Prices remain elevated compared to typical levels but could fall further, or spike again, as the year progresses.
London, UK:, May 07, 2019 (GLOBE NEWSWIRE) -- The vanadium market is often volatile. Last year, ferrovanadium prices reached dizzying heights, averaging US$125/kg in November. Since then, they have fallen back substantially, averaging US$68/kg in March and US$46/kg April. Prices remain elevated compared to typical levels but could fall further, or spike again, as the year progresses. The direction of prices will be determined by developments in China.
Vanadium is mostly consumed in steel applications in China, specifically in high-strength low-alloy (HSLA) steels used in reinforcing bars used in construction. Future demand for vanadium in Chinese HSLA rebar will be determined by regulation. New high-strength rebar standards (officially effective from November 2018) are now in place and were designed to limit the use of inferior steels in construction. The standards eliminate low strength Grade 2 rebar and set out specifications for three higher strength alternatives: Grade 3, Grade 4, and Grade 5. These will consume much more vanadium.
In preparation for the introduction of these new standards, Chinese steel mills were stockpiling ferrovanadium in 2018 which underpinned the increase in prices. However, thus far the new standards have not been strictly enforced, and a "tolerance period" has been in place since November. Thus, rebar producers and the construction industry are still able to produce and utilise lower quality rebar. Some destocking occurred, which contributed to softening prices.
This ongoing tolerance period is the main factor contributing to falling vanadium prices, although seasonal factors have played a part: little construction takes place in winter in China and thus demand for ferroalloys diminishes. In addition, higher-than-expected substitution of ferrovanadium for ferroniobium in China (caused by high vanadium prices) reduced vanadium demand and helped push prices downwards. Ferroniobium imports into China peaked at 7kt in January 2019 but fell back in February and March.
With the peak season for Chinese construction still ahead, it remains possible that vanadium prices will stabilise or even begin to increase as the year progresses. Roskill maintains that any sign of strict implementation of new rebar standards will result in higher vanadium demand and thus higher prices. But as ever, vanadium prices are likely to be volatile.
Whether or not Chinese regulations are enforced, supply-side constraints suggest that the vanadium market will remain tight over the medium term. With the market now in structural deficit, there are questions surrounding how supply will meet demand. With an estimated three-quarters of feedstock supply accounted for by co-production (where vanadiferous iron ores are used in the production of steel and vanadium reports to the slag), the bulk of vanadium feedstock supply is made available because of iron/steel market dynamics rather than in response to vanadium demand. There is also limited upside potential from primary and secondary supply, save for Chinese coal stone which serves as a swing producer. Roskill expects structural deficit and elevated prices to remain for some time, which should incentive a handful of new projects into production over the next decade.
A major unknown, is represented by vanadium redox batteriesfor more information.
