Excellent find, thank you for sharing. The whole document is well worth reading.
The new environmental standards are expected to lead to a decrease in supply , leading to higher prices, or so we hope. However, I and others have queried whether the Chinese government is serious about enforcing the new standards. As we all know, it's one thing to have a law on the books, quite another to enforce it. Indeed, in the past, I have even raised this with DG (Mastermines). He has his ear very close to the ground in China, and his reading of the situation is that the government is absolutely committed to enforcing the standards.
When asked about this recently on Twitter, he had this to say:
"What we're seeing on standards generally is move away from the past compliant attitudes towards environmental and standards issues and let the market finds it's own way. The CCP seems to really mean business these days and it's definitely a new look CCP."
Another matter which concerns me is the macro-economic environment. This is a risk for every single company, listed or unlisted, on the ASX and on just about every other stock market in the world. However, on balance, I feel very comfortable about the risks here for AVL. We forget that the vast majority of Chinese still enjoy a standard of living well below that of America and Europe. Should trade tensions force the hand of the Chinese government, they have plenty of scope to grow internally, rather than really on purely export growth strategies.
Also, consider that should U.S tariffs hit Chinese steel producers, this will NOT have an adverse effect on vanadium demand, as the source of steel consumed by the U.S will shift to other countries, namely the US itself (or at least that's the plan). So, we will witness a shift in the location of the production of steel. From our perspective, it doesn't matter who makes it, as long as vanadium is in demand. And guess what? The U.S is LACKING in readily accessible vanadium deposits to meet the demand of the newly competitive steel industry. Add to this, the demand coming from VRBs, and that represents a perfect storm. What's that I hear you say? VRBs are still just pie in the sky? Think again!
Why the United States needs a good vanadium deposit
Mara Strazdins, B.Sc., November 29, 2017
World energy requirements are changing with the onset of energy storage grids needed to store energy produced from large scale solar and wind farms. That’s where vanadium redox flow batteries come in as one of the great new technological game changers for large energy storage needs. Forbes (James Conca, Dec 13, 2016) notes that although vanadium flow batteries are large in scale, they are also fully containerized, nonflammable, compact, reusable over semi-infinite cycles, discharge 100% of the stored energy and do not degrade for more than 20 years.
The vanadium flow battery is essential for our future energy consumption requirements. In the U.S., the Energy Storage Association believes that energy storage is a fundamental part of a secure energy future and an effective, "all-of-the-above" national energy strategy.
According to the U.S. Energy Storage Monitor Q3 2017 Executive Summary report, lithium-ion batteries dominated the U.S. energy storage market for the eleventh straight quarter, holding 94.2% of the market in Q2 2017. Vanadium-redox flow batteries held 5% of the market in Q2 2017, attributable to 2.0 MW of deployments. California will remain the undisputed king of the U.S. storage market over the next five years. Arizona, Hawaii, Massachusetts, New York and Texas will all battle for second place, with each market forming a significant chunk of deployments through 2022. By 2022, the U.S. energy storage market is expected to be worth $3.1 billion.
Where are vanadium flow batteries used for energy storage in the U.S.?
In March of 2017, Utility San Diego Gas and Electric (SDG&E) and Sumitomo Electric (SEI) announced the unveiling of a new 2MW/8MWh pilot vanadium redox flow battery storage project in California to study how the flow battery technology can economically enhance the delivery of reliable energy to customers, integrate growing amounts of renewable energy and increase the flexibility in the way the company manages the power grid. The vanadium redox flow battery storage facility will provide 2 megawatts (MW) of energy, enough to power the energy equivalent of about 1,000 homes for up to four hours. Flow battery systems have an expected life-span of more than 20 years, and could have less degradation over time from repeated charging cycles than other technologies. SDG&E will be testing voltage frequency, power outage support and shifting energy demand.
