Yachty apologies if my previous post rattled you. It wasn't intended to as I was interested in your foray elsewhere.
I directed you towards TPs interview because quite simply I don't have a crystal ball about future vanadium and share price.
I do know this though. I was very confident about the future of this company before the Vanchem acquisition, and I am even more so now. I have also felt that the recent drop in vanadium price (since March) was due to short term factors and have previously posted that opinion. I was delighted to read TPs analysis which seems to confirm my view and explains it so well. Thus I am confident that there will be a recovery in the vanadium price 'soon'!
The short term sp, whilst being a little irritating, isn't the reason I am here so not concerned.
Just my opinion.
Yachty did you take your profit from BLOE before the sharp drop from its peak?
Does that mean you are looking to buy back the BMN shares you sold?
Do you think Terry Perles is correct in expecting the market to wake up to the increase in vanadium (and niobium) consumption in China?
Do you agree with his conclusion that "We do believe that we are going to see the price very soon move back above this $15 per lb V2o5 support level..."
If yes then you may have some if the info you need to help you decide when to buy BMN.
Final Results and Dividend Policy due by end of June.
BE update due soon?
Q1 production total at first glance is disappointing. However a careful read of the RNS reveals a different picture. This quote in particular:
"Vametco has seen an improvement in mine production scheduling, vanadium grade in kiln feed, together with an increase in the hourly feed rate to the kiln and recovery. In addition, overall plant recovery has seen significant improvements.
These improvements resulted in production for March 2019 of 270 mtV, which is the highest monthly production rate achieved by Vametco in the past 21 months."
This tells us that the improvements to production process have worked (1st paragraph) and that led to a much improved production total for March (2nd paragraph). So we now know that the most recent production figure available (March) shows production figures significantly up.
In terms of why Jan / Feb didn't show that increase well possibly the changes hadn't been completed. However it is also possible that power rationing was a factor. Note the very pointed comment below, also from the RNS. That is not a random comment ... it almost certainly contrasts March with the preceding months.
"Vametco's production was not affected by recent power rationing implemented by Eskom, the South African national utility, during the month of March."
It looks like the assertion that production was not interrupted (Jan / Feb) is incorrect.
As always it is unwise to just look at the headlines without examining the detail.
Just my opinion.
Looking back through some old posts of mine I found this one from 10 May 2017 quoting FM, though I can't remember the original source. Seems to be very prophetic!
"Vametco is not a destination it is a start and an exciting start."
"Vametco ...... a launch pad that will allow us to do a lot of exciting things in the vanadium market, not just on the steel side on the energy side as well..."
Good link Headancer.
A couple of useful quotes to reinforce the idea of a continuing structural deficit in the vanadium market:
"Vanadium demand will continue to strengthen due to demand for higher strength steel from the steel industry, as well as incremental new demand from Vanadium Redox Flow Batteries (VRFBs)."
"China has been leading the demand surge for vanadium for both higher strength steel rebar and for VRFBs. Both of these demand drivers look set to continue. It is also significant to note that the world is moving towards electrification of the transport sector. This means an additional huge demand for electricity and energy storage."
If the theory that stockpiles of vanadium in China are rapidly depleting I wonder just how soon and how fast the V price might recover?
In western markets we are also seeing a very weak market. In fact we now have prices in the west that are below Chinese prices. It's a very unusual situation . I think the very high price in the end of last year did result in some substitutional loss of market share in the west and as a result of that the major suppliers particularly into Europe are facing a situation where off take and contract customers are not as high as they anticipated and so they are dealing with a problem of placing the last few % of production into a relatively thin spot market and that has caused the western price to actually to move a bit below the Chinese prices. It's unusual given that outside of China there's an annual deficit of about 8,000 tons of vanadium and so normally the availability of Chinese exports drive the western markets.
So today we are in a position where vanadium and niobium are basically at par in terms of their costs for the steel maker. We do look for some rebar producers that moved to niobium in the second half of 2018 to come back to vanadium. The inventories of rebar in China are declining. Rebar production today in China has reached a high point. Rebar production is more than 20% above the levels in February, so the inventory of vanadium at the steel mills are being rapidly depleted and we do expect to see these mills coming back in a big way to start sourcing more vanadium.
So in summary we do think we have a very opaque market here. It's very difficult to understand what's going on and in this environment rumour can take on a life of its own and we do believe that the perception that niobium will replace vanadium in high strength rebar is causing the current weakness in the market and we expect that very soon the market's going to wake up to the fact that the consumption of both vanadium and niobium are increasing dramatically in China.
