thought to be 15 mt. This was sold to the West and kept prices low for the first half of the 1990s while this was absorbed. That was the last time anyone in the world had a large stock of Rhenium. The Defence Logistics Agency (DLA) never had one, and, surprisingly, nor did the Russians. It just wasn’t a significant market when such decisions were taken.
As a measure of where we are today, we need to see that, at 45 mt of supply, the world still needs every gram, kilo and metric ton and it seems almost inconceivable that any party will ever have a stock of more than a few tons again.
It is against this perspective that the largest users, the aero-engine makers need to form their long term supply decisions. In their favour is the long perspective of this industry, where it is common to project airline orders going out 30 years. What was the headline we read last week? ‘The world will need 27,800 new commercial and freight aircraft by 2030’ according to Airbus’s latest Global Market Forecast.
Although it is true that GEs new alloys, N515 (Re 1.5%) and N500 (Re 0%), are making inroads into blades within the most voluminous engine category (for the 69% of new aircraft that will be single-aisle planes), it is a question of whether you view the Rhenium reduction programme as a technological breakthrough or just ‘rationing’. My tendency is, of course, to view it as the latter. The need to reduce Rhenium consumption on high-cycle aircraft, where possible, allows just enough Rhenium to be eeked out amongst its un-substitutable applications in the larger engines – the Trent 1000, lead engine for the Dreamliner, for example, or engines for the A350XWB (Extra Wide Body) – a nice description, I always think, for the aircraft catwalk.
The other side of the Rhenium coin is production. In 2008, when prices peaked at $12,000 per kg, there were far too many headlines for my liking about large new supply coming to the market. Top amongst these was the 7mt per year advertised by Ivanhoe Australia. Perhaps the extrapolation of Rhenium in geology to commercial production was misleading. Certainly, we have yet to see any production from this source as the miners find out that turning grams of Rhenium within ore to kilos in alloy is a long and, yes, rocky, path.
However, there was one tangible benefit to be derived from the high prices of that period – namely, the much better husbanding of scrap. It would be almost inconceivable for anyone not to put aside Rhenium-bearing nickel alloy in the form of casting scrap, used blades or grindings, without first trying to recover the valuable Rhenium units or at least selling them to someone who might.
This cottage industry has really grown in efficiency and is exactly what price is meant to do – the light was shone on the subject and the market reacted. As a result, Rhenium prices have been orderly and balanced. The present levels of around US$4000-4500 reflect exactly the $1500-2000 per kg Re needed to recover Rhenium from such scrap, and $2000 per kg Re at which scrap is sold. Without recovery of these units, or reversion of those units within cleaned scrap – perhaps 10mt in total above the 45 mt of primary supply referred to earlier – the market would quickly revert into deficit.
As to where we go now, long term contracts for Rhenium supply are being talked over between the engine makers and super alloy people but watch closely for Russia. Petro dollars are being directed by the Kremlin to the renaissance of the Russian aircraft industry. This is a flagship industry for the Russian nation and we expect Russia to be a far larger buyer of Rhenium units than China in the coming ten years. They are more advanced and have a longer history in their production of civial gas turbines in general – and, in the case of Russia, their units will most likely come from the free market. And there is no space for them to write producer supply chain contracts with the biggest Western producers as these are already bed-blocked by GE, Pratt & Whitney and Rolls-Royce Plc.
Let’s face it, whatever happens to Rhenium it ain’t gonna be because of the deficit. Sometimes its good not to be in base metals.