NEW YORK Vanadium prices are likely to rise in 2013 and 2014 as an increase in demand from the Chinese steel sector exceeds supply, according to a Roskill Information Services report.
While the London-based research firm forecast that the market will "remain broadly balanced" between 2012 and 2017, having endured a period of volatility over the previous decade, an increase in Chinese consumption is likely to once again impact the supply/demand balance.
"With demand expected to marginally exceed supply in 2013 and 2014, Roskill expects a recovery in vanadium prices over this period. Consumption is then forecast to slightly lag production as new capacity comes on stream between 2015 and 2017 and prices are expected to remain relatively stable," the report said.
Vanadium pentoxide prices are expected to reach $11 per pound by 2017, the report added. The product is currently trading in a range of $6.60 to $6.90 per pound, according to AMMs most recent assessment.
The Chinese steel sector has become increasingly important to the vanadium market, with China accounting for 34 percent of global vanadium demand compared to just over 20 percent in 2006. The trend is likely to continue, with global steel production forecast to rise by 3 percent annually and the expectation that China will consume additional quantities of vanadium to meet new rebar regulations.
"New design codes in China aim to restrict the use of lower-strength reinforcing bar and government directives require the production of high-vanadium-content alternatives. This has the potential to increase the intensity of Chinas vanadium usage in steel, which currently lags those of developed countries such as the U.S.," the Roskill report said.
The report noted that new vanadium projects in China and the rest of the world should meet future increases in demand, "although much remains dependent on the price of vanadium, which may render a wide number of producers in China and the rest of the world uneconomical if it falls below a certain level."