A few questions about Glencore’s (supposed) plans for Syrah and graphite (and a certain technology metal, vanadium)
The graphite world has gone dizzy at the news of unsourced reports out of Australia that Glencore is about to make a bid for Syrah Resources (ASX:SYR), owner of the (claimed) largest graphite resource in the world. Syrah’s shares have rocketed, as have those of its neighbour in Mozambique, Triton Minerals (ASX:TON), whose stock rose Friday by more than 20% by early afternoon trade in Sydney.
But, at least here in Australia, no one seems to have stopped and asked the question: is Glencore really that interested in graphite? If it is, then it will no doubt want to become a dominant force in that market (which would explain partially the sudden ignition of Triton shares).
Getting into graphite would a major step for Glencore. Its present commodity divisions are nickel, zinc, oil, agricultural, iron ore, copper, coal, alumina/aluminium — and ferroalloys (which include vanadium, of which more in a moment).
Just one point: this is being written late afternoon Friday in Sydney. It is possible that there might be an after-market announcement by Syrah. So this post may have to be updated, but even if there is this would not affect my main point — which is that Glencore getting involved in graphite would be far more significant than an actual takeover of Syrah (or any other graphite producer).
But, as well all know, Syrah’s Balama project has a vanadium by-product, and Glencore is one of the world’s largest producers of primary vanadium.
Until now, vanadium has been used mainly for high-strength steel alloying. It occurs in more than 60 different minerals (including phosphate rock and titaniferous magnetite). Its steel applications have accounted for 87% per cent of the vanadium consumed. However, customers and regulators are putting pressure on steel makers to increase metal strength and there are tighter regulations for rebar steel.
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The metal is now in the process of a massive game-changer — and the name of that game-changer is Vanadium Redox Batteries (VRBs for short). It’s all about the ability of national power grids to store energy.
But it is the needs of power grids that is now dominating discussion of vanadium. Grid operators, renewable energy generators and utilities are looking for bulk-energy storage technologies to increase the efficiency and stability of the national grid systems. They want to be able to tap stored energy if peak demand exceeds expectations, or there is a problem — the cut-out of a large wind farm or the shut-down of a nuclear plant. The grid operators need to avoid voltage sags and spikes, brownouts or even blackouts. VRB systems are currently being built or operated. Sumitomo Electric Industries and Hokkaido Electric Power Co are spending $200 million on a grid-integrated plant with 60 megawatts of storage capacity. Alongside, incidentally, the companies are also building a 20MW peak capacity lithium-ion battery system. In China, Dalian Rongke Power has installed a VRB storage system at a 50MW wind farm at Shenyang. The company is also developing a new industrial park to manufacture up to 4.3 gigawatts annually of VRB capacity at a cost of $400 million.
Recently, London-based research house Hardman & Co noted that the vanadium industry is dominated upstream by South Africa, Russia and China and downstream by the steel industry. But with new producers (there are at least four Australian-listed companies involved with vanadium projects) and new end uses in the form of storage batteries, the vanadium sector might be going to undergo a dramatic change. As Hardman added: “The vanadium supply chain is seen by some observers as semi-functional, based as it is on a creaking South African mining infrastructure, ageing Russian mines and a tariff-happy Asian trade”
The unsourced reports that Glencore and Syrah have been talking informally raise more questions than they answer. Is Glencore going to move into the graphite sector, in which case it will be a game-changer for the whole sector? Is Glencore going to develop a new mine from scratch with all the uncertainties that entails? Or is it interested mainly in the vanadium, either in terms of extracting it or making sure it stays in the ground until needed?
Whatever happens, it will be most interesting to watch.
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