Viewpoint: Rising supply to weigh on FeV

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.

In addition, steel mills will draw as heavily as possible on niobium, a replacement for vanadium in certain steels. Although demand for niobium rose in 2018 in line with prices, participants expect that the conversion to niobium has already been made wherever possible, leaving mills with no easy circumvention for melting vanadium.

Though a small part of vanadium consumption, master alloy and chemical market demand is also anticipated to be only slightly higher than the same period of 2018.

Still, most dismissed outlooks for a full decline in prices back to early 2017 levels. Environmental restrictions will continue to curb output of ferro-vanadium and vanadium pentoxide in China, pushing the country toward a net importer. Pangang plans to cut December output for inspections to 2,500-2,600t from the regular 3,300-3,400t. In addition, some producers and recyclers are expected to reduce output by as much as 1mn lbs over the coming year. Stocks of other ferro-vanadium alternatives such as Bushveld's vanadium-nitrogen alloy are expected to ease as earlier production disruptions are absorbed into the supply chain.

Glencore's production of vanadium pentoxide was down by 6pc to 14.7mn lbs over the first nine months of 2018.

The US imported 10,478t of ferro-niobium in the first 10 months of 2018, up from 8,851t in the prior year period. Imports of ferro-vanadium edged up to 3,533t from 3,332t in the prior year.