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Vanadium Spikes On New Chinese Regulations

The global scramble for a little-known metal called vanadium is officially underway.

The metal, which when used in small amounts can help strengthen steel significantly, is in high demand following new Chinese regulations on infrastructure and buildings. The new rules, which came as a result of a 2008 earthquake that devastated part of China, are aiming to phase out the use of low strength steel in building projects, according to the Wall Street Journal.

The market for the metal is very small, with about 80,000 metric tons produced each year. Roughly 90 percent of that is used in small amounts in projects like bridges and skyscrapers. While two years ago it cost less than $5 per pound, it surged as high as $29 per pound last month.

(Click to enlarge)

Supply of vanadium globally has been "drawn down to nearly nothing,” according to Jack Bedder, director at a London-based research and consulting firm.

The new Chinese regulations set out specifications for three high-strength grades of steel that each require vanadium. While many of the miners of this metal have been shut down, the surge in pricing is reinvigorating the interests of numerous companies. Macquarie group said that global demand for the metal could be up 25 percent in coming years.

About 14 percent of the world's vanadium comes directly from mines and it is usually found alongside of minerals like iron ore, coal and aluminum. It’s relatively abundant but it hasn’t been mined on its own because prices have been too low to make it worth it. As a result, the new boom has brought in smaller miners that are setting up next to major mines, like Energy Fuels' Utah mill.

Related: Interest Rate Hike Hits Oil Hard

Curtis Moore, vice president of marketing and corporate development at Lakewood, Colorado's Energy Fuels Inc., stated: “It’s hard to say whether we will have enough capacity to bring in other miners. Certainly we are open to it.”

The surge is also helping fuel and re-energize mining projects worldwide. At Energy Fuels, Inc., they plan to start collecting discarded vanadium from its mill in Utah. In addition to this, the miner is also going to be revisiting old mines that it has already shut down, but that also likely contain significant amounts of the metal.

Additionally, Largo Resources Ltd. in Brazil is spitting out record volumes of the metal from its Maracás Menchen mine and is aiming to lift its production capacity by 25 percent. The company, based in Toronto, is considering adding to its infrastructure and placing a new facility near its mine simply to focus on vanadium them.

Mark Smith, Largo’s chief executive said: "The market needs new production in a big way."

By Zerohedge

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