Vanadium on the rebound

In the first quarter of 2003, the vanadium market finally showed signs of improving, according to a report by British market analyst Roskill. The improvement followed an extended period of chronic oversupply and uneconomic prices.

The Economics of Vanadium (10th edition) says Xstrata’s decision to close its Windimurra plant in Australia, responsible for about 10% of the world’s V2O5, reduced vanadium supply, which, in turn, caused prices to rise.

The brief history of the Windimurra plant illustrates the difficulties faced by vanadium producers over recent years. In 1997, a bankable study for the proposed plant was submitted after a period of steady growth in demand. The study was based on a projected vanadium pentoxide price of US$3.50 per lb. When the plant opened in January 2002, the price had fallen to US$1.40 per lb., and it remained under US$1.50 per lb. for most of the next 30 months. This was a reflection of not only a downturn in vanadium demand but of the burgeoning supply of vanadium on the market, particularly that which was recovered from secondary sources.

While world production rose by almost 10,000 tonnes between 1994 and 2002, demand over the same period showed only limited growth. Looking ahead, Roskill predicts the long-term, annual growth rate for vanadium to be about 3%. With the reduction in production capacity, the market is regaining lost ground and prices are recovering. However, Roskill says the price will remain subdued in the medium term, particularly if supplies increase in the absence of new markets or applications.

The report shows that primary production of vanadium is centred on the activities of the Xstrata group. In South Africa in 2002, Xstrata produced a total of 7,700 tonnes contained vanadium, plus 3,100 tonnes at its Windimurra operation. Most vanadium is produced as a vanadium-bearing slag as a byproduct of steel; the steel is produced by smelting vanadiferous iron ores. Highveld Steel & Vanadium of South Africa is the largest producer of vanadium in slags, having turned out 9,600 tonnes of contained vanadium in 2002. In the same year, Russia accounted for almost 5,900 tonnes of contained vanadium, and China, for 16,000 tonnes (Chinese vanadium production could be higher if recovery methods were better).

An increasingly important source of vanadium is secondary materials, such as heavy crude oils. These secondary sources account for roughly 4,000 tonnes annually.

Demand for vanadium has largely stagnated since the mid-1990s. Consumption fell to around 34,700 tonnes in 2002, after a peak of more than 37,000 tonnes in 1998.

More than 85% of all vanadium is consumed in the manufacture of specialty steels; thus demand is largely determined by the underlying trends in the steel industry. In other words, the vanadium market is controlled by the prevailing global economy.

There are potential medical uses for vanadium in the treatment of diabetes and as a contraceptive, but the most significant potential use is the vanadium redox battery (VRB), which has superior capacity for energy storage. Studies suggest that battery could provide a market for up to 10,000 tonnes V2O5 per year. However, it’s unlikely the battery would reach the market in the near future.

— The preceding is from an information bulletin published by London-based Roskill Information Services.