INTL FERRO-ALLOYS CONF: Vanadium rally must turn, but prices will settle at higher base

Vanadium prices will find a much higher base than their 2015 lows when they inevitably fall, due to a structural shift in the global vanadium market, according to Amy Bennett, principal consultant at Fastmarkets MB.

“Ferro-vanadium will not stay above $100 per kg for eternity [and] at some point there will be less of a panic to get material,” delegates heard at Fastmarkets’ 34th International Ferro-alloys Conference in Lisbon, Portugal this week.

Fastmarkets assessed the ferro-vanadium price at $124-126 per kg, delivered duty-paid in Europe, and the vanadium pentoxide price at $28.50-28.90 per lb, in-warehouse Rotterdam on Friday November 9, up 207% and 275% respectively from a year ago.

The vanadium market has tightened considerably since late 2016 due to environmental inspections and a ban on imports of vanadium slag which have taken hold in China, removing environmentally unfriendly production from the country’s output.

At the same time, new regulations in China concerning a higher minimum required vanadium content in rebar have created a rush for material among consumers.

High prices and the associated credit risk have also started to squeeze traders out of the market in Europe. At today’s prices, a 24-tonne truck of ferro-vanadium would cost about $3 million in the spot market, using Fastmarkets MB data, pushing some players out of the market on account of prohibitive financing costs.

But after such a sharp increase in prices, there are concerns the market could will fall just as quickly once it turns.

“It is difficult to forecast the timing and the magnitude of the correction, but it’s clearly a market that has overheated. We’re seeing a real buying frenzy at the moment while everyone tries to get the vanadium that they need,” Bennett said.

“Some traders may start to get rid of their high cost positions, but don’t expect the lows of 2015 and 2016. The market has structurally changed [and] vanadium will settle at a higher base than in past cycles,” Bennett said. 

Ferro-vanadium prices reached near 12-year lows of $12.75-13.40 per kg, delivered duty-paid in Europe, in November 2015, according to Fastmarkets MB data.

By comparison, Fastmarkets MB expects ferro-vanadium prices to average $85 per kg in Europe this year, and $77 per kg in 2019, with prices turning in the first quarter and averaging lows around $60 per kg in the third quarter.