Hallgarten & Company forecasts vanadium prices to jump from US$9.50 per pound at the end of 2017 to $13.20/lb at the end of 2018, $15/lb at the end of 2019 and $18/lb at the end of 2020.
This was the first time Hallgarten & Co included vanadium, typically used for strengthening steel, in its metal analysis since 2010, with principal and mining strategist Christopher Ecclestone noting that it had been futile to talk about the metal in past years as no one was enthused about it until now.
"We feel that 2018 will be the year of the specialty metals and that vanadium is the metal to watch from this universe," he said.
Ecclestone noted that people had rarely paid attention to the metal, which is a by-product of the mining of other metals and of the petroleum refining industry, but it had been named at a number of events in 2017 as the next best thing "now that lithium has somewhat done its dash with promoters overcooking the soufflé".
Vanadium prices rocketed in the September 2017 quarter to around $12.50/lb, with Ecclestone citing a combination of perceptions of changing Chinese policies on vanadium content in steel alloys and its potential in electricity storage devices, such as the vanadium redox battery (VRB), which could see mass adoption from solar and wind generation.
He said both perceptions were justified, but the latter only in the long term, as there was no demand in the short-term, to "justify storming into vanadium (even for stockpiling) on the VRB potential because these batteries are currently using so little of the global supply".
However, he said the China story was "real, but reversible".
After the September quarter surge, the price retreated somewhat to $6.50/lb during the December quarter, but then rebounded to $9.50/lb, with Ecclestone noting that it remains 30% higher than the long-term average during this decade.
"We had warned at the time of the surge that any Chinese decision was revocable if prices went too high and that may have been the impetus for the decline. At current levels, though, there is no need for the Chinese to shift from their original decision to adopt a higher vanadium component in construction steels," he said.
A more conspirational reason for the retreat could be Glencore (LN:GLEN) not liking the price rise, with Ecclestone pointing out that as a trader, Glencore makes money on the spread and, in theory, the same percentage spread on a higher price means more income, although it could also have been caught short without enough guaranteed supplies for sales contracts written at lower prices.
Investor interest
With the recent price rise, investors have started to look for primary mines or projects, although he said they weren't many to choose from.
"Back in the more balmy days of the turn of the decade, the potential names to conjure with were only five or six companies, with only two being advanced. The ranks were thinned further with ASX-listed producer Atlantic Ltd (AU:ATI) going bust and some of the assets of others moving on to new owners," he said.
There are only around 16 listed vanadium players worldwide, with Ecclestone naming Bushveld Minerals as a standout with Largo Resources as the most prominent producers that are accessible.
He said another with serious short-term potential included Western Uranium, which he said has become somewhat of a misnomer due to its vanadium content being worth more than its potential uranium output at current prices.
"As the promotorial class are sheep-like, they won't want to be interested until the price is significantly higher and the air is full of buzz," Ecclestone said.
"They are so high on lithium, they need little else to stimulate their imaginations these days. At least so far all the players we know of in the space are serious, which makes this metal a rarity in mining circles."
