Over the last 2 years, the global ferrovanadium (FeV) market has experienced a skyrocketing price hike and notable changes in global trade. Prices more than doubled compared to 2017. Higher FeV prices have provoked higher demand for substitute alloys and are the reason behind numerous expansion projects all over the world.
According to a forecast of Evraz, one of the biggest vanadium producers in the world, a surge in vanadium production will be possible only starting from 2020-2021, while the shortage issue could be resolved by 2022 when the output reaches 113,000 t. The company notes, that new vanadium projects in Australia are in the early stages now and will be potentially producing 25,000 t of the material only in 4-5 years. Moreover, opportunities of FeV substitution with FeNb are almost exhausted by now.
China was behind the global vanadium price rally
The initial pretext for the price increase was environmental inspections of vanadium producers in China which started in mid-2017. Besides the inspections, vanadium slag imports into China were banned since January 1, 2018. Vanadium slag is the key raw material for producing vanadium pentoxide (V2O5) and FeV in China. The ban has forced small, local FeV producers to look for alternatives in China, which is not easy.
Although vanadium is one of the most common elements in the earth’s crust, it is found mostly in concentrations that would be uneconomical to mine or process for vanadium content alone. As a result, it is most often produced as a by-product of other mineral operations. By far, the largest source of vanadium is a by-product of the production of iron and steel using iron ore with high vanadium content. In China, this type of vanadium extraction covers up to 80% of total output. Since 2018, vanadium production from stone coal, as an alternative of slag extraction, has increased by almost 5 times in China, but still, cover peanuts share.
The ban on the vanadium slag imports amid the constantly declining content of vanadium in the local iron-smelting slag as a result of the use of higher quality iron ore has become the main driver of the speculative jump in prices of V2O5 in China since H2 2017. Consequently, the quotes for ferrovanadium were soaring as well.
Moreover, aiming to squeeze the maximum benefit out of the situation, suppliers of V2O5 in the Chinese market focused to their own FeV and vanadium nitride (products with higher added value) production, so those companies became to use more V2O5 for their own needs. This factor once again heated up the excitement in the raw materials market and, accordingly, ferrovanadium.
By H2 2018, the situation in the local Chinese market of vanadium products was so speculative and overheated, that domestic FeV prices were sometimes 40% higher than those in the global market. Being the biggest FeV supplier in the world (up to 20% in global trade), China has decreased exports by 25% in 2017-2018. Under these circumstances, global prices for FeV have reached a historical record high by November 2018 (up 3 times YoY).
Global FeV market has passed unprecedented price rally
The appearance of substitute products ceased the price increase in Europe off
Since the very beginning of the FeV price rally, American and European customers were looking for a cheaper and more predictable substitute. And they found it: ferroniobium (FeNb). Allowing to reach the same chemical and physical characteristics in steel, the substitution of FeV for FeNb has become a widely used practice in the USA and Europe by the end of 2018.
According to customs data, European FeNb imports have risen by 23% since 2017. Meanwhile, the imports of FeV have decreased by 19%. By the end of 2018, the prices for FeNb went up, while those for FeV (at least in Europe) appeared to be under pressure. The trend persists in 2019 as after Lunar New Year it has become clear that there is no actual FeV shortage in China.
Higher usage of FeNb instead of FeV leads to its price increase in Europe
Despite notable rollback, Chinese vanadium market still no lacking support
Regardless of numerous suppliers' statements and experts' analysis, vanadium products market in China was evidently speculatively overheated over the last couple of years. The dynamics of local V2O5 and FeV output show it better than any words. Thus, pentoxide production has reached 65kt in 2016, 75kt in 2017 and 79kt in 2018, according to the local sources. The alloy output has totaled 31.6kt in 2017, up 3% YoY, and 37.9kt in 2018, up 20% YoY.
By the end of 2018, Citing high stocks and lower demand from high-quality steel producers, FeV suppliers were forced to reduce prices. Over the last 6 months, domestic prices for FeV in China reduced by 16% every month.
However, in the long run, FeV consumption in China will continue to rise. On November 1, 2018, a new quality standard for reinforcement HRB600 came into force, which implies a ban on the use of water cooling in the production of rolled products for the purpose of quenching. An alternative to quenching is the increase in the content of manganese or vanadium in steel.
Besides, vanadium is the core element (electrolyte) in the Vanadium Redox Flow Batteries (VRB) which, unlike lithium-ion batteries, are mostly used to store renewable energy. Nowadays, the battery industry accounts for a mere 1-2% of the overall vanadium consumption. VRB technology is already quite popular in China: the batteries will be used here to store solar and wind energy.
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