International vanadium supply increment long relies on import from China

Asian Metal: Thanks for accepting the interview of Asian Metal, Mr. Zhang. Please give a brief introduction of your company.

Mr. Zhang: Shanghai Meikai International Trade Co. belongs to MICA Group (MICA). MICA was founded in 2005. At the beginning of its establishment, MICA mainly engaged in steel business, with offices in Tianjin and Hong Kong. Due to business development need, MICA established Shanghai Meikai International Trade Co. in 2018, specializing in the import of bulk raw fuel, export of steel and related financial derivatives. The main products include iron ore, coal, pig iron, steel, alloy and so on. The company has long-term cooperation resources of some products. We signed a long-term cooperation agreement with EVRAZ of Russia for ferrovanadium business, and we are the exclusive agent of EVRAZ in China.

Asian Metal: What kinds of vanadium products does Meikai mainly engage in, and what’s the scale?

Mr. Zhang: At present, our vanadium products are mainly 50#FeV and 80#FeV of EVRAZ, and the import volume varies with the market demand. Take the most recent month as a example, we imported and sold out about 200t in December 2020.

Asian Metal: China is a big vanadium producing country. Why will so many international vanadium products flow to China in 2020? What do you think is the main reason for this phenomenon?

Zhang: China imports a big amount of vanadium products not because of the lack of vanadium, but because the price level of vanadium in China is relatively high. Economic benefits are the key factor that drives global vanadium products to China. In 2020, COVID-19 reshaped the supply and demand frame of the international vanadium market, and the flow of international vanadium products to China increased significantly compared with previous years. In my opinion, there are two main reