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Ferrovanadium price gap between China and Europe is getting wider

market insights

October 23, 2019

The global market for ferrovanadium (FeV) remains quiet amid poor end-user demand. However, thanks to more consolidated supply, sellers in China have managed to keep offer prices largely unchanged in October 2019 after the national holiday week from 1st to 7th has ended.

Meanwhile in Europe trading companies have been trying to offload inventory. Consequently, prices for FeV in Europe have dropped by 5% from the beginning of October and by almost 30% compared to Q2 2019.

According to European price reporting agencies, prices for FeV (70-80% V) were 26-26.5 $/kg V (FCA) in early October. By the end of October, on Metalshub FeV was already offered at prices of 24-26 $/kg V DDP in the spot market. Sellers have been complaining about very poor demand for the seventh consecutive week and are in a hurry to sell material. Indeed, demand for all ferroalloys in Europe has been under pressure. According to Worldsteel data, Europe has produced 104 Mt of steel over the first 8 months of 2019 vs. 107 Mt in 2018. Noteworthy, monthly steel output was down only by 1-2% YoY from January-June 2019, while since then the figure has worsened to a minus of 3-5%. As mentioned before, European Steel Association (Eurofer) predicts that the real steel demand for the full year 2019 will fall by 0.4% YoY in Europe.

Market insiders in China report that contrary to expectations buying activity in FeV market has not revived after the national holidays. The domestic FeV price in China decreased slightly for the alloy in comparison with late-September. Nevertheless, the current price level is still 3% higher than it was at the beginning of 2019. End users report that they still have ferrovanadium inventory and buy mainly vanadium nitride.

The slower decline in prices in China is explained by very consolidated supply. After the vanadium slag import has been banned in China in 2018, there is a consistent lack of raw material to produce FeV in the country. The largest source of vanadium is a slag from the production of iron and steel using iron ore with high vanadium content. In China, this type of vanadium production comprises around 80% of the total production. Meanwhile vanadium production from stone coal is still minimal despite its rapid growth rate. The ban of vanadium slag imports caused a lot of speculation in the vanadium pentoxide (V2O5) market. Trying to take advantage of this situation, Chinese V2O5 suppliers have used more of the feedstock for their own FeV and vanadium nitride production. So less V2O5 was freely traded in the market. This trend remains intact in the market even today. Over the first 8 months of 2019, the biggest V205 and FeV producers in the country were the same: Pangang Group Xichang Gangfan Co., Ltd, Pangang Group Vanadium Titanium & Resources Co., Ltd, Chengde Xinxin Vanadium and Titanium Co., Ltd.

So the gap between the Chinese domestic and the European FeV prices has widened. In October 2019, the price difference reached 10 $/kg V. It creates a geographic arbitrage opportunity: buying FeV in Europe and selling it in China. This has been a popular trade on Metalshub in the middle of October.

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