Are Vanadium Prices Already Showing us their Future?
Updated: Jun 1
I believe now is the right time to revisit and record a few of my more recent posts on vanadium pricing.
Firstly, this one from 3rd April, which discussed a report on the vanadium market, spanning 29th March to 2nd April 2021.
Key figures being those related to V205 prices, which is the key ingredient in this whole market.
At the time of that report, European V205 prices were $8-8.50 per lb. Equivalent to 113,600 CNY/t.
From the same report, we see that the "V205 giant flake companies conclude the April price at 112,000 CNY/t."
That is equivalent to $7.90 per lb.
Let's now switch over to the latest report from yesterday. Average V205 price in China reported at c. 111,000 CNY/t. However, it's important to appreciate that's retail sales only. It's the large factory prices that determine the general direction of pricing and they set prices at end of each month.
Now here's my set of Twitter posts on historic vanadium pricing points, as determined by TPP Squared at the Vanitec 8th Energy Storage meeting, which I have said many times before is an absolute must-read for anyone interested in the vanadium market.
Let's now deliver into the detail once more.
TPP Squared quote from slide 90.
"The vanadium price distribution chart shows a clear peak at US$6.00-$7.00/lb V2O5 reflecting the historical equilibrium market clearing price when supply exceeds demand, and the cost of production drives the market."
TPP Squared then go on to say this,
"A secondary peak occurs at $15.00-$16.00/lb V2O5 representing a point of price stability in an environment where supply struggles to meet demand. At this price level we don’t see very much substitutional loss of demand and so in tight markets there is support for prices in this range."
What that is basically saying is that once V205 prices move past the $6.00 - $7.00 range, then the vanadium market is showing signs that demand is outstripping supply. With that then in play, the vanadium market then has the ability to push up to as high as $15.00-$16.00/lb V205, without the substantial substitution (eg. increase Niobuim usage) having a significant effect.
Here's now my marked-up chart from post number 9 from the above set of posts I published.
Historically, when the price of V205 passes c. $8 per lb in an uptrend, then it has gone on to spike higher on all 4 occasions since the early 1980s. For the record, the above chart has been inflation-adjusted already.
$8 per lb also appears to act as a support/resistance point.
Back to April 2021 once more and those V205 prices.
Europe V205 $8 - $8.50 per lb.
China V205 $7.90 per lb.
What's clear is that we are already past the historical US $6.00 - $7.00/lb V205 level that according to TPP Squared reflects,
"the historical equilibrium market clearing price when supply exceeds demand."
Where we now appear to be, is up against (be it my calculated) the $8 resistance level with Europe already through it. However, given their influence, I see China as the key here.
What we know is that China producers are operating at near full capacity, having expanded V205 production in 2020 by c. 20% and they did it at a time when demand in other key markets such as the US and Europe, was struggling...
and still, V205 prices sit right on that $8 mark.
Demand in those other markets is clearly now returning with US ferrovanadium (not to be confused with V205) prices in the week commencing 29th March, running as high as $16.50 per lb. That equates to c. +$36 per kg.
Add this to the +$8 per lb European V205 figure and it's clear to see that both markets are active again.
Increased Chinese demand and production can be put down to their significantly increased vanadium content in Chinese steel. This being driven by the very rebar regulations that drove the vanadium spike in 2018.
As the above slide from TPP Squared demonstrates, vanadium content in Chinese steel in 2021, is expected to increase by c. 20% on 2019 levels.
The very reasoning that drove vanadium market prices to the dizzy heights of c. $28.50 per lb in November 2018, is now exerting its influence on that same market in 2020/21.
The main Chinese V205 factory prices at the end of April will be well worth looking out for, especially those from Pangang the producer of c. 35% of total Chinese V205. A sustainable push north of $8 per lb could well be a signal that the market is ready to go much higher. However, if we follow TPP Squared's lead then the market is perhaps already demonstrating that another uptrend is already in place.
Note - This article represents the opinion and research of the author only and the author currently holds a position in one or more of the stocks mentioned. Nothing shared in this article is to be deemed financial advice. Where possible all facts have been checked and references provided, however it is the responsibility of the reader to check all details for themselves before making any financial decisions. Please also refer to the disclaimer policy