Singing Rhenium Trader Knows Why $11,100 a Kilo Saves Lost Fuel
By Michael Janofsky and Chanyaporn Chanjaroen
Aug. 20 (Bloomberg) -- 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 theater.
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,'' Lipmann said in an interview at his office in Walton-on-Thames, about 20 miles (32 kilometers) southwest of London. ``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, 51, 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 aluminum has more than doubled since 2003.
Rhenium, an element found with deposits of copper and molybdenum, traded at $11,100 a kilo (2.2 pounds) in July, compared with $1,478 in June 2005, according to Lipmann.
The grayish metal with the chemical symbol Re is No. 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 U.S. Geological Survey's Web site.
Profit Tripled
In the fiscal year ended July 31, rhenium accounted for 60 percent of the 16.84 million pound ($32 million) revenue of Lipmann's firm, Lipmann Walton & Co., compared with about 40 percent the previous year. Over the same time, the company's profit more than tripled to 1 million pounds, Lipmann said.
``Anthony has specialized in rhenium for a long, long time now,'' says Martin Hayes, chief correspondent for MinorMetals.com, a division of London-based FastMarkets Ltd. ``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 tradable'' on any exchange, Hayes said.
World production of rhenium rose to 49.5 metric tons last year from 47.2 tons in 2006, according to the U.S. Geological Survey. More than 90 percent comes from Chile, Kazakhstan and the U.S., where processors have special equipment to capture the metal, said Michael Magyar, a USGS commodities specialist.
Rhenium's price is unlikely to fall until more such machinery is installed, Magyar said.
Growing Demand
For now, ``as many as seven tons of rhenium a year are lost'' because of a lack of suitable equipment, he said. In addition, Poland's KGHM Ecoren SA, the world's fourth-largest rhenium producer, said on Aug. 7 it was cutting 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 airlines are demanding 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. New engines for commercial aircraft will probably contain as much as 6 percent, said Jack Lifton, a Farmington Hills, Michigan-based consultant to investors who specializes in minor metals.
For its next generation of fighter jets, the Pentagon is also planning to use engines with a higher concentration of rhenium, Magyar said.
Direct Purchases
Deborah Case, a spokeswoman for General Electric Co.'s jet engine unit, provided a company document saying GE is exploring alternatives to rhenium because of its price surge. Spokesmen for United Technology Corp.'s Pratt & Whitney unit and Rolls-Royce Group Plc declined to comment on rhenium.
While engine companies negotiate purchases of the element directly with producers, increased demand for aircraft reduces supplies to the open market. That's pushing up prices for companies that use it for such products as rocket thrusters, turbine blades for power plants and lead-free gasoline.
The limited volume of rhenium that is traded on the open market can make prices hard to assess, Lipmann says.
``Sometimes I'm wrong when I quote it too low or too high,'' he said. ``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.''
Oxford University
Lipmann, who is married with one child, 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,'' he says. His father was a metals trader, creating Lipmann Walton in 1953.
After Oxford, Lipmann 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 at age 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.
``She was married four times,'' Lipmann said. ``But never to Dryden, the great love of her life.''
Love of Arts
Lipmann takes weekly singing lessons, puts poetry to music and attends theater regularly. He said he favors 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 the American Tom Lehrer, which replaces the lyrics of a Gilbert and Sullivan tune with all the known elements.
In 1989, working for the London-based firm now known as Wogen Plc, Lipmann began seeking business in former East 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, or APR, which contains the rhenium produced in refining.
``They asked me whether I could sell it for them,' he said. ``I didn't know what to do with it.''
A colleague told him that a Japanese company might be interested. That led to his first rhenium trades -- 5 to 10 kilos a month to Japan's Sumitomo Metal Mining Co. Ltd., at $1,200 a kilo.
Delivery Refused
During the 1990s, the price of rhenium fell to less than $300. Among Lipmann's customers was one in Los Angeles, who bought a ton a month. One day, the buyer, whom Lipmann declined to identify, refused to take delivery.
``Suddenly I became a proud owner of one ton of rhenium,'' Lipmann said, recalling that it took more than 18 months to sell.
``I almost went bust,'' he said. ``I had put all my money in rhenium.''
Ultimately, rising fuel costs and demand for more efficient jet engines changed his fortunes. He asked a refiner in Germany to convert APR into pellets he could sell on the open market.
``That's how I began at the threshold of a new industry,'' he said. ``In a way, everything came from making a mistake.''
To contact the reporters on this story: Michael Janofsky in Los Angeles at mjanofsky@bloomberg.net; Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net
Last Updated: August 19, 2008 19:01 EDT |
