INTERVIEW: Protectionism ‘isn’t all bad’ for minor metals, Anthony Lipmann says
The minor metals industry is facing turbulent times and increased volatility in all regions, but some things remain constant and there are always new opportunities if you know where to look, says former-chairman of the MMTA Anthony Lipmann.
For Lipmann, owner of niche metals company Lipmann Walton and former chairman of the Minor Metals Trade Association, the constants include an “old fashioned” way of trading combined with flexibility toward new market opportunities.
And this approach has worked for his company, which now generates an annual turnover of roughly £8-12 million ($10-15 million).
But being flexible enough to respond to new markets and new opportunities is also a key part of the business plan.
The family-owned company, which is based at Hampton Court on the outskirts of London, specializes in niche metals and trades around 34 commodities and by-products, including zirconium, hafnium, rhenium, gallium and indium. Its principal customers include the aerospace industry, the makers of super alloys and master alloys, along with electronics component manufacturers.
Lipmann has been in the industry for 40 years, but writing is his other passion and he has decided that now is time for a different chapter in his life. He plans to pass the running of the family firm to his 31-year-old daughter, Suzannah Lipmann, part of the family’s third generation of metal merchants.
The transition to becoming managing director of Lipmann Walton is already under way but “this will be a steady and transparent process,” Suzannah says.
“While I want to maintain our core values and keep things as stable as they have been, at the same time I am willing to be flexible,” she adds. “The opportunities are there if we are willing to adapt.”
The business model will remain the same, however, with the company still holding stocks and releasing them when they are required.
“Instead of doing back-to-back transactions,” Anthony says, “we decided that the less risky way [to do business] was to buy metals and just sell them when necessary.
“If we buy zirconium, we know that this is used in a certain industry. But the people that buy it don’t know when they will need it - and we do,” he adds. “The reason we make money is that we have it in stock - we are a stockholder. Sometimes we hold stocks for a year or more.”
The company’s business typically relies on researching and anticipating which metals will see surges in price. This obviously entails a level of risk.
Often, the company’s involvement in trade for a specific element begins with a customer-led inquiry. But it can also be application-led and may depend on new usages for rare metals.
“Rare metals are not really hit by big macroeconomic movements,” Lipmann says. “But sometimes, suddenly, a group of factors [push prices up] together.”
This was the case with pure vanadium metal - a niche product used in a small selection of super-alloys and one of the company’s specialities.
The vanadium market has tightened since late 2016 due to environmental inspections in China and a ban on imports of vanadium slag. In addition, new regulations from Beijing requiring a higher minimum vanadium content in steel rebar have created a rush for the material by end users.
Fastmarkets MB’s price assessment for vanadium pentoxide was $28.50-29.00 per lb, in-warehouse Rotterdam, on Friday November 30, up by 275% compared with November 2017.
“Still, sometimes the market goes against us [so] we know how to lose money,” Lipmann says.
But, of course, the company knows what a good day looks like. Some of the materials it has in stock have reached a price peak in recent years. Over the past decade, for instance, Rhenium has become a vital part of the aerospace industry, where it is used in high-temperature superalloys.
Fastmarkets MB’s most recent price assessment for rhenium was $1,440-1,580 per lb on November 23, unchanged since early August.
Hafnium is also a strategic metal in the construction of nuclear power plants and industrial gas turbines. And even in a market that only consumes about 50-60 tonnes per year at best, increased demand and tight supply have driven up prices.
Fastmarkets MB’s price assessment for hafnium was $950-1,050 per kg, in warehouse, on November 23, steady since May.
“We are focusing on scandium and amorphous alloys [bulk metallic glasses based on zirconium], which I handle,” Suzannah says. This rare-earth element is generating significant interest in the aircraft industry for its good strength-to-weight ratio.
While new markets are always on the company’s watch list, so too are new regions - it is gravitating toward Asia. “Not long ago, we signed our biggest contract with Japan,” Suzannah says.
This was achieved thanks to her long familiarity with the country and to her language skills.
“We are also opening to South Korea, with a growing number of contracts in the country,” she says. “When interacting with other cultures, a lot of it is to do with the way you deal with your clients. You very much need ‘soft’ skills.”
She is part of a new group of metal traders aged 25 to 35 in whom Lipmann Walton is keen to invest. The company sets no targets for its employees; this is partly to avoid over-trading and too strong a focus on quantity over the quality of deals but, above all, it is to keep a focus on the building of expertise.
The company tries to find a balance between pursuing new opportunities and building customer loyalty.
“We have had some of the same customers for 25 years,” Anthony says. “There are many companies that were ‘born yesterday’ and expect to be treated in a certain way but we have earned the trust of our counterparts. A small company can have big relationships - we sign around 150 contracts a year and try to include three or four new companies.”
Protectionism can bring new opportunities
Anthony Lipmann started making significant profits when the commercial world was opening up in the 1990s with the break-up of the Soviet Union.
Although several Lipmann Walton clients are based in Russia and Eastern Europe, Antony does not believe that the current isolationist trend and the trade restrictions they give rise to will harm the business.
“Protectionism is not necessarily a bad thing for our industry,” he says. “The more barriers you put in my way, the happier I am. It makes it more interesting. We have no fear.
“The metals trade goes in cycles” he adds. “During my father’s time - he set up the company during the Cold War in 1953 - traders would be dealing between countries that could not deal directly with each other.”
Should the trade war between United States and China escalate further, “it might change the flow of trade, but people will [still] need rhenium for engines and cobalt for batteries, [and] some of these materials are irreplaceable,” Anthony says.
The situation looked more positive after US president Donald Trump and Chinese president Xi Jinping reached a temporary truce at the G20 summit in Buenos Aires on December 1, when they agreed to postpone certain tariffs for 90 days, but there is still uncertainty about whether or not they can resolve their differences.
The trade war could, in Anthony’s opinion, benefit other countries. “I am surprised that Russia, the main producer of titanium, is not withholding supplies, since the US and Europe depend on it,” he points out.
Other uncertainties that slow down trading can also lead to positive developments, in Suzannah’s view.
“Brexit could present new trading opportunities,” she says, referring to the process by which the UK is negotiating to leave the European Union.
The essence of the Lipmann Walton trading strategy is bridging the gaps between countries and moving metals between different regimes and places. Anthony decries speculation in the minor metals industry.
“We are very lucky in the minor metals trade, which has low volumes of material and high values that are not that liquid enough to be traded on an exchange,” he says. “And because it is off-exchange, and is so niche and so complicated at the same time, it does not attract investors - and we hope that it never will.
“It is business-to-business... Our end user is not a faceless broker but a real customer,” he adds.
Suzannah also puts great emphasis on this as she prepares to take up her new position.
“I will never compromise our values or take a shortcut, [and risk ruining] many years of reputation,” she says.
She is gradually announcing the transition in the company’s leadership to her contacts but her father will remain an influential voice. “I will [still] attend conferences and get involved,” he says.
There is every indication that he will not be far away, and - in his own words - will still be “a very stable element, not reactive.”