What’s Up And Down With Vanadium?

Date: Apr 02, 2019

Vanadium, that little-known metal used mostly in the steel industry, saw a dramatic price increase from lows near US$ 2.50 per pound in 2016 to over US$ 30 per pound in late 2018 — a twelve-fold increase. And yet since November 2018 the price halved. It now stands around US$ 15.50 per pound and continues to tick down. What are the reasons propelling vanadium’s surge up and then down? And where might it go next?

Looking to China

The global supply of vanadium pentoxide, V2O5, the principal economic mineral form, is in the range of 150 kt/yr, containing just less than 85 kt/yr of vanadium, a relatively small and niche market. The Chinese produce around 55 kt/yr of vanadium, or 65% of the market. Like many other commodities, China controls price and demand through production or usage. The recent price spike and fall are related to the Chinese goal of improved safety of construction through the use of higher strength steel rebar. The addition of 0.2% vanadium to the steel alloy increases strength by 100% and reduces needed weight by up to 30%.

Other Chinese factors affecting vanadium supply are environmental concerns and regulations that are reducing internal supply as operations are put off line due to higher energy usage and related pollution. Local steel mills replace the iron source with vanadium-free seaborne ores. But they will still need vanadium for the steel alloy production thus creating a demand for non-Chinese sources. It is this overall growth and need for new sources that could be met by new overseas operations and by increases at the current primary producers.

The new Grade 3 steel rebar standard was initially introduced in 2012 with a grace period for implementation. The standard was again set for implementation in November 2018. This deadline brought buying into the market, lowered inventories and pushed prices higher. Current statistics indicate that 95% of the market is now producing at the new Grade 3 rebar standard. This uptake on the new standard suggests growth through demand for vanadium will come from the overall increase in steel use in a growing economy in China, expected at 6% y-o-y.

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