logo-loader

Vanadium prices rise as China rebar standards improve

no_picture_pai.jpg

SP Angel – Morning View – Wednesday 10 10 18

 

Vanadium prices rise as China rebar standards improve

CLICK FOR PDF

MiFID II exempt information – see disclaimer below 

 

Bushveld Minerals* (LON:BMN) – Vanadium prices continue to rise on shortage of vanadium pentoxide as new rules on vanadium in steel come into force in China

Kefi Minerals* (LON:KEFI) – Quarterly update

Strategic Minerals* (LON:SML) – Quarterly magnetite sales and cash balances

 

Vanadium prices rise

  • Vanadium prices jumped another 6% higher to US$112-116/kgV in Western Europe this week according to Metal Bulletin.
  • Asian Metals also report a vanadium of US$117.5/kgV for ferrovanadium in China.
  • The Metal Bulletin report US$104-110/kgV for China.
  • Metal Bulletin’s trade log gives a useful view of the trade in ferro-vanadium and vanadium pentoxide with trades showing up to 28 September.
  • The high price of vanadium is reporting to be causing some substitution of ferrovanadium with ferroniobium though this does not appear to be affecting the rise in prices.
  • Asian Metals in Beijing report a shortage of vanadium pentoxide is driving prices and this will not change in the short term.

 

Vanitec applauds more stringent Chinese rebar standards

  • Vanitec, the International Trade Association representing companies and organisations involved in the processing, manufacture, mining, research and use of vanadium and vanadium-containing products, today praised the Standardisation Administration of the People’s Republic of China on its recently released new high strength rebar standard intended to reduce the use of substandard steel to improve earthquake resistance of buildings.
  • The new rebar standard, GB/T 1499.2-2018 released by the government earlier this year and comes into effect on 1st November, eliminates low strength Grade 2 (335MPa) rebar and authorizes 3 different high strength standards: Grade 3 (400MPa), Grade 4 (500MPa), and Grade 5 (600MPa).
  • Professor Yang Caifu, of the Chinese Central Iron & Steel Research Institute (CIRSI) who leads the joint Vanitec/CISRI Vanadium Technology Centre noted that "for hot-rolled HS rebar, V content will be at 0.03% V in Grade 3, 0.06% V in Grade 4, and more than 0.1% in Grade 5 rebar so the implementation of the new standard will significantly promote the application of vanadium in Chinese rebar products."
  • "Vanadium is the most common addition for high strength rebar, because it offers the best combination of high strength, good ductility, bendability, weldability, and reduced sensitivity to strain aging", according to Vanitec. Unlike the substitute niobium, vanadium permits the use of economical hot rolling practices due to the high solubility of vanadium carbonitrides in austenite which minimizes the risk of cracking during casting.
  • Limited primary mine supply and shuttering secondary production from environmentally harmful magnetite steel manufacture is creating a tightening market balance to draw ferro-vanadium 80% prices to record highs of $117.5/t.

 

New lithium superpower created by booming battery industry

  • With projects and partnerships now spanning South America and Australia, Chinese major Ganfeng Lithium Co., are utilising proceeds from a share sale in Hong Kong this week to continue a growth spree that’s forecast to make it the industry’s second-largest producer this year.
  • On a recent site visit to Ireland with the Company’s first overseas partners International Lithium Corp. to study prospective sites, former executive Kirill Klip adds “They understood so many years back -- in the early 2000s -- that lithium would be driving all of the green energy revolution. It’s a very hands-on approach, literally -- they were working with our geologists turning over rocks, studying all the lithium boulders.
  • Since that Irish expedition, Ganfeng’s share of refined lithium output has jumped from about 6% in 2013 to an estimated 11% this year, according to Roskill Information Services Ltd. It accounts for about a quarter of battery-grade lithium hydroxide, the material that’s now most sought after by automakers, the researcher’s data shows.
  • Formed in 2000 in southeastern Jiangxi province and listed in Shenzhen a decade later, Ganfeng’s expertise has been in processing lithium raw materials -- which come typically from South America’s salt lakes or mines in Australia -- into the next stage chemical products that can be used in lithium-ion batteries. Its rapid growth and plans to use its share sale proceeds to lift output further have drawn blue-chip customers anxious to secure long-term supply. Since August, Ganfeng has struck new agreements with Tesla Inc., BMW AG, and battery producer LG Chem Ltd.
  • That swift growth has been well timed. Fewer than one million EVs had been sold in total at the start of 2016, there are now about four million on the world’s roads and it’ll take only about another six months to add a further million, according to Bloomberg New Energy Finance.
  • The jump in lithium output has swelled Ganfeng’s earnings -- forecast to rise about a third this year -- and catapulted the company ahead of established industry leaders such as FMC Corp. in terms of volumes. It’s on course to surpass the second-largest, Chile’s Sociedad Quimica y Minera de Chile SA, this year, according to consultant CRU Group, and is seen eventually challenging the No. 1, Albemarle Corp.
  • Vice Chairman Wang Xiaoshen focuses on disciplined growth, noting “We lithium suppliers still have to be careful not to over-expand our business, we have to be more conservative. We want to do things step-by-step, every year see how the market grows, see how the near-term demand grows.”
  • Recent expansions were announced only once the company had secured long-term supply agreements with customers such as LG Chem and BMW, according to Wang. “So we don’t just dream about big demand coming and then build capacity.”
  • For the longer-term, Ganfeng is positioning itself for opportunities beyond raw materials, including battery production and recycling.

