Date: Nov 15, 2018

Bushveld Minerals (BMN) continues to buck the trend among resources stocks, after investors this week bought into a robust third-quarter trading update from the miner. Chief among the report’s highlights was news that the third phase of expansion at the group’s 74 per cent-owned Vametco mine has now started, and that nameplate capacity is set to expand by a third to 5,000 metric tonnes (mt) of vanadium a year.

Tightening market conditions for the steel strengthening additive are also helping. In the three months to September, the average ferrovanadium price climbed by 24 per cent quarter on quarter to $85.80 (£66) per kilo. The jump more than offset the impact of industrial action and unplanned maintenance in the period, which caused a 15 per cent drop in output and has led Bushveld to downgrade full-year forecasts by 10 per cent to 2,600-2,650mt.

Arguably, output could fall further and sentiment towards Bushveld shares would remain buoyant. According to Metal Bulletin, the ferrovanadium price averaged $114 per kilogram (kg) in October, as shortages of the material have been exacerbated by the market’s newfound inflexibility.

Historically, when prices rose dramatically, buyers could count on Chinese slag processors to sell vanadium as a by-product. But much of that secondary output has been shuttered, just as China has raised its rebar standards for steel manufacturing – a move that increases demand for vanadium.

Naturally, should Chinese steel demand drop or contract, then it’s altogether possible that vanadium prices could sharply decline. According to Katusa Research, as much as 40 per cent of global vanadium demand correlates to the Chinese rebar market.

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