Chinese vanadium pentoxide (V2O5) producers may be unable to achieve their scheduled production ramp-up plans in 2019 due to cost pressures stemming from the comparatively low V2O5 price so far this year and persistent stringent environmental inspections across the country, market sources told Fastmarkets MB.

Many Chinese V2O5 producers planned to ramp up their operations in 2019, encouraged by handsome profits achieved in the past year when the vanadium price hit a record high thanks to expectations of a big increase in demand for the material after China’s new rebar policy came into effect on November 1, 2018. 

The rebar policy requires domestic Chinese mills to utilize greater volumes of alloys such as ferro-vanadium to meet the revised tensile strength requirements, and therefore was expected to generate greater demand for vanadium products as a result

Benefiting from the predicted rise in demand following the new rebar policy, the export price for V2O5, min 98%, fob China recorded an all-time high of $31-33 per lb last October, Fastmarkets MB data shows. 

Some market participants spoken to by Fastmarkets say Chinese V2O5 production will increase by 20,000 tonnes from vanadium slag and by 9,600 tonnes extracted from stone coal in 2019. 

Another Chinese market participant, who argued the above expectations somewhat exaggerated the real situation, said he had recently forecast the overall growth of V2O5 production in China at 13,000-15,000 tonnes this year, but he admitted at the same time that the total volume would have been much larger if he made the predication at the beginning of the year because the price at that time was not that low. 

Chinese vanadium producers typically use vanadium slag and stone coal to produce V2O5 with the former accounting for about 80-90% of production in China, Fastmarkets MB understands. 

Lower V2O5 price pressures stone coal-fed producers
The relatively low V2O5 price at the moment has already put some pressure on domestic producers, especially those extracting V2O5 from stone coal, because the production costs involved in stone coal extraction are usually higher than those producing V2O5 from steel slag, market sources said. 

Fastmarkets assessed the export price for V2O5, min 98%, fob China, at $7.90-8.20 per lb on June 20, flat week on week and maintaining the lowest level since November 2017. The price has dropped by 46.3% from $14-16 per lb at the beginning of the year and by 74.8% from the record high of $31-33 per lb on October 25, 2018. 

The cost for extracting V2O5 from stone coal is about 70,000-120,000 yuan ($10,177-17,446) per tonne (equivalent to $4.60-7.90 per lb), compared with 60,000-120,000 yuan per tonne ($3.90-7.90 per lb) for producing V2O5 from steel slag, according to market participants. Both prices include value-added tax. 

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