 

Dow Jones Industrials

 

-0.21%

at

  26,431

Nikkei 225

 

+0.16%

at

  23,506

HK Hang Seng

 

+0.44%

at

  26,287

Shanghai Composite

 

+0.18%

at

   2,726

FTSE 350 Mining

 

-0.18%

at

  17,305

AIM Basic Resources

 

-0.27%

at

   2,165

 

Economics

US – The US$ index and Treasury yields have pulled back on Tuesday on the back of President Trump comments that the Fed

  • Speaking to reporters late US time on Tuesday, Trump said he does not like what the Fed is doing because the US has inflation “really checked” and he does not think “it’s necessary to go as fast” with raising rates.
  • Nikki Haley, a US ambassador to the UN, said she will be retiring from the post after spending two years as a representative in the organisation.
  • The decision is reported to have come as a surprise to several White House officials, including Chief of Staff John Kelly and Vice President Mike Pence.
  • Trump is planning to name a successor in two to three weeks or sooner.
  • Hurricane Michael led to a shutdown of nearly 40% of US Gulf of Mexico crude output with the storm upgraded to Category 4 (of 5).
  • The nation’s largest privately-owned crude terminal, the Louisiana Offshore Oil Port LLC, said on Tuesday it halted operations at its maritime terminal.
  • In total the storm is reported to have closed 670k barrels of daily oil and 726mln cubic feet of natural gas production by midday on Tuesday, according to the Bureau of Safety and Environmental Enforcement.
  • Hurricane conditions are expected to also spread well inland across portions of the Florida Panhandle, southeaster Alabama and southwestern Georgia.

 

France – Industrial production growth ticked lower in August amid a general trend of weakening expansion pace in output across Eurozone economies.

  • Industrial Production (%mom/yoy): 0.3/1.6 v 0.8/1.9 in July and 0.1/1.5 forecast.

 

UK – The pound is climbing on the back of positive momentum in the Brexit negotiations as the Times reported that a group of 30-40 Labour MPs are planning to endorse a less hard-line proposal to avoid a no-deal exit.

 

Italy – Government bond yields have come off from multi-year highs driven by Finance and Economy Minister Giovanni Tria worried tone over a sell off in the government debt.

  • Tria highlighted government concerns over “unacceptable” bond yield spread which hit close to the highest level in more than five years.
  • The spread climbed to 316bp yesterday before coming down just below 300bp.
  • “Although so far there hasn’t been an explosion as some feared, we are of course worried… as a responsible government we aim to explain the budget and thus investors in our meetings in order to calm markets,” Tria said.
  • Nevertheless, the minister has not offered any signs that the government will change its plans, supporting the targets set by the cabinet earlier.
  • The stock index is down 0.1% this morning and is off 7.4% since the end of September as market worries over official budget intensified.

