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TTP Squared Inc • Metals Industry Consultants
Vanadium Market Outlook
April 2013
Disclaimer:
The information presented in the slideshow has been compiled by Terry Perles, President of TTP Squared Inc. TTP Squared Inc and Mr Perles
provide information and advice to vanadium producers and consumers around the world. Mr Perles has worked in the vanadium industry for over 25
years and is considered an expert in the industry. Mr Perles is a full time employee of Atlantic Ltd.
Mr Perles and TPP Squared Inc provided Atlantic Ltd with the information in this presentation as part of Mr Perles’ employment agreement. Atlantic
has permission to use the information as it sees fit and all facts and forecasts have been checked for accuracy with Mr Perles. Further updates to all
or part of this presentation will come as new information arises.
TTP Squared Inc Disclaimer:
This presentation only reflects the personal views and opinions of the Author regarding vanadium market. Such opinions are prospective because
they are subject to factors of risk and uncertainty, and real future results may diverge considerably from those expressed or suggested in the
aforementioned statements made herewith. Any analysis carried out on the basis of this presentation is the exclusive responsibility of the person
executing said analysis. Given the above, the Author, under no circumstances, may be held responsible for direct, indirect, incidental, special,
punitive or other kinds of consequential damages derived from any use made of the Author’s opinions.
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TTP Squared Inc
Terry Perles – President TTP Squared Inc
Mr Perles is the founder and President of TTP Squared Inc., who offer consulting services to the
vanadium industry.
Mr Perles has more than 25 years of vanadium industry experience, having previously held the role
of VP Sales and Marketing at Stratcor, as well as being a consultant to vanadium producers and
consumers.
He is recognised globally as an expert in the vanadium industry and brings that valuable knowledge
and experience with him to the Company.
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Global Vanadium Supply and Demand Forecast
Source: TTP Squared, Inc
• Tight vanadium supply/demand balance forecast over the next five years – expected to be
driven by continued increase in intensity of vanadium use and substitution of low strength
carbon steel with high strength steel.
• Potential demand for energy storage could further add to the supply deficit significantly in
the coming years.
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Ferrovanadium Price Forecast – Short Term
Source: TTP Squared, Inc
• Limited production and growing demand should lead to further tightening in global
inventory levels and resulting higher prices in the coming months.
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Ferrovanadium Price Forecast – Long Term
Source: TTP Squared, Inc
• Over the long term, balanced supply/demand projections combined with current tight
global inventory levels leads to increasing upward pressure on prices.
• Future Chinese supply demand dynamic seen to drive global pricing with low excess
Chinese supply foreseen over forecasting period.
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Price Forecast Assumptions
• Excess global stocks accumulated between 2005-2010 have been depleted in 2011 and
2012.
• This has led to a relatively tight market and rising prices in late 2012.
• Opportunity for a short term price spike similar to 1989, 2005 and 2008 when
ferrovanadium prices surpassed US$80/KgV in inflated terms.
• Forecast tight supply/demand balance and depleted inventory levels expected over
2013-2017 (assumes all planned capacity expansions come on line, see next slide).
• Growing dependence on Chinese exports is a long term trend that will continue leaving
markets outside of China vulnerable to price upsets based on availability of Chinese
exports.
Source: TTP Squared, Inc
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New Vanadium Supply
• Windimurra expected to reach in excess of 80% of the full production run rate of 6,300
metric tonnes of vanadium (tonnes) in June 2013.
• Expansion of Chinese steel mills processing vanadium bearing magnetite planned to add
20,000 tonnes by 2016.
• Of which 7,000 tonnes expected by 2016 largely from restart of stone coal in 2014.
• Maracas project in Brazil expected to reach full production of 8,600 tonnes in 2017.
• Expansion of Highveld Steel in South Africa planned to add 500 tonnes by 2017.
Source: TTP Squared, Inc
• Expansion of vanadium supply from steel mills in China and South Africa are highly
dependent upon global steel market developments in the coming 2 years.
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Vanadium Inventory
Surplus
Deficit
London Metal Bulletin
Ferrovanadium Price
Source: TTP Squared, Inc
• Excess global inventories accumulated 2005-2009 will reach a critically low level in 2013.
