FOCUS: Stark regional price variations drive Chinese ferro-vanadium sellers to become buyers in Europe
During a protracted period of relatively lower prices, the European vanadium market appeared to flout the upstream tightness and strong demand seen by market participants in China.
Ferro-vanadium is trading in a range of $28.50-29 per kg, fob China, according to data collected by Metal Bulletin, while prices were languishing at $26-26.60 per kg, delivered duty-paid in Europe, when last assessed on Friday July 14
Metal Bulletin will launch fob-basis reference prices on Thursday July 20 for Chinese ferro-vanadium and Chinese vanadium pentoxide in order to regularly monitor and quantify the difference between the Chinese export market and prices in Europe.
Unwilling to miss out on higher prices closer to home, Chinese producers have turned to the European market to make spot ferro-vanadium purchases, reserving their own stocks for enquiries in the domestic and Asian markets.
The European purchases will likely be used to fulfil Chinese producers’ contracted deliveries – some of which are tied to independently assessed reference prices – to customers in the continent, according to market participants spoken to by Metal Bulletin, leaving the former with higher stocks to sell in Asia, where ferro-vanadium has, atypically, been trading at a premium to Europe.
A flurry of enquiries appeared in the final two weeks of June and returned late last week in time for Chinese buyers to fill their monthly commitments.
In the domestic Chinese market, upstream vanadium supplies are tight and demand for ferro-vanadium is good, meaning material is trading at the equivalent of $30 per kg and above.
“It doesn’t make sense [for Chinese producers] to ship; it would be better to buy and cover your commitments in Europe,” a trader source said.
By prioritising domestic and Asian business, sellers also enjoy more flexible inventory management as material incurs shorter freight times, another trader added.
In light of the price discrepancy between China and Europe, producers and traders in Europe have jumped on opportunities in the duty-unpaid market, selling material on a cif basis for shipment to customers in Asia. Sellers are concerned they would be underselling if they committed their stocks in Europe.
Stasis in Europe
Chinese buying has been the catalyst for a rally in Europe this week, with material snapped up in the $27s, and offers quickly exceeding $28 per kg in the first half of the week. European prices will next formally be assessed on Wednesday July 19.
European prices reached highs of $27.75-28.50 per kg, delivered duty-paid, in late April, but promptly succumbed to trader profit-taking after such a swift rally from prices as low as $24.60 per kg in March.
The market then stabilised, making only small moves in a range of $25.70-26.60 per kg, delivered duty-paid, between May 31 and July 14.
During the seasonally slower summer period, cheaper units and trader profit-taking took longer to filter through and producers lowered their offers in order to compete with traders in tenders.
Buyers were able to locate units from sources other than China. Earlier this year the US commerce department imposed anti-dumping duties of 54.69% on ferro-vanadium exported from South Korea by Fortune Metallurgical Group Co and Woojin Industry Co.
South Korean ferro-vanadium exports to the USA have dwindled as a result of the investigation, prompting concerns that some material has been diverted and stored in European warehouses, adding to a stock overhang in the region.
European ferro-vanadium prices averaged just above $26 per kg last month, leaving converters in a position to (successfully) hold out for cheaper V2O5 stocks.
Metal Bulletin assessed V2O5 prices at $5.35-6 per lb, in-warehouse Rotterdam, on Friday July 14, compared with offers in the Chinese export market between $6.40 and $6.60 per lb, fob.
European V2O5 buyers have been able to maintain conversion margins by sourcing older Chinese material, already held in Rotterdam warehouses, or resorting to production from elsewhere in the world, including Brazil and Korea, where supplies are les constrained and production costs are cheaper.
“It’s like there are two worlds now. There’s the Chinese world…and the rest of the world, where production is doing well and they have to sell it,” a converter source said.
With oxide prices plateauing in Europe and ferro-vanadium in good supply over the summer months, there had been limited momentum behind further price rises.
But European traders have eyed an opportunity to restock in recent weeks, with truckload ferro-vanadium business gaining pace around $26 per kg. Market participants spoken to by Metal Bulletin see only an upside to European prices, given cheap stocks are finite and replacement costs in China have been unrelentingly high.
Chinese buying, met with that restocking, will only expedite that rally after a period of calm in Europe.