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Vanadium prices dipped slightly to US$28 per kilogram, leaving investors wondering if vanadium’s recovery was over and if prices would ever return to their lofty pre-recession heights. A report from analysts at Roskill Information Services answers exactly.
Vanadium prices seem to have stabilized around US$30 per kilogram in 2010 after falling from the lofty levels of US$70 and US$80 they hit in the early months of 2008 before the global recession. In July, the price dipped slightly to US$28 per kilogram, leaving investors wondering if vanadium’s recovery was over and if prices would ever return ever to their pre-recession heights. A report from analysts at Roskill Information Services answers exactly that and its authors believe $75-per-kilogram vanadium could be back as early as 2015.
The report cites the metal’s 20-year history of price volatility and the recent stability as reasons for optimism. Vanadium prices fell sharply during the economic downturns in 1998 and 2003. In 2009, when economic conditions worsened vanadium prices fell again, but stabilized quickly thanks in part to a swift reaction by producers, who cut production when demand dropped, helping to keep the supply-demand margin tight.
The report also notes the important role China’s continued growth plays in maintaining demand and driving vanadium prices up. Over the last decade, China has become the world’s main producer of vanadium, supplying nearly 50 percent of global production. With more expansion planned for the next two years, China will only consolidate its position as the world’s largest producer. China is also the world’s largest consumer of vanadium, with demand growing by 13 percent per year between 2003 and 2009 driven largely by the country’s thriving steel industry.
The Roskill report suggests countries with mature economies have a much higher intensity of use for vanadium in steels than industrializing countries. For example, in 2008 the intensity of vanadium use in steel was three times greater in the United States than in China. Over the next decade the report believes closing this gap will be one of the main drivers for growth in vanadium demand.
Despite this expected grown in demand, new projects have been limited. World production of vanadium did increase by more than 7 percent from 2003 to 2008, but most of the increase was created by using spare capacity at existing operations. In 2006, producers began increasing capacity to meet demand, but again most of the expansion came from existing mines and plants.
Chinese Steel Growth Continues
HSBC Holdings has more good news for vanadium prices this week, reporting iron ore production in China rose to a new daily record in July.
Daily output reached 3.4 million metric tons for July, HSBC analysts led by Daniel Kang said in a July 21st report. If that pace of production is maintained, China will produce 384 million tons of concentrate this year, well up from last year’s 238 million tons.
HSBC analysts believe China is continuing to ramp up domestic production to cut its reliance on foreign imports of steel.
“We expect iron ore imports to slow in coming months,” the report states. “We believe that these pricing levels will continue to encourage domestic [Chinese] miners to continue production at high levels.”
The domestic iron ore industry is profitable if prices exceed 1,000 yuan (US$148) a ton, HSBC said. Iron ore prices at Tangshan, Hebei province are up to 1,130 yuan a ton, up 13 percent after having risen for seven of the past eight days.
HSBC’s report also stated China’s Ministry of Land and Resources has targeted 1,100 million tons of annual domestic ore production by 2015, up 25 percent from the 875 million tons produced last year.