Junji Itoh, managing director of Sumitomo Electric stated, "We are delighted to see our first flow battery system operating in the U.S. through the multiple-use operation of the battery system in SDG&E's distribution network, we would like to prove its economic value and potential use on the electric grids." (March 16, 2017, http://sdgenews.com/battery-storage...-spurs-energy-storage-innovation-flow-battery)
In June of 2107, The Natural Energy Laboratory of Hawaii Authority (NELHA), Hawaii Electric Light Co., Ulupono Initiative, and UniEnergy Technologies (UET) began installation of a 100kW/500kWh advanced vanadium flow battery at the Hawaii Ocean Science and Technology Park (HOST Park) administered by NELHA with operation to begin next year. The flow battery technology and was developed by the U.S. Department of Energy’s (DOE) Pacific Northwest National Laboratory (PNNL) and commercialized by UET. (June 28, 2017, By Renewable Energy World Editors at http://www.renewableenergyworld.com)
In April of 2017, UniEnergy Technologies (UET) announced the installation a new large flow battery on the grid in Snohomish County in Washington State. The 2MW, 8MWh battery system installation is currently the largest capacity containerized flow battery system in the world. It's housed in 20 connected shipping containers and will be used by the Snohomish Public Utility District which has also invested in lithium-ion battery installations.
(https://arstechnica.com/information...hour-flow-battery-is-the-largest-of-its-kind/)
If the current projects prove successful, more vanadium flow batteries could be integrated onto grids in ecthe U.S. In April 2017, the Energy Storage Association joined with 52 private companies and business associations to deliver a letter to leaders of Congress stating that any dialogue on enhancing and rebuilding America’s infrastructure must include consideration of advanced energy storage systems and that modernization and innovation on the electric grid can reap immense rewards in creating a more resilient, reliable, cost-effective, and sustainable U.S. electric system.
Currently there is no vanadium mined in the U.S. The USGS 2017 Commodities Report states that vanadium is mined mostly in China, South Africa and Russia. In 2007, these three countries mined more than 95 percent of produced vanadium. As the demand for large energy storage grids increases, U.S. based vanadium deposits may be considered strategic.
There are only a few companies in the U.S. that are currently developing vanadium deposits. One company is Prophecy Development Corp with their Gibellini and Louie Hill Projects representing a pure-play vanadium opportunity situated in Nevada. Another pure vanadium project is the Bisoni-McKay property situated adjacent to the Gibellini vanadium project.
Vanadium in the U.S. also occurs as a bi-product in uranium deposits such as those found in the Colorado and Utah. Small quantities of vanadium were produced as a byproduct from the mining of uraniferous sandstones on the Colorado Plateau but all byproduct vanadium production has been suspended since 2014. (USGS 2017 Commodities Report)
Now, some of you will recall that I have harped on at length about the new maritime sea and belt road initiative of the Chinese, and what it means for steel consumption, and by extension, demand for vanadium. (HINT: A lot of both will be required ). Here is a refresher:
So, coming back to the document you linked to, I was very pleasantly surprised to read the following:
OUTLOOK
It is widely known that since 2017, China has reinforced its efforts in deepening nationwide supply-side reform to pursue a sustainable and healthy economic development for the community. The steel sector was the first industry targeted in such reform and the goal of cutting excessive steel capacity by 150 Mt has been met before the deadline of 2020. As China’s economy seems to have accustomed to its new normal pace of growth, the growth of fixed assets investment within the country will inevitably slowdown.
On the other hand, the determination of China’s commitment to environmental protection and pollution control (as further indicated by the establishment of the Ministry of Ecology and Environment of the PRC in March 2018) is expected to usher in more stringent enforcement of environmental regulations. Some of the country’s biggest steelmakers have been warned for their failure to comply with anti-pollution laws, and others have been placed on a rectification list following their breaches of environmental and safety regulations. There is immediate pressure for steelmakers to step up their exertions on compliance with environmental policies without further delay. As reiterated, these anti-smog policies and related environmental protection measures have resulted in a drastic shift in demand for higher-grade iron ore and thus, price premium for the high-grade iron ore may increase further whereas the demand and prices for low-grade iron ore have fallen and may continue to fall.
The escalating trade war between China and the US poses major concerns for and critical impacts on the steel industry. As such, export opportunities for the Chinese steel industry are extremely limited and there appears no alternative solutions for export, which could offer an immediate reprieve for the industry. Some major industry players are however, evaluating and monitoring the market conditions in other emerging countries, which could potentially tap into China’s Belt-and- Road initiative as one of the probable means to utilise the overcapacity in the steel industry.
TL: DR:
Vanadium is not a "one trick pony" commodity. It is facing a huge increase in demand and at the same time, cuts in supply. A perfect storm. And we are in the sweet spot in terms of getting a mine up and running.
). Here is a refresher:
(20min delay)
