Vanadium Market Fundamentals and Implications Metal Bulletin 28 th - PDF document

Vanadium Market Fundamentals and Implications Metal Bulletin 28 th International Ferroalloys Conference November 13, 2012 Berlin Germany Terry Perles TTP Squared, Inc Abstract

and lithium battery systems incorporating 1.0 Vanadium Demand vanadium for mobility applications are 1.1 Vanadium Demand 2012 under development today with potential to have a significant impact on future vanadium demand. Global vanadium demand today is driven by Vanadium Demand by Application Steel Titanium Chemicals Batteries two basic variables: global steel production 1% 4% 3% rates, and the specific vanadium consumption rate (kilograms V used per metric ton of steel produced, or KgV/MT steel) within the steel industry. Changes in 92% Total 81,000 MTV in 2012 these two variables will be the main drivers for changes in global vanadium demand in November 2012 Figure 1: Vanadium Demand by Application the coming years. Global vanadium demand in 2012 is Currently titanium alloy production is in a estimated at 81,000 metric tons vanadium strong growth phase and this application will contained (MTV). The vast majority (92%) make a contribution to growth in vanadium of vanadium demand is from the steel demand in the next 5 years but the industry. Vanadium is used to produce tool, magnitude of the market impact pales in high speed and high alloy steels containing comparison to changes in the steel industry as much as 20% vanadium (V), as well as demand for vanadium. Vanadium chemical high strength low alloy (HSLA) steels which applications are for the most part mature contain typically less than 0.5%V. applications with growth in vanadium consumption in this field projected to be Vanadium is also used in the production of close to global GDP growth. Energy storage titanium alloys for aerospace and industrial applications do offer potential to have a purposes. The workhorse titanium alloy significant impact on vanadium demand used in aerospace applications is Ti6-4, growth in the coming years. which contains 4%V. There are also other titanium alloy compositions produced which 1.2 Global Steel Production use vanadium. Titanium alloys account for about 4% of consumption in 2012. About 3% of global vanadium consumption is in petrochemical, catalyst and pollution control applications as well as ceramic pigments, special glasses and other chemical industry applications. In 2012 about 1% of vanadium consumed was used in energy storage applications. Vanadium redox flow battery (VRB) Figure 2: Global Steel Production systems for grid energy storage applications

Global steel production in 2011 was through September North American steel reported as 1,490,060 MT i . Global steel production is 4.1% ahead of the same period production in January 2012 was well below in 2011. January 2011. From February through May 2012 global steel production was roughly 2% higher than the corresponding period in 2011. More recently global steel production levels have dropped to levels close to 2011 production rates. Through September 2012 global steel production was 0.6% above 2011 production levels. Figure 5: 2012 Steel Production Forecast Our projection suggests that global steel production in October will be similar to September levels, and then November and December levels will run at 95% of the September/October production levels. This projection is in line with historical seasonal effects on steel production in the last quarter Figure 3: EU Steel Production of the year. We therefore project global Steel production in the EU has been steel production in 2012 at just over 1.5 particularly weak in 2012 compared to 2011. billion metric tons, or 0.8% growth from EU Steel production through September is 2011 production levels. 4.4% below the same period in 2011 Figure 6: 2017 Steel Production Forecast Figure 4: North American Steel Production Our longer term projection for global steel production suggests a compound annual North American steel production started the growth rate (CAGR) of 3.9% from 2011- year very strong relative to 2011 but in 2017. Our projection assumes a CAGR of recent months production levels have pulled back to close to 2011 levels. Year to date

4.6% for China, 1.1% for the EU and 3.2% produce steel with a less than 3% cost for North America from 2011-2017. increase, but sell the high strength steel as a value added product at much higher 1.3 Specific Vanadium Consumption margins. Steel users can pay higher prices for high strength steel but use significantly less steel for a given project leading to lower total cost. Less raw materials and energy 2012 Vanadium Specific Consumption Rates are consumed, less pollution is generated, 0.100 0.090 and less capital is deployed in steelmaking 0.080 capacity for a given amount of infrastructure 0.070 0.060 KgV/MT Steel development. 0.050 0.040 0.030 As a result there is value created at all stages 0.020 0.010 of the value chain and this creates a strong - North Europe Japan CIS World China Other India America Average driver for the ongoing replacement of lower November 2012 Figure 7: Specific Vanadium Consumption Rates strength C-Mn steel with HSLA steels. Today perhaps 60% of global steel produced The global average specific vanadium is C-Mn steel, about 20% HSLA steels and consumption rate in 2011 was about 20% special high alloy steels. There 0.052KgV/MT steel. We project the 2012 is no reason that the market share of HSLA specific global average specific vanadium steel to total steel cannot double or triple in consumption rate at 0.054KgV/MT steel. the coming years as a result of the strong Specific consumption rates for vanadium economic and sustainability drivers which vary from 0.089KgV/MT steel in North result from the replacement of C-Mn steel America to 0.029KgV/MT steel in India. with HSLA steels. Growth in specific vanadium consumption rates is a result of the replacement of relatively low strength carbon manganese (C-Mn) steel with HSLA steels which use small amounts of vanadium, niobium, titanium or some combination of these microalloying elements. In many cases a small amount of vanadium (typically 0.05%V) added to C-Mn steel can result in a 50% to 100% increase in yield strength. In applications where steel is a load bearing Figure 8: Specific Vanadium Consumption Rate material – particularly in infrastructure Forecast development applications in the developing world which are driving global steel If we look at the time period 2004-2006 we production growth rates - this efficient see a period where the specific vanadium strengthening of the steel results in consumption rates actually decreased. This economic value for everyone in the supply decrease was a reaction to extremely high chain. By using HSLA steel rather than C- vanadium market prices. At this time Mn steels the steel producer is often able to vanadium prices rose to extremely high