Last year in China we had about 40 million tons of grade 2 rebar. The revised standard eliminates grade 2 rebar and now in theory all of that grade 2 rebar must be produced to grade 3 standard. The revised standard also eliminates the possibility of sending quench and tempered steel into this market. We don't know how much quench and tempered steel went into the market last year but circumstantially it looks like about 10,000 tons of vanadium consumption per year had been impacted by the use of quench and tempered steel in this market. So we fully anticipate that today the mills have started consuming more vanadium and that the grade 2 and the quench and tempered steel is going to be and is being replaced by steel that's alloyed with either vanadium or niobium. As we go through the numbers if we make the rather extreme assumption that half of the grade 3 rebar could be produced using niobium we come up with an analysis that suggests vanadium consumption in China should increase from 36,000 tons of pure vanadium in 2018 to 44,000 tons of pure vanadium in 2019. At the same time niobium consumption in China is forecast in this scenario to rise from 25,000 metric tons of pure niobium to 40,000 metric tons of pure niobium.
The fact that China produces almost no niobium means that imports are a very good proxy for consumption. Import data is readily available so it's easy to see the growth of niobium imports and therefore niobium consumption in China. Far less obvious is the impact of the new situation on vanadium consumption given the fact that China's historically a net importer of vanadium so the internal supply demand changes are not readily visible. Today in China rebar production's reached an historical high point. Inventories of vanadium built at mills in late 2018 are being depleted. It's my view that both consumption of vanadium and niobium are occurring at record levels at Chinese steel mills. We do believe that once the mills have exhausted the inventories built in late 2018 we are going to see a significant increase in buying from the Chinese steel mills.
We do believe that we are going to see the price very soon move back above this $15 per lb V2o5 support level and we do think that there's going to be a very turbulent environment today in China this year given the situation. Also it's important to note that today vanadium prices in China are below niobium prices and in that situation there's no incentive to deal with the operational issues associated with using niobium in this application.
What we can see from the data is what we have is an environment where consumption is ahead of production. Vanadium prices at $15 have very strong support level but what we saw January through March saw the price rise from $15 to about $17 on the back of a tight market situation, before we saw the price suddenly start to collapse again. In late March it became apparent that the Chinese steel mills were not ignoring the new standard as evidenced by rising imports of niobium which is the substitute for vanadium in some cases in this application. Significant increase in niobium imports led to a second industry rumour. Obviously the standard was not being avoided or ignored or there would not have been an increase in niobium imports, but the high import levels of niobium in January led some people to believe that niobium would completely replace vanadium in high strength rebar.
It's clearly my view that this speculation is incorrect, metallurgically that's an impossible outcome and I think that this misconception pushed the price down to the point we have now. If we very briefly look at metallurgy, both niobium and vanadium impart higher strength on steel but they do it through very different metallurgical mechanisms. Vanadium is very predictable, it's very easy and it is the best solution for this application. In some cases, if we have the right metallurgical understanding, if we have a reheat furnace with the ability to get the billets up to 1200c, if we have a high powered rolling mill and if we are producing rebar smaller than 25 mm diameter it is theoretically possible to use niobium rather than vanadium. The use of niobium requires a controlled rolling practice that leads to higher energy useage, lower throughput through the mill and will result in higher quality issues, but it can be done in some cases.
So what we really need to understand is what's going on in terms of niobium and vanadium consumption in China. If we look at the latest data available it will suggest that in grade 3 rebar 38% of the rebar is 25mm in diameter or larger and therefore can not be produced with niobium due to the metallurgical limitations. It's also the case that grade 4 and grade 5 high strength rebar in China must use vanadium. There's no question about it. So the new standard has in effect done two things. It's eliminated loopholes that allowed people to send quench and tempered steel into this market advertised as grade 3. Quench and tempered steel does not meet the standard for elongation and it will not perform well in seismic activity. When this use of illegal quench and tempered steel was discovered a research project by the Chinese Iron and Steel research institute was initiated. It was discovered that there were some steel mills sending quench and tempered steel into the market and calling it grade 3 rebar. The revision of the standard is designed to solve that problem.
I leave you with some light reading!
