Supply of Certain Resources in Australia-Free-Samples for Students

Question: Discuss about the Demand and Supply of Certain Resources in Australia. Answer: Introduction In Australia, mineral resources play an important role in economic growth of the nation. Complete information about resource stocks is pre condition for appropriate policy formulation. Australia has possession over different mineral resources such as gold, lead, nickel, uranium, zinc, iron ore, zircon and others. Australia holds a strong position in terms of storage of bauxite, cobalt, lithium, manganese ore, silver, vanadium and tungsten (ga.gov.au 2017). In this paper supply, demand condition of vanadium resources in Australia is discussed. Australian Vanadium Ltd initiates exploration and evaluation of mining tenements with implicit focus on Western Australias Vanadium deposit. Article summary Production and exploration of resources in mining industry exclusively depend on commodity cycles and a set of external factors affecting supply and demand. The uncontrollable external factors lead to fluctuation in the market. It is difficult to escape challenges from fluctuation in the commodity cycles. Small emerging resource explorers are likely to suffer more from commodity cycle fluctuation than large explorers are. The Managing Director of Australian Vanadium Ltd Vince Algar in the report opined that it is not possible to for miracle always and therefore companies should set long-term objectives. For Australian Vanadium Ltd, the long run goal is to become a global vanadium producer. Vanadium is a metallic element mainly used for metal alloys. Today Vanadium is also used as an important element of battery technology and storage of energy. The Gabanintha Project of AVL is expected to bring an upsurge in the Vanadium market following a period of stagnation and a considerable low level of prices. After facing a significantly low value for the last four or five years, the Vanadium market is gradually recovering. The low value of Vanadium discourages investment in the market. The lack of investment in turn leads to a reduction in global supply of Vanadium. The situation further worsens with close down of steel plants in China and South Africa. These are the two major consumers of Vanadium. Chinas central government targets to reduce carbon emission and carbon footprint. This has a direct impact of raising steel demand and associated demand for Vanadium. China has been suggested to increase the use of vanadium. The boosted demand in the Chinas market will surely have a considerable impact on the market and give AVL opportunity to expand its market share with capitalization in the market. In 2015, stock price in vanadium mar ket was $3.50 per pound, which now increases to $10 per pound reflecting the improvement in market condition (miningglobal.com 2017). The Gabanintha project of Western Australia extracting large volume of Vanadium becomes extremely important to meet the growing demand. After consistent years of low value, the Vanadium market is now showing sign of prosperity. Apart from demand supply condition, miners needs to maintain a god relation with regulatory bodies and local landowners. The growth trend of vanadium demand is expected to persist in future. Economic theories and concept In market economies demand and supply are two important determinants of price and quantity. The demand and supply conditions are reflected by the respective demand and supply curve. Demand and supply curves show the relationship of price with demand and supply situation. Apart from price there are other factors that causes a change in demand and supply and affects market price and quantity (Azevedo and Leshn 2016). The vanadium market has undergone with a phase of low valuation for the alt four or five years. Low value means low profitability. This in turn means a lower return from investment. With a low return, the investors are less motivated to invest in the market. Inadequate investment leads to a lack of supply of vanadium globally. The inadequate supply generally pushes the prices up. However, for Vanadium market the price hike did not happen. The driving factor for low vanadium price is decline in global demand. South Africa and China are two countries making huge demand of Vanadium for their steel plants. The closure of steel plants in these two countries reduces demand significantly. This brought Vanadium prices down. To address this issue Chinas government has taken steps to improve the situation. Government now emphasizes to reduce carbon emission in the nation. Coal plants are one of the major sources of carbon emission. China now focuses on modifying its operation techniques. This has created new demand for steel. Vanadium is used as an alloying element in steel. When steel demand increases then associated demand for Vanadium also increases. The increased demand from China increases the valuation of steel. Vanadium stock prices have almost tripled between the last two years. In November 2015, recorded Vanadium stock prices was $3.50 per pound which now become $10 per pound. This gives AVL rays of hope and provide opportunity for market expansion. Recommendation Demand is not the only factor to be considered for a profitable mining business. The producers or explorer should maintain a good relationship with regulators and landowners. Having permission to operate in the right place and proper communication needs to be ensured. Therefore, the company should give focus on this aspect as well. Proper funding is required to successfully implement any mining plan. Government should come forward and provide necessary assistance. Long run success of the company needs a clear vision about coming future. A clear understanding regarding the current market state is a prerequisite for Gabanintha Vanadium to become a world class supplier. Conclusion Australia has control over different mineral resources. Vanadium is one such resources. Mining industries face market fluctuation depending on fluctuation in the commodity cycle. The Vanadium market has gone through dynamics of market fluctuation because of a change in global supply and demand situation. Australian Vanadium Limited has initiated a project named Gabanintha Vanadium project to explore Vanadium resource in Australia. Reviving global demand of Vanadium from China encourages market exploration of the company. However, the successful implementation of the project requires correct insight about present and future state of market References Azevedo, E.M. and Leshno, J.D., 2016. A supply and demand framework for two-sided matching markets.Journal of Political Economy,124(5), pp.1235-1268. Benton, D. (2017).Australian Vanadium records major resource upgrade amid market boom. [online] Miningglobal.com. Available at: https://www.miningglobal.com/mining-sites/australian-vanadium-records-major-resource-upgrade-amid-market-boom [Accessed 11 Dec. 2017]. Ga.gov.au. (2017).Australia's Identified Mineral Resources - Geoscience Australia. [online] Available at: https://www.ga.gov.au/scientific-topics/minerals/mineral-resources/aimr [Accessed 11 Dec. 2017]