Viewpoint: Rising supply to weigh on FeV

Date: Dec 27, 2018

Easing supplies coupled with lower consumption rates are expected to force US ferro-vanadium prices down in the first half of 2019.

Market participants expect US ferro-vanadium prices to decline by as much as a third over the first months of 2019 from current levels before stabilizing. Rising availability and weaker offshore demand are expected to continue undercutting prices.

Alloy prices are projected to come off near all-time records as costs drive consumers to restrict consumption and producers to operate at maximum levels. Stocks in the US and Europe have built back up to more typical levels after months of gradually sliding availability. Although in few hands, US suppliers hold sufficient tons to meet spot and long-term mill demand.

Chinese rebar standards and environmental restrictions for producers, which most cite as the source of the rally between September and November, will continue supporting prices but to a lesser degree than in the second half of 2018. The standards, set forth from the country’s Standardization Administration, require rebar to contain roughly 0.3kg vanadium/ton steel in order to pass yield strength tests. They came into effect 1 November.

Mills in China could cut buying prices and volumes shifting as much as possible to non-grade 3 rebar and adhering to standards as little as possible. Participants also anticipate that efforts to build vanadium stocks in the wind up to the implementation of the standards ceased ahead of November and should provide some demand buffer in case of shortages.

In the US, mills had mixed demand projections for 2019 annual contracts, despite most opting for maximum volumes in order to circumvent spot market shortages. Melt rates and construction demand are expected to be flat or fall in the first several months of the year. Declining demand would alleviate tightness for both ferro-vanadium (V 50pc) and (V 80pc), especially as larger supplier stocks have rebounded from lows. Traders expect continued difficulty in sourcing the alloy until after the initial wave of mill purchases, which typically wrap up ahead of the Chinese lunar new year.

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