Bushveld Minerals: Vanadium demand remains strong

Bushveld Minerals Q2 vanadium production rose quarter on quarter to 886t V compared to 688t V in Q1, underpinned by improved operational stability at Vametco in the period. In H1 2021, Bushveld’s production was 1,574t V compared to 1,649t V in H1 2020. The 2021 production guidance ranges 3.4-3.6kt V compared to 3,644t V in 2020.

According to Roskill, Bushveld has been able to stabilise its production in Q2 after Q1 was impacted by a maintenance shutdown at Vametco and an industrial action in April 2021. At this stage, the group’s 2021 production guidance of 3.4-3.6kt V for both Vametco and Vanchem remains unchanged versus a 2020 production of 3.6kt V.

A flat y-o-y production at Bushveld confirms Roskill’s view that vanadium supply will remain tight in 2021. Brazil’s Largo Resources production increase will be limited as the group is gradually reaching its nameplate capacity of 7.3ktpy V after its recent kiln improvement.

South Africa’s Glencore will recover to its pre-COVID production level while Russia’s Evraz’s production fluctuates with its steel and pig iron output. A supply increase will therefore largely depend on China’s steel slag producers, which are also getting closer to their production capacity.

At the same time, vanadium demand remains strong, boosted by high steel production globally. Despite China’s government calls to cap steel production, annualising the H1 production would take China’s 2021 steel output to 1,126Mt a 5.7% y-o-y increase. In the world ex-China, annualising the H1 data would bring production back to its pre-COVID-19 level.

Depleted inventories have also been rebuilt. Demand may, to some extent, moderate in the second part of the year. China’s peak construction season is over and consumption in the rest of the world could be tested by erratic COVID-related measures taken by governments.

A combination of limited supply and strong demand will bring the vanadium market to a deficit in 2021 from a surplus in 2020. This environment is illustrated by vanadium pentoxide prices which reached an eight-year high of US$9.6/lb. Roskill believes that the current deficit will perjure in 2022 and 2023 until new greenfield vanadium projects enter the market in 2024. As a result, prices are likely to remain elevated until then. A couple of signposts should be looked at:

• Will Chinese vanadium supply reach its limit and will China reduce its vanadium exports substantially when demand increases and supply in the rest of the world remains limited?
• To what extent will China’s peaking steel production impact vanadium demand?
• Will the vanadium redox batteries technology hold its promise and how fast could this market grow?
• In the longer-term new vanadium supply coming from oil spent catalysts could also impact the market balance by bringing new material.

Roskill’s NEW Vanadium: Outlook to 2030, 19th Edition report is available now.