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By Charlotte Radford, Anna Xu, Chris Kavanagh AMM
July 24, 2017
Concerns over upstream vanadium supplies provided the backdrop for a burst of trader restocking in Europe and the USA last week, though the Chinese market held on to its premium status despite sharp price increases elsewhere.
Chinese ferro-vanadium and vanadium pentoxide are in tight hands amid news that local vanadium plants in the major production hub of Panzhihua, Sichuan province, will have to halt production while environmental inspections are conducted.
“We have limited material on hand and are reluctant to sell at this moment as [we] cannot get the cargo from producers. The production cut [at vanadium pentoxide plants] will make the situation much worse,” a trader told Metal Bulletin.
V2O5 prices were assessed at $6.40-7 per lb, fob China, up 3% week-on-week, though European buyers struggled to get offers from Chinese sellers.
Metal Bulletin assessed ferro-vanadium prices, fob China, at $30-33 per kg on July 20, an increase of 9.6% week-on-week.
Higher prices in the export market filtered through from rallying domestic prices, market sources said.
Local ferro-vanadium prices rallied as much as 5% per day last, week reaching 117,000-118,000 yuan ($17,310- 17,458) per tonne by Thursday July 20.
China’s domestic V2O5 prices jumped 7% between July 19 and 20 alone, reaching 110,000 yuan per tonne on July 20 – up 7.3% from the previous day – with material tight and traders declining to offer from their limited stocks.
For now, China’s largest vanadium producer, Pangang, is operating with no disruption at its plants although forthcoming environmental inspections have created concern over future supplies.
“We are now running normally with 3,000 tpm of vanadium pentoxide in our two plants in Panzhihua and Xichang,” a Pangang Group representative told Metal Bulletin.
“However, around 300 tonnes [of V2O5] in Panzhihua area will be removed from the spot market in the following month when the plants here are ordered to halt for environmental inspection,” the spokesman added.
China’s production of vanadium pentoxide has averaged 7,000-7,200 tpm so far this year, Metal Bulletin understands.
V2O5 inventories were already tight. Chinese suppliers, including Chengde Jianlong, which had previously declined to offer material to export enquiries, are no longer quoting on domestic enquiries either, the company told Metal Bulletin.
Higher domestic prices mean Chinese vanadium prices continue to run ahead of the international market and have retained a premium over prompt spot prices in Europe and the USA.
In Europe, ferro-vanadium prices made only slight moves in June and the first half of July, trading in a range of $25.70-26.60 per kg delivered duty paid.
“The last few months [of lower prices in Europe] were a surprise for us, but producers were very aggressive in tenders, and traders offered lower to compete,” a second trader source said.
European ferro-vanadium prices continued to build on their earlier gains in the second half of last week, jumping another 6.1%. Metal Bulletin assessed European ferro-vanadium prices in a range of $28.50-30.50 per kg, delivered duty-paid in Europe on Friday July 21, up from $27-28.60 per kg two days earlier.
Trader purchasing made up the bulk of ferro-vanadium buying in Europe last week, with consumers coming into the market on an as-required basis and reluctant to buy during the rally.
“Consumers say you’re crazy, check the market, panic, and then come back and ask you what’s going on,” a third trader said.
But those holding material felt no pressure to sell amid trader restocking, with all eyes on still higher prices in China’s domestic and export markets.
“Chinese prices have kicked up another notch, so the gap has been preserved,” the second trader said.
European V2O5 prices were assessed in a range of $6-6.60 per lb, in-warehouse Rotterdam, on July 21, up from $5.35-6 per lb previously.
Traders expressed an interest in buying but struggled to find offers, with others reluctant to do inter-trade business in a rallying market and keen to hold out for still-higher prices next week.
Converters, meanwhile, are reluctant to buy given uncertainty over how ferro-vanadium prices will move during the time elapsed between purchasing the raw material and conversion, which can take four weeks.
“It’s going up like a rocket and we don’t know when it’s going to end,” the third trader said.
In the USA, ferro-vanadium prices staged a precipitous rise, taking their cue from the soaring prices in China and Europe, with suppliers holding back from offering.
US spot prices for ferro-vanadium climbed to a 33-month high, reaching $12.85-13.25 per lb on July 20, up 8.52% from $11.7-12.35 per lb previously, according to Metal Bulletin sister publication AMM’s latest assessment.
Although prices have fallen short of lofty expectations for much of the year due to a lacklustre spot market demand in the USA, market participants suspect that the market has reached the turning point.
“The market has exploded. Anything below $13 would be a very cheap sale at this point,” a supplier source told AMM.
“There is no doubt suppliers have completely pulled back, and they are showing a lot of discipline in the market today,” a second supplier source said to AMM.
Spot market demand from consumers has been absent from the market during the price run-up because many have opted to wait out the market volatility.
“For a consumer, this is the worst time to come out, so they will hold off as long as they can until the price settles in,” the first supplier source noted.
But despite the continued dormant spot market demand from end-users, US suppliers have unanimously elevated offering prices as overseas prices have risen sharply in response to a tightening global supply, particularly in China.
“This is what everyone has been talking about for six months now: a global shortage,” a third supplier source said to AMM.
Traders have flooded the market to replenish depleted inventories and have been met with significantly higher offering prices.
“Most traders are out of material at this point, leaving only a handful of suppliers with inventory on hand,” the second supplier source said.
Replacement costs for traders have been prohibitive in recent months because US prices have been lagging behind regional prices elsewhere amid illiquidity in the spot market.
“We’ve been saying for a while that prices should be higher than they have been, and now it’s finally starting to show up with replacement costs being factored in,” the second supplier source added.
Traders are now finding it difficult to supplement inventories because overall availability in the USA has thinned out.
“There is a shortage of supply and a lot of traders have been caught off-guard after selling everything cheap,” a fourth supplier source explained. “Prompt material is tight and all the people selling in the $11s are now out looking.”
As in Europe, market participants were quick to note that US prices continue to lag behind the global markets despite the significant move higher.
“In the USA, we have traders galore coming to us from outside the country trying to buy up any cheap material, some of whom I’ve never even heard of,” a fifth supplier source said.
While market participants anticipate further pricing upside ahead within the USA, some expressed concern about the sustainability of the jump in prices given the lack of consumer interest.
“It is way too early to tell what legs this price run has. We’ve seen in the past that these run-ups can be pretty short lived when it’s based on environmental inspections over in China,” the second supplier source explained. “We’ll have to wait for a few consumers to come out to see if these higher prices are here to stay.”