VIEWPOINT
Supply cuts lift Vanadium prices
The vanadium pentoxide market made strong gains last year that could continue in early 2017, as production cuts have tightened supply internationally.
European prices ended 2016 at their highest level since January 2015, while the Chinese market reached its highest level since January 2013.
The European market for minimum 98pc grade vanadium pentoxide fused flake climbed to a $4.80-5.20/lb V2O5 range in mid-December, lifted by higher offer prices out of China. Prices started the year in a $2.30-2.70/lb V2O5 range, their lowest level since at least mid-2004.
The Chinese market was assessed at 85,000-87,000 yuan/t ($12,221-12,508/t) ex works at the end of December, rising from Yn75,000-76,000/t in the three weeks previous.
The recent rally has been fuelled by a sharp reduction in prompt supply availability after the local government ordered most producers in the Panzhihua National Vanadium and Titanium High-Tech Industrial Development Zone to halt production for environmental inspections in response to the disposal of polluted water in the Jinsha river. The Panzhihua region is China's largest vanadium ore producing region. A number of producers increased their offer prices in expectation of further supply shortages.
But beyond the short-term impact of those supply cuts, Chinese vanadium pentoxide prices had already doubled from Yn36,000-37,000/t at the start of 2016. The reduced availability of vanadium slag — the main feedstock — following cutbacks in steel production in China and the country's increased imports of non-vanadium-bearing iron ore used to make steel have reshaped the market.
China's largest vanadium producer Panzhihua Iron and Steel Group (Pangang) has stopped selling vanadium slag to the spot market and is using it for its own vanadium production. Chengde Iron and Steel Group (Chenggang) has also stopped selling slag and is using imported material from New Zealand in a bid to save costs and to offset a shortage as demand is now higher than its mining quota for vanadium-bearing titanomagnetite ore.
Private-sector Sichuan DeSheng Group Vanadium and Titanium, the largest supplier of vanadium slag in China, carried out maintenance for 10 days in October, removing 2,000t of slag from the market. Its imports typically come from Russia and New Zealand.
Supplies of Russian vanadium slag to Chinese consumers have largely dried up, as Russian suppliers did not settle annual contracts with Chinese buyers at the end of 2015 when vanadium prices dropped to their lowest level since November 2006.
China's leading vanadium producer, state-owned Citic Jinzhou Metal, has resumed output this week after securing enough vanadium slag feedstock from its Russian suppliers. The company suspended production in mid-August for maintenance and postponed its planned restart in October as it ran out of feedstock. It has 8,000 t/yr of vanadium pentoxide flake capacity and typically produces 600 t/month. The company had not updated its offer price for flake since October because it ran out of inventory.
The reluctance of Russian and other producers to supply material was compounded by the halting of vanadium slag production last year at financially embattled Evraz Highveld Steel & Vanadium in South Africa. The company filed for business rescue — a form of bankruptcy protection — in April 2015, its operations affected by weaker demand, the fall in international prices and rising costs. That in turn resulted in the closure of Mapochs Mine, which supplied vanadium to Evraz, and Vanchem Vanadium Products, which held a stake in Mapochs.
The devaluation of the yuan, which has fallen to an eight-year low of 6.96 against the US dollar this month, has increased the cost of importing material into China and further supported the increase in prices. The tight availability of raw material pentoxide has fed through to higher costs on the ferro-vanadium market. At the same time, demand has increased with rebounding Chinese steel production levels increasing ferro-vanadium consumption.
In the US, fewer imports are expected to remove over 2mn lbs of supply from the market in 2017 and several steel mills have struggled to secure all of their expected annual consumption on long-term contracts, with rising demand driven by a need to meet growing orders for finished products.
In addition to demand from the steel sector, demand for vanadium from the battery sector is expected to rise as developers push the adoption of vanadium redox batteries. Bushveld Minerals, which is developing the Mokopane vanadium project in South Africa and is in the process of acquiring the operational Vametco vanadium mine and processing plant from Evraz, is looking to develop vanadium redox flow batteries for energy storage.