Largo transcript May 2019
Terry Perles on Vanadium market. (From 12 minutes)
I would like to start just looking back over 2018 and a bit of a recap on where we've been. Looking at 2018 vanadium production totalled just more than 89,000 tons of pur vanadium while consumption of vanadium was about 97,000 tons of pure vanadium. So in this year 2018 we saw significant deficit and global inventory drawdown. In 2018 vanadium prices as reported by MetalBulletin publication "in warehouse Rotterdam" duty not paid basis started the year at $9.75 per lb V2o5 and peaked at $29.15 per lb V2o5 in mid November before falling to $15 per lb V2o5 at Christmas. Then from January to late March 2019 prices rose from $15 to $17.75 per lb V2o5 before a second downward movement began taking the price down to today's level of $8.45
Fundamentally vanadium production continues to lag demand and the situation is expected to persist for several years. Given the fundamental situation the market right now is very difficult to explain. Clearly the data shows that there's not a tremendous amount of support for vanadium prices above $15 per lb V2o5 and very high levels above $15 we start to see the loss of market due to substitution and we also see some high cost new sources of production coming to the market. For example the Chinese stone coal mines and energy fuels extracting vanadium from their retention ponds. So the price has moved from $29.15 in November down to $15 was not a surprise although the speed at which the downward movement occurred was a bit if a surprise.
During the second half of 2018 Chinese steel mills built inventory vanadium in advance of the implementation of the new standards effective November for high strength rebar, and this pressure helped push the vanadium price up to a very high level. In November / December with vanadium prices at extremely high levels and the mills having built some inventory spot buying was very weak in China. We have a very opaque market here. Some people interpreted the weak spot business as a reflection of the Chinese mills ignoring the new rebar standard and I believe this perception caused the price to move back down very rapidly by Christmas to the $15 level.
YinYang you clearly know far more about future prices than any of us, so why did you ask me the question?
And you are not annoying me. I am just trying to help you to understand more about BMN and vanadium. I like to educate but sometimes the pupil is not willing!
YinYang I posted a transcript yesterday of the Largo conference call with Terry Perles (a vanadium expert) where all these issues that you are mischeviously raising were dealt with. Had you read that transcript carefully you would have a much better informed understanding of the vanadium market.
Feel free to look in my posting history.
As I said YinYang it's an issue for you to wrestle with.
If you think you know more about the future price of vanadium than those working in the field, and are a better judge of what the future share price if BMN will be than the numerous well researched long term holders then I suggest you follow your own instinct. I can't lead you by the hand on that one.
Fortune Mojapelo 15 May 2019
""We are confident of steadily delivering on Vametco's productivity targets and, with the recently announced conditional acquisition of the Vanchem vanadium project for US$68 million, Bushveld Minerals is on a clear path to achieving its long term capacity target of 10,000 mtV of annual production capacity. These initiatives will significantly enhance our competitive position in the Vanadium market over the coming years."
Terry Perles May 2019
"Fundamentally vanadium production continues to lag demand and the situation is expected to persist for several years."
"We do believe that we are going to see the price very soon move back above this $15 per lb V2o5 support level and we do think that there's going to be a very turbulent environment today in China this year given the situation. Also it's important to note that today vanadium prices in China are below niobium prices and in that situation there's no incentive to deal with the operational issues associated with using niobium in this application."
"... we do believe that the perception that niobium will replace vanadium in high strength rebar is causing the current weakness in the market and we expect that very soon the market's going to wake up to the fact that the consumption of both vanadium and niobium are increasing dramatically in China."
27 March 2019
Roskill's Jack Bedder views the market for vanadium as dynamic and diverse and suspects it'll remain in deficit for some time.
He says while supply will remain tight, demand is set to increase considerably over the short term.
Apparently 9 companies that had year end 31 December 2018 were suspended for failing to publish accounts by 30 June 2018. It's a serious deadline so expect Final Accounts definitely by 30 JUNE !
Gkb47 there is no evidence that the structural deficit idea is wrong. Simply look at global consumption and production figures to get a handle on that.
So why is vanadium price down? Well I think Mr Perles gave a very plausible account of what is likely to have happened. He also seemed confident that the deficit would continue for some years and expected a bounce in vanadium price soon.
"It's my view that both consumption of vanadium and niobium are occurring at record levels at Chinese steel mills. We do believe that once the mills have exhausted the inventories built in late 2018 we are going to see a significant increase in buying from the Chinese steel mills."
"we expect that very soon the market's going to wake up to the fact that the consumption of both vanadium and niobium are increasing dramatically in China."
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