Vanadium news, page-120

The new Gold Rush

BY BEN KRITZ,
JANUARY 06, 2019

• THE NEW GOLD RUSH

BEN KRITZ
FOR investors looking for the next hot market, 2019 may not seem to be starting off with a lot of promise. Cryptocurrency has turned out to be the folly anyone with any sense should have realized it was from the start, and stocks have spent the past couple of months staggering toward a long overdue return to rational values.
The safe, prudent thing to do, as always, would be to invest in safe, prudent things. Gold never goes out of style. And while corporate bonds might not be a good idea, there are still plenty of issuers of stable sovereign debt instruments to offer choices better than hiding one’s money under the mattress.
But where’s the fun in “safe” and “prudent”? If your intention is to put your money out of sight and let it slowly percolate for the benefit of your descendants, safe and prudent is a good path to follow. If your goal is to earn something substantial in this lifetime, however, catching the “next big thing” is a better choice, provided it represents something tangible (unlike cryptocurrency) and carries a risk level somewhat less than playing the Lotto (also unlike cryptocurrency).
For the next few years, the “next big thing” may be exotic metal commodities, specifically lithium, vanadium and palladium, as well as neodymium and praseodymium. Most of these enjoyed a surge in 2018, and all appear to be headed nowhere but up for at least the next five or six years.
Lithium: Lithium is the most important material in the manufacture of rechargeable batteries, which of course are used in everything from your electric toothbrush to large-scale energy storage systems. Lithium supplies are expected to lag significantly behind demand for several years, even though producers are scrambling to open up new sources outside China, which is both the world’s biggest producer and consumer of lithium.

What is interesting about lithium as a commodity is that most producers are already foreseeing a critical shortage a few years in the future, around 2023 and 2024, based on projections for global electric vehicle production. That presents opportunities for timing investments that commodities usually don’t offer, provided one remains vigilant.
Vanadium: Vanadium had a big year in 2018, because an oversupply that was created a few years earlier finally ran out. In fact, vanadium producers were caught by surprise to some extent by how fast supplies went from a surplus to a serious deficit, with prices for the metal subsequently skyrocketing.

All things being equal, that situation would stabilize within a few months, but there are two new factors that are going to add pressure to the vanadium market. The biggest is the coming into force this past November of new Chinese standards for steel reinforcing bars, which require vanadium as a strengthener. Second, vanadium is a key component for the next generation of large-scale energy storage systems called the vanadium redox flow battery. These systems help extend the capabilities of variable energy sources like wind and solar, making it possible to use them as more than intermittent, supplementary power sources.
Palladium: The main use for palladium is in catalytic converters for gasoline-powered vehicles; for a long time it was considered a cheaper substitute for platinum, which is rarer and has other applications.
China again is driving the market for this particular metal. New Chinese emissions regulations intended to combat the horrendous air pollution in China’s major cities require the use of greater amounts of palladium in catalytic converters. Like vanadium, the price of palladium was also affected by a past supply glut and subsequent drawdown of stockpiles, although supplies going forward are not expected to be quite as tight. Still, strong demand should keep palladium prices elevated for some time.
Neodymium and Praseodymium: These two rare earth metals (along with dysprosium and terbium) are vital to the manufacture of electric motors used in vehicles. In contrast to the other metals on this list, prices for the rare earths bottomed out in 2018 as supply remained more than adequate. This is expected to change beginning this year as vehicle production worldwide increases; an average electrically powered car requires about three kilograms of rare earth magnets.
The rare earths are also at the mercy of geopolitical currents, at least for now. China has been almost the sole source of rare earth ores, and in the past has shown no reluctance to impose export restrictions if it feels it needs to protect its own manufacturers’ supply. The impact of the ongoing United States-China trade war also raises questions about the stability of supply, and when questions are raised, so are prices.
The sourcing risk for the rare earths is expected to be reduced in the coming years with new mining and processing facilities opening in Western Australia, Quebec and Greenland. However, if electric vehicle production increases by anything close to the 20 percent per year most industry analysts are forecasting, rare earth demand will increase by about 5 percent per year, putting pressure on supplies despite their expansion.
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