 

Currencies

US$1.1488/eur vs 1.1472/eur yesterday  Yen 113.09/$ vs 113.35/$  SAr 14.587/$ vs 14.869/$  $1.317/gbp vs $1.308/gbp  0.711/aud vs 0.707/aud  CNY 6.920/$ vs 6.923/$

 

Commodity News

Precious metals:         

Gold US$1,189/oz vs US$1,188/oz yesterday

   Gold ETFs 67.1moz vs US$67.1moz yesterday

Platinum US$825/oz vs US$825/oz yesterday

Palladium US$1,073/oz vs US$1,071/oz yesterday

Silver US$14.40/oz vs US$14.40/oz yesterday

           

Base metals:   

Copper US$ 6,282/t vs US$6,292/t yesterday

Aluminium US$ 2,045/t vs US$2,056/t yesterday

Nickel US$ 12,935/t vs US$13,010/t yesterday

Zinc US$ 2,682/t vs US$2,678/t yesterday

Lead US$ 1,938/t vs US$1,936/t yesterday

Tin US$ 18,980/t vs US$18,925/t yesterday

           

Energy:           

Oil US$84.9/bbl vs US$84.5/bbl yesterday

Natural Gas US$3.311/mmbtu vs US$3.293/mmbtu yesterday

Uranium US$27.55/lb vs US$27.50/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$69.5/t vs US$69.2/t

  • Iron ore futures in Dalian climb to highest level in two months as restocking by mills after the week-long National Day holiday drives demand. Benchmark spot prices advanced to the highest level since March, breaking out of a long run in the $60’s range, while high-grade material nears $100 a metric ton amid signs of sustained demand in China. The rally has come as Beijing battles air pollution by curbing industrial activity, although analysts are divided on whether restrictions this year will be harsher than last season.
  • Exports of ore to China from Australia’s Port Hedland, the main maritime gateway to mines in the Pilbara, rose to 37.4mt last month, from 35.5mt in August, according to port authority data.
  • As part of efforts to support growth, China said this week it’s speeding up construction of 15m homes in program that so far has pumped 3.2tr yuan ($463bn) into the economy.
  • Iron ore for Jan. as much as +1.8% to 518 yuan/ton on Dalian Commodity Exchange, highest since Aug. 14.

Chinese steel rebar 25mm US$680.8/t vs US$680.5/t

Thermal coal (1st year forward cif ARA) US$97.0/t vs US$98.8/t

Coking coal futures Dalian Exchange US$191.7/t vs US$191.6/t

           

Other:  

Cobalt LME 3m US$61,750/t vs US$62,000/t

China NdPr Rare Earth Oxide US$46,606/t vs US$46,582/t

China Lithium carbonate 99% US$9,827/t vs US$10,039/t

Tungsten APT European US$275-290/mtu vs US$275-290/mtu

 

Company News

Bushveld Minerals* (LON:BMN) 27.9p, mkt cap £309m – Vanadium prices continue to rise on shortage of vanadium pentoxide as new rules on vanadium in steel come into force in China

BUY - Target Price raised to 37p (from 34p)

(Bushveld Minerals now hold 74% of Vametco)

  • Vanadium prices continue to rise driven by China’s drive to reduce pollution and new standards increasing the proportion of vanadium used in steel for construction, mainly rebar.
  • China’s Green Shield strategy has caused many major steel producers to switch to cleaner and higher grade Australian iron ore which contains much less vanadium for byproduct production
  • Ferro-vanadium prices jumped another 6% higher to US$112-116/kgV in Western Europe this week according to Metal Bulletin.
  • Asian Metals also report a vanadium of US$117.5/kgV for ferrovanadium in China.
  • The Metal Bulletin report US$104-110/kgV for China.
  • Metal Bulletin’s trade log gives a useful view of the trade in ferro-vanadium and vanadium pentoxide with trades showing up to 28 September.
  • The high price of vanadium is reporting to be causing some substitution of ferrovanadium with ferroniobium though this does not appear to be affecting the rise in prices at this stage.
  • Asian Metals in Beijing report a shortage of vanadium pentoxide is driving prices and this will not change in the short term.
  • We also expect some incremental increases in production from primary vanadium producers though primary vanadium only makes up 17% of the global supply.
  • Some new byproduct production from graphite production may also come to the market in future years though difficulties in vanadium extraction from this source may delay its introduction.

