China’s new vanadium-steel rebar standards take effect, what’s next for vanadium market?

Date: Nov 1, 2018

China vanadium steel rebar standards

China’s new standards requiring more vanadium in its steel come into effect tomorrow.

As China’s November deadline to incorporate more vanadium in its steel rebar takes effect tomorrow, vanadium investors are left wondering the impact this will have on the commodity, which is already experiencing a tight market that has driven its price up more than 840% in the last two years.

China’s Standardization Administration announced the new high strength rebar standard back in February this year, saying it would officially come into effect on 1 November 2018.

Under the new standard, 0.03% vanadium will be incorporated in grade three steel, with this amount increasing with each grade to require more than 0.1% in grade five rebar.

Vanadium organisation Vanitec’s John Hilbert said the new standard is a “positive development” towards boosting vanadium consumption world-wide.

“Vanadium is the most common addition for high strength rebar, because it offers the best combination of high strength, good ductility, bendability, weldability and reduced sensitivity to strain aging,” Mr Hilbert explained.

Additionally, when incorporated in the steel rebar, vanadium can be used in economical hot rolling practices.

Market dynamics

Commenting on the current vanadium market, Australian Vanadium (ASX: AVL) managing director and Vanitec committee member Vincent Algar said it was an “exciting” time for the sector.

After languishing between 2010 and 2017, the commodity has seen a resurgence due to the strengthening steel industry and vanadium’s emerging use in the vanadium redox flow battery.

Additionally, one lesser known fact about vanadium is it outperformed other battery metals in 2017 – outdoing the likes of cobalt, lithium and nickel, according to Bloomberg.

This rapid vanadium growth is expected to continue, propelled by China’s new steel rebar standards and the fact that many Chinese-based steel manufacturers are believed to be short of vanadium.

“I can see that there’s a very large demand and very large market for new vanadium production,” Mr Algar noted.

He added Australian Vanadium hoped to be able to deliver into that market with its advanced flagship Gabanintha project in Western Australia.

Price performance

According to Mr Algar, the vanadium price is now “hitting its high-level straps”.

A commonly traded vanadium product is 98% pure vanadium pentoxide. Since the start of 2017, the price for this product has risen from around US$3.50 per pound to its current value of more than US$33/lb – equating to a hike of more than 800%.

Many investors believe the price will max out soon because it has pushed past its previous high of around US$25/lb in 2005-2006, but Mr Algar says the present market conditions are “completely different” to previous times.

Ferrovanadium, which is another traded vanadium product has grown from an average of US$33 per kilogram in 2017 to push past US$100/kg in September.

Vanadium price China steel rebarb standard
Vanadium price rising in recent weeks.

Mr Algar pointed out people are debating whether vanadium has reached its peak, or if there has been a “step change” in the market.

“This new position has not been reached before in such a way,” he said.

“It spiked the last time it was here, and this is not a spike.”

“This is a slow and steady increase from an all-time low where we had a supply shock to the market,” he explained.

Analysts such as Roskill are predicting vanadium consumption will reach around 133,000 tonnes per annum by 2025 and this estimate doesn’t take into account the mounting demand for the commodity in redox flow batteries.

In 2017, about 90% of vanadium was swallowed up by the steel industry, with the redox flow battery market accounting for a mere 2% of vanadium production.

However, vanadium consumption in redox flow batteries is predicted to soar to 20% of global production by 2030 as the sustainable energy revolution surges ahead.

ASX-listed vanadium companies are looking to fill this demand, including Australian Vanadium (ASX: AVL), Tando Resources (ASX: TNO) and recently-listed QEM Ltd (ASX: QEM), to name a few.

Stone coal supply shock

Previously when the vanadium price fell, a supply shock came from China where an influx of vanadium flowed onto the market from stone coal processing, which generates vanadium as a by-product.

However, Mr Algar pointed out the Chinese Government’s tightened environmental regulations would prevent this from occurring again.

“In order to get the vanadium out of the stone coal, you have to leach it, roast it, then leach it with acid.”

“It’s a very dirty process that’s done by various small corporations throughout China. It’s extremely environmentally damaging. It introduces toxins and acid into the environment.”

“It’s outlawed by the Chinese authorities and they have been very clear … it is a matter of record that they will not accept that environmental degradation under any circumstances.

“No market conditions will allow corporations in China to pollute both the air and the land,” Mr Algar explained.

Additionally, other major vanadium producing countries such as Russia have closed environmentally dubious operations and enforced more stringent regulations on the industry.

Projected supply and consumption

With tighter environmental regulations, new rebar steel standards, lack of imminent vanadium supply in the pipeline, and a booming steel sector, Mr Algar pointed out vanadium consumption would continue to grow creating even more constricted market conditions.

When commenting on the commodity’s price movement, Mr Algar said he expected the vanadium price will taper off at some stage in the future, but the current deficiency in replacement supply, combined with increased demand would drive price higher in the near-term.

Bushveld Minerals London AIM vanadium Vametco South Africa
The outlook for vanadium demand remains strong.

Many investors are betting on how high it will go with some predicting the 98% vanadium pentoxide price will push past US$40/lb.

Adding to the situation is the prediction new vanadium supply will not come online until at least 2022.

And, until then, it’s estimated about two new operations the size of London AIM-listed Bushveld Minerals’ Vametco asset are required to come online each year for the next seven years just to meet projected market consumption.

To read full article please click here