Graph: EU vanadium price.
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Vanadium Steel Market Share
Source: TTP Squared, Inc
• Vanadium containing steel sub-sector has been steadily growing and is seen to continue to
rise due to a shift from low to high strength steels ie substitution and intensity in use.
Graph assumes average vanadium content in vanadium steel 0.05%
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Vanadium Consumption in Steel Industry
Source: TTP Squared, Inc
• Vanadium containing steel sub-sector has been steadily growing and is seen to continue to
rise due to a shift from low to high strength steels ie substitution and intensity in use.
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Steel Production: China vs Rest of World
Source: TTP Squared, Inc
• Growth in global steel production has been driven by China in the past 10 years.
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Crude Steel Production Growth
Source: TTP Squared, Inc
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Specific Vanadium Consumption Rates in Steel Industry
Source: TTP Squared, Inc
• China’s currently low specific vanadium consumption rates are rising substantially driven by
increased intensity in use of steel rebar. Grade 2 rebar (no vanadium) is being phased out
following the new Grade 3 rebar standard (typical V content 0.35KgV/tonne steel) coming
into effect from July 2012.
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Chinese Vanadium Supply and Demand
Source: TTP Squared, Inc
• The Chinese supply surplus is declining due to:
• Increased demand driven by intensity and substitution in use;
• The majority of stone coal processors halting production in 2012, facing market prices
below cash costs; and,
• Increasing Chinese exports.
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Source: CPM Group Vanadium
Market Outlook (2010), Atlantic Ltd
Vanadium production capacity structure
~81%
Vanadium-bearing ores
(Magnetite, uranium ore, phosphate, bauxite)
FEED
-STOCK
Vanadium slag ~67%
Secondary sources
Primary vanadium ~13%
(Steel by-product)
~19%
(Oil residues, power station f ly ash, spent catalysts)
(Mining)
New
Windimurra
supply
Intermediate products
(Vanadium oxides)
PRODUCT
FINANCE
END-USE
Steel alloying ~85–90%
(Ferrovanadium-80, Ferrovanadium-50, Nitrovan)
~5–10%
High performance alloys
Producer and end user inventories
~3%
Govt strategic stockpiling
Steel
Aerospace
Chemicals
Batteries
(HSLA steel, tool steel, f ull alloy steel, stainless steel, carbon steel)
(Ti-Al-V alloys)
(eg Catalysts)
(Redox, LithVan)
Current industry segmentation
% of Total Vanadium Supplies
% of Vanadium Ore Supply
% of Global Vanadium demand
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Trading activity
Vanadium chemicals
Long term demand growth profile
Broadly in line with global growth
Above global growth trend
Substantially above global growth trend
Chinese Vanadium Demand – Industry Structural Change
CHINESE REBAR
Source: TTP Squared, Inc
• In 2012, 166 million tonnes of Chinese rebar were
produced, comprising:
Steel rebar
• 86 million tonnes of Grade 2 rebar (no vanadium
content)
• 66 million tonnes of Grade 3 rebar (0.35KgV/tonne
steel vanadium content)
• 13.5 million tonnes of Grade 4 rebar (1.0KgV/tonne
steel vanadium content)
• Once fully implemented, new China Grade 3 rebar standard in construction will substantially
increase global vanadium demand, driven by regulation (upgrading of Grade 2 to Grade 3 rebar).
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Chinese Vanadium Demand – Industry Structural Change
CHINESE 12th FIVE-YEAR PLAN
Source: TTP Squared, Inc
• Strictly control the production of steel from vanadium bearing magnetite ores in an effort
to conserve the vanadium bearing natural resources.
• Promotion of construction of industrial base to allow further industrialization of the
economy leading to ongoing strong demand for steel in construction projects which will
lead to demand for vanadium.
• Strengthen energy conservation and environmental protection by eliminating small
environmentally damaging vanadium producers.
• Develop markets for high end steel products including Grade 4 rebar (1.0 KgV/tonne steel).
• China will continue to move towards more efficient use of vanadium resources and
development of higher strength steels (requiring vanadium) to support ongoing
infrastructure development, and control vanadium production to support domestic
economic development.
