Primary and recycled rhenium supplies stable, ‘engine revert’ increasing rapidly

Roskill publishes new market outlook for rhenium; forecasts that rising demand for rhenium in aero engines will likely be satisfied by increasing supply of secondary rhenium contained in ‘engine revert’ produced from end-of-life gas turbine parts.

At the recent Paris Air Show the big three aero engine manufacturers, GE Aviation, Rolls-Royce and Pratt & Whitney, announced billions of dollars of new sales. This was excellent news to rhenium suppliers since rhenium consumption is dominated by the nickel-based superalloys that are used in gas turbine aero engines and also, to a lesser extent, in industrial gas turbines (IGT).

Gas turbines are some of the most technically accomplished and complex machines ever created, but despite considerable effort by engine manufacturers there is currently very little substitution potential for rhenium-containing superalloys in the hottest parts of the most powerful gas turbines. Since 2005 total rhenium demand from the superalloy sector has grown at a CAGR of 7% and in 2014 accounted for 78% of total rhenium demand.

However, while a straightforward correlation between gas turbine construction and rhenium demand held true in the past, today the picture is less clear due to a mature recycling industry and the increasing quantity of reprocessed end-of-life gas turbine parts consumed as ‘engine revert’.

Primary and recycled rhenium supplies stable, ‘engine revert’ increasing rapidly

Roskill’s 5-year outlook covers the viability of new projects coming on-stream, the supply of material from existing and secondary sources, different scenarios for demand, and the relatively probability of optimistic and pessimistic price forecasts.

Rhenium primary supply is almost entirely as a by-product of copper or molybdenum production and is highly inelastic; since 2006 primary supply has averaged 45tpy and been broadly stable.

In 2014 Chilean refineries produced 40% of primary rhenium from a combination of Chilean and imported molybdenum concentrates. The USA is the second largest producer of primary rhenium at just under 20% and other important sources of rhenium included Poland and China. Kazakhstan’s state-owned rhenium refinery, historically a major rhenium producer, produced very little in 2014 due to a lack of raw materials.

Secondary supply of rhenium, as pure metal or ammonium perrhenate (APR), increased considerably from 2007 to 2012, in response to high rhenium prices and a large investment in new recycling capacity. However, since 2013, against a backdrop of steadily falling spot prices, several recyclers have experienced challenging economic conditions and as a consequence production of secondary rhenium metal and APR has fallen slightly.

The most significant and disruptive development in rhenium supply has been the rapid increase in superalloy ‘engine revert’ produced from end-of-life gas turbine parts. The use of engine revert as meltstock for new batches of superalloy has reduced demand for primary or recycled rhenium metal and this in turn has depressed rhenium spot prices.

The increased availability of engine revert has been supported by the trend in the aero engine market away from selling engines and towards selling pay-by-the-hour engine service agreements. Service contracts close the loop on scrapped engine parts, thereby offering engine manufacturers the opportunity to produce engine revert 'in-house'.

The development of the engine revert supply chain has provided the superalloy industry with a significant degree of control over their rhenium input costs and has reduced their exposure to the spot market. In 2014 engine revert was a relatively open supply chain, but it is likely to become an increasingly closed loop as superalloy manufacturers seek to retain ownership of their rhenium units throughout the life cycle of their gas turbines.

Looking ahead: strong superalloy growth met by increased quantities of engine revert

Demand for rhenium will experience a period of strong growth between 2015 and 2018 followed by stability through to 2020. Demand growth for the forecast period will average 6%py and reach about 85tpy. Superalloy turbine parts for aero engines and industrial gas turbines will remain by far the largest end market for rhenium at over 80% of total rhenium consumption.

On the primary supply side there are no rhenium projects that are expected to contribute a significant net increase in rhenium availability within the forecast period, with the possible exception of production re-starting in Kazakhstan. In Chile the state-owned mining company, Codelco, is constructing a plant at Mejillones which could recover up to 6.6tpy of rhenium from late 2015 onwards, but this plant, called Molyb, will use feed material that would have otherwise been treated by Molymet.

The rhenium recycling industry, the market’s swing producer, experienced considerable capacity growth when rhenium metal and APR spot prices were high, but is now squeezed between low spot prices and relatively high scrap prices. Several recyclers have reduced their operations, but should prices rise again recycling activity will increase once more.

The increasing supply of engine revert is expected to continue over the next decade, echoing the growth in the use of rhenium-containing alloys in aero engines since the late 1990s, albeit after a delay of over a decade.

The story of the rhenium market since 2008 has been that of a small group of rhenium consumers from the superalloy sector (aero engine manufacturers and superalloy producers) systematically increasing their control over rhenium supplies, not for anti-competitive reasons, but in order to stabilise their input costs and reduce their exposure to a low volume, but essential, raw material. Despite past volatility, the future market for rhenium is expected to be more stable, largely as a result of increasing quantities of engine revert becoming available.

Roskill’s latest rhenium report provides an in-depth look at an industry that little information is otherwise available on, and is dramatically more comprehensive than its previous editions. This new report provides a detailed analysis of supply, demand, trade, and prices, complete with detailed historical and forecast data, geared specifically to the needs of industry participants, traders and investors.

Roskill’s new Rhenium: Market Outlook to 2020 report contains full estimates for 2014, profiles on major producers and projects, an assessment of key market trends and an outlook for supply, demand and prices to 2020.

This latest edition is available at a price of £5500 / US$8800 / €6900 from Roskill Information Services Ltd, 54 Russell Road, London SW19 1QL ENGLAND. Tel: +44 20 8417 0087, Email: [email protected]   Web: www.roskill.co.uk/rhenium.