The Conversation (0)
The demand for vanadium will be driven by high strength low alloy steel, which will be needed in rebuilding Japan’s infrastructure.
Earthquakes in Japan have caused the destruction of infrastructure that will soon need to be rebuilt—possibly with higher safety specifications than before. High Strength Low Alloy (HSLA) steel adds vanadium to the iron ore, making it much stronger and lighter. Japan already uses a large amount of HSLA steel, but this standard could be raised further in the rebuilding. The vast majority of global demand for vanadium is as a steel strengthener, and is the great force in determining price.
The role of vanadium as a steel strengthener in building infrastructure makes it a particularly valuable commodity, which is why China is particularly keen on keeping a steady supply and why the United States has added the mineral as part of its 2010 Critical Materials Strategy.
“I think in terms of Vanadium in general, the key driver for the price of vanadium is going to be infrastructure buildups in emerging markets. This metal is going to find a home where there is insatiable demand, and right now that is emanating from Asia,” said Chris Berry, Founder of House Mountain Partners, LLC and researcher of junior mining and resource stocks, the commodity and energy space, as well as geopolitical relationship between emerging and developed economies. “China is increasing its demand for vanadium, and not only is china the largest producer of a lot of these metals, but it’s also the largest consumer and that’s really one of the keys to the vanadium space.”
The global steel demand in 2011 is forecast to be 1.3 billion tons, which is an increase of 5.3 percent over 2010. This forecast was released before the disaster in Japan, and rebuilding infrastructure could push this demand even higher. Approximately 85 – 90 percent of vanadium mined is used as a strengthener in steel.
In an article for Miningweekly.com, Evraz Highveld Steel & Vanadium CEO Scott McDonald said, “It is also likely that other seismic regions, such as the west coast of the US, could begin to specify stronger steel grades for their building and construction industries.”
In his interview with Vanadium Investing News, Berry maintains that in the long term, the major driving force for future vanadium consumption will continue to come from emerging markets, such as India and China whose GDPs are growing at about 8 and 9 percent respectively.
“Contrast that with the United States that is growing at three percent a year. If you are a believer in this emerging market growth thesis and this emerging market quality of life thesis and the need for steel to satisfy that growth and that quality of life, then vanadium is definitely going to be a part of that,” said Berry.
There are other minerals such as molybdenum and niobium that can be used for strengthening steel instead of vanadium, though they do not currently reflect the current availability and affordability of vanadium.
“There are substitutes for vanadium, but they won’t be a replacement until vanadium gets to a much higher price,” said Berry.