Last year, vanadium outperformed many battery metals including cobalt and lithium to gain 130%. Chinese vanadium pentoxide increased from $9/lb at the start of December 2017 to $13/lb at the end of January, but the third week of March registered a whopping $15.5/lb for 98% min vanadium pentoxide.
The question as to whether market participants have placed undue emphasis on these changes needs to be understood through careful analysis of the market fundamentals of the commodity in question.
Considering vanadium for steel use, growth in crude steel production was 3.6% CAGR over the last ten years, compared to the growth in intensity of vanadium use at 8% CAGR. Vanadium’s intensity growth has significantly outpaced steel growth, placing pressure on vanadium demand and prices. For metals used in steel, it is common for a new rebar standard or a change in market pace to affect the commodity’s value.
In December 2010, China imposed new design codes for construction steel. This came in response to the 2008 Sichuan earthquake which took the lives of around 68,000 people due to disintegrating and falling floor systems in brick and concrete structures. These new codes took effect in 2011, with the aim of gradually eliminating the use of (grade II) lower strength bars.
Chinese authorities clamped down further in 2013 by imposing more stringencies on those producers who did not meet the rebar standards, resulting in sustained declining inventory levels. This caused vanadium prices to eventually surge in 2017, fueled further by supply constraints in South Africa and China and overall lower contracted vanadium volumes.