Model Assumptions:

  • We are raising our price assumptions for vanadium to US$82.17/kgV from US$77.8/kgV for 2018 and to US$45/kgV from US$35/kgV for 2019.
  • We are looking at the potential impact of ferro-vanadium substitution with ferro-niobium in the steel industry though we suspect this is may only apply at relatively high price levels.
  • The South African rand remains relatively weak partly due to the impact of South African government statements on the reclamation of farms without compensation and government inaction relating to violence on South African farms.
  • The spot rand price is at 14.587 against the US dollar. We assume the spot rand rate for 2019 onwards in our modelling vs a rate of 14.2 previously.

Conclusion

See further inputs and assumptions in the table below:

*SP Angel act as Nomad and broker to Bushveld Minerals. The analyst has visited the Vametco process plant and associated mining operations.

 

Kefi Minerals* (LON:KEFI) 1.9p, Mkt Cap £10m – Quarterly update

  • The Company has provided an update on the status of the Tulu Kapi Gold Project financing and development schedule.
  • ANS Mining Share Company, a local investment syndicate, committed $30-38m in equity funding in TKGM, an Ethiopian subsidiary owning the mining license over the project area, to be dispersed in two tranches subject to a set of conditions:
  • $9m to be released in December 2018 subject to official approvals and the receipt of indicative terms sheet from providers of the balance of the project funding;
  • $21-29m at the closure of full development funding in early 2019.
  • The Government of Ethiopia committed $20m towards the project to be released over 2019-20 covering infrastructure spend.
  • $160m in secured bonds ($110m to cover construction costs and $50m to fund financing costs during the construction period) as well as $20m working capital facility have been proposed.
  • Resettlement programme is scheduled to start 1 January next year and proceed over the next three months.
  • Construction is expected to be launched in Q1/19 and commissioning is forecast in H2/20.
  • On updated DFS numbers the project is estimated to run at $800/oz AISC and generate $73m in EBITDA per annum with a payback of three years.
  • Start of exploration works across licenses in Ethiopia and Saudi Arabia will be launched once the Saudis pass new mining regulations and construction activities start at Tulu Kapi.

*SP Angel act as Nomad and Broker to KEFI Minerals

 

Strategic Minerals* (LON:SML) 1.5p, Mkt Cap £20.0m – Quarterly magnetite sales and cash balances

  • Strategic Minerals reports the sale of 10,304 tons of product worth US$598,000 during the three months to 30th September 2018 from its Cobre operation in New Mexico. This brings the rolling 12 months sales from Cobre to 74,364 tons or US$4.9m.
  • Despite the "suspension of minimum monthly sales associated with a major client's contract, as announced on 7 June 2018", comparative rolling 12 months sales remain significantly above the 57,279 tons recorded for the 12 months to September 2017 and revenues of US$4,9m are ahead of the US$3.7m reported for the twelve months ending 3oth September 2017.
  • The company reports a 30th September cash balance of US$1.77m (30th June 2018 - US$ 2m), following expenditure of approximately  US$800,000 on the advancement of exploration at the CARE properties in Western Australia, the Leigh Creek Copper project in South Australia and the drilling at the Redmoor property of Cornwall Resources during the quarter plus the expenditure of around US$340,000 on corporate overheads.
  • Strategic Minerals confirms that "Currently, the Company expects it will fund the remainder of its 2018 development expansion plans from internally generated funds and have significant surplus funds at the year-end"
  • Commenting on the progress achieved, Managing Director, John Peters said that "With production expected to be re-started at Leigh Creek Copper Mine next year and work expected to commence on a Pre-Feasibility Study for Redmoor, the Board feels confident that recognition of this underlying value is near-at-hand."

Conclusion: Strategic Minerals' Cobre sales are continuing to fund the exploration at CARE and at Redmoor as well as the re-opening of the Leigh Creek Copper mine. The company expects to finish 2018 with surplus finds available as it moves to the establishment of a second cash generating asset at Leigh Creek in 2019.

 

*SP Angel act as Nomad and broker to Strategic Minerals

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

DXS International to launch its new suite of solutions for the NHS early...

David Immelman, CEO of DXS International, tells Proactive London's Andrew Scott the vision of the business is to help healthcare payers such as the NHS to reduce the cost of healthcare but also to improve the outcomes for patients and helping over-worked clinicians. He says they're on the...

9 minutes ago

16 min read