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January 19, 2019 3

Vanadium 2018 – Wild Ride or Steady Growth?

vanadium-rotary-kiln
A rotary kiln operating at a large Chinese steel mill in late 2018

What really happened in 2018?

After a roller coaster ride in 2018 many people are worried that Vanadium is likely to repeat it’s boom and bust past. In fact, if we discount November and December what we see is simply solid growth throughout the year.

A seasonal decline in Vanadium usage.
We believe the spike that caused V205 to reach around $37/LB on the China spot market was caused by a number of factors. Output in the China steel industry is always lower during the winter period starting in December and running through to the end of Chinese New Year. Output is around 35% less and, in some areas, has been as high as 50% lower. Quotas are set regionally by government and mostly effected by anticipated higher pollution levels along with winter weather constraints. This annual reduction causes higher output leading up to the quotas as steel mills raise stock levels in readiness.

The effect of changes to re-bar standards.
While changes to re-bar standards were claimed as the predominant reason for the surge in pricing, it’s unlikely they had a major direct effect. Compliance towards to end of the year was low. However, the uncertainty over compliance would certainly have added some panic and confusion in the market. It’s not unreasonable to suggest that the indirect effect would still have been a major contributor to high prices. We can never discount the power of hype in the market, nor can we ever accurately understand its effect.

V205 prices drop from $37/LB to $16/LB.
Once the quota reductions began sellers outnumbered buyers and we saw prices fall back dramatically. Rumours at the time of a lack of enforcement likely contributed to reducing some of the hype and panic in the market. The positive effect of prices moving up to $37/LB was minimal for Vanadium stocks. However, the perceived negative effect of prices moving dramatically down to $16/LB effected the share price of many Vanadium focused enterprises.

I think we can accurately state that Vanadium is more of a niche investment right now. During 2018 more mainstream investors were drawn in by media coverage although not enough to be boost prices relative to the price performance of Vanadium. It’s likely that these same new investors panicked when prices dropped causing a disproportionate reaction to what had in effect been a great year.

So, what really happened in 2018?
The year ended with China spot prices around USD 16/LB for V205 98% up from around $10/LB in late 2017 and $5/LB a year earlier. Hardly a boom and bust for 2018. Our advice to investors is to forget the hype driven spike in late 2018 and concentrate on $16/LB as the factual annual growth. At around 60% it’s still in the top performers of 2018.

Moving into 2019
Most analysts agree that there is a structural deficit in Vanadium supply. This is the first of a number of articles on Vanadium and we’ve attempted to explain the real story of 2018 and where we finished the year ready to take on 2019.

Our next article will look at 2019 and where we see the market moving for both existing producers and those resources hopeful of joining this rather small and elite group.

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Please note that Mastermines’ articles are our own opinions and not subject to payment or input from others. Currently, we do not intend to introduce paid subscriptions. In addition, we write articles as conversational pieces. Our aim is to discuss information, ideas, theories and opinions of battery technology and battery minerals to retail holders. ‘New Energy’ is an unfolding story, the market will shift along the way and so may our opinions and investments. Please read the disclosure of both our investments and consultancy, which are updated on a monthly basis.

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