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Chinese Vanadium Supply from Co-product Slag
Source: TTP Squared, Inc
• China is positioning two large vanadium producers (Pangang and Chengde) as national
champions as its industry undergoes restructure towards economic and environmental
efficiency.
• Previously anticipated growth in coproduct vanadium supply for new steel mills could be
effected by the current steel market in China.
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Titanium Alloy Demand for Vanadium
• In 2011 approximately 3,000 tonnes of vanadium was
consumed in titanium alloy production.
Titanium alloy use in modern aircraft
• Vanadium consumption in titanium alloys is expected to
reach 6,000 tonnes in 2016.
• Air traffic is forecast to double over the next 15 years,
increasing demand for vanadium in titanium alloys used in
aircraft.
• Military demand for titanium alloys will increase by 40%
in the period 2010-2015.
Source: TTP Squared, Inc
• Titanium alloy demand will represent a fast-growing sector in future global vanadium demand.
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Vanadium Demand in Energy Storage Applications
VANADIUM BATTERIES Source: TTP Squared, Inc
• Extremely large capacities make vanadium redox batteries
(VRBs) well suited to use in large power storage applications
having an extremely rapid discharge capability – ideal for use
in wind or solar energy storage. Vanadium demand in VRB
applications conservatively projected to grow from 1,100
tonnes in 2012 to 8,500 tonnes in 2017.
Vanadium redox battery
• Lithium vanadium phosphate batteries produce higher
voltages and improved energy for weight characteristics –
ideal for use in electric cars. Vanadium demand in lithium
batteries conservatively expected to grow from 200 tonnes in
2012 to 1,700 tonnes in 2017.
• Actual growth in demand for vanadium in energy storage
applications could be significantly higher than these
conservative projections over the next few years.
• Vanadium demand in energy storage could impact global vanadium demand substantially.
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Vanadium Industry Cash Cost Curve 2012
Secondary
Primary Ore
Co-product Slag
Source: TTP Squared, Inc
• Costs associated with processing co-product vanadium slag into FeV have increased.
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Vanadium Supply by Region
Includes processing of raw material
sourced internationally by China, Korea,
Japan, Taiwan and USA.
Source: TTP Squared, Inc
• Chinese vanadium production in 1H2012 decreased by 13% compared to 2011 production levels
due to closure of the majority of stone coal based production and slower than expected
expansion of co-product vanadium slag from steel production.
• Outside of China, Windimurra is the only potential source for significant expansion of vanadium
production in the next 2 years.
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Vanadium Raw Material Supply by Country
Total vanadium
production 71,508
tonnes in 2012
Source: TTP Squared, Inc
• China is the largest producer of vanadium, most of which is sourced from processing of
vanadium bearing slag from the steelmaking process and is also consumed in the steel
making process.
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Vanadium Supply by Raw Material
Total vanadium
production 71,508
tonnes in 2012
Source: TTP Squared, Inc
• 67% of current vanadium production sourced from processing of vanadium bearing slag from the
steelmaking process using vanadium rich iron ores (China, Russia, South Africa).
• 22% of vanadium production from primary ore mines (Windimurra is one of only three globally).
• Primary vanadium production economics are not influenced by iron ore prices, unlike production
from by-product steelmaking slag which is influenced by the steel mill being profitable.
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Vanadium Demand by Region
Source: TTP Squared, Inc
• China’s vanadium demand has been steadily increasing.
• North America’s vanadium market has been impacted by a reduction in historically available
supply coming from the oil industry following switching of some power stations’ fuel source
from oil to shale gas thereby needing to rely more on imports.
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Vanadium Demand by Application in 2012
Total vanadium
consumption 80,733
tonnes in 2012
Source: TTP Squared, Inc
• 90% of global vanadium demand comes from steel applications.
• 4% of vanadium demand comes from titanium and super alloy products – a strong growth
market.
• Potential strong growth of vanadium usage in energy storage applications in the coming
years could alter this situation.
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Contact:
Terry Perles
President
TTP Squared, Inc
Contact:
Glen Zurcher
Investor Relations Manager
Atlantic Ltd
T +1 412 897 3066
E [email protected]
T +61 8 61 41 7215
E [email protected]
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