The Chinese market was assessed at 85,000-87,000 yuan/t ($12,221-12,508/t) ex works at the end of December, rising from Yn75,000-76,000/t in the three weeks previous.
The recent rally has been fuelled by a sharp reduction in prompt supply availability after the local government ordered most producers in the Panzhihua National Vanadium and Titanium High-Tech Industrial Development Zone to halt production for environmental inspections in response to the disposal of polluted water in the Jinsha river. The Panzhihua region is China's largest vanadium ore producing region. A number of producers increased their offer prices in expectation of further supply shortages.
But beyond the short-term impact of those supply cuts, Chinese vanadium pentoxide prices had already doubled from Yn36,000-37,000/t at the start of 2016. The reduced availability of vanadium slag — the main feedstock — following cutbacks in steel production in China and the country's increased imports of non-vanadium-bearing iron ore used to make steel have reshaped the market.
China's largest vanadium producer Panzhihua Iron and Steel Group (Pangang) has stopped selling vanadium slag to the spot market and is using it for its own vanadium production. Chengde Iron and Steel Group (Chenggang) has also stopped selling slag and is using imported material from New Zealand in a bid to save costs and to offset a shortage as demand is now higher than its mining quota for vanadium-bearing titanomagnetite ore.
Private-sector Sichuan DeSheng Group Vanadium and Titanium, the largest supplier of vanadium slag in China, carried out maintenance for 10 days in October, removing 2,000t of slag from the market. Its imports typically come from Russia and New Zealand.
Supplies of Russian vanadium slag to Chinese consumers have largely dried up, as Russian suppliers did not settle annual contracts with Chinese buyers at the end of 2015 when vanadium prices dropped to their lowest level since November 2006.
China's leading vanadium producer, state-owned Citic Jinzhou Metal, has resumed output this week after securing enough vanadium slag feedstock from its Russian suppliers. The company suspended production in mid-August for maintenance and postponed its planned restart in October as it ran out of feedstock. It has 8,000 t/yr of vanadium pentoxide flake capacity and typically produces 600 t/month. The company had not updated its offer price for flake since October because it ran out of inventory.
The reluctance of Russian and other producers to supply material was compounded by the halting of vanadium slag production last year at financially embattled Evraz Highveld Steel & Vanadium in South Africa. The company filed for business rescue — a form of bankruptcy protection — in April 2015, its operations affected by weaker demand, the fall in international prices and rising costs. That in turn resulted in the closure of Mapochs Mine, which supplied vanadium to Evraz, and Vanchem Vanadium Products, which held a stake in Mapochs.
The devaluation of the yuan, which has fallen to an eight-year low of 6.96 against the US dollar this month, has increased the cost of importing material into China and further supported the increase in prices. The tight availability of raw material pentoxide has fed through to higher costs on the ferro-vanadium market. At the same time, demand has increased with rebounding Chinese steel production levels increasing ferro-vanadium consumption.
In the US, fewer imports are expected to remove over 2mn lbs of supply from the market in 2017 and several steel mills have struggled to secure all of their expected annual consumption on long-term contracts, with rising demand driven by a need to meet growing orders for finished products.
In addition to demand from the steel sector, demand for vanadium from the battery sector is expected to rise as developers push the adoption of vanadium redox batteries. Bushveld Minerals, which is developing the Mokopane vanadium project in South Africa and is in the process of acquiring the operational Vametco vanadium mine and processing plant from Evraz, is looking to develop vanadium redox flow batteries for energy storage.
Published by Argus Metals
To find out more about services, contact us today.
Thanks!
You are now able to view the article in full.
You are now able to view the article in full.
Coming soon:
Argus Metals
We'll soon be launching a brand new suite of metals services covering the global ferrous and non-ferrous markets, delivered by a powerful new online platform called Argus Metals.
Take a sneak-peak online now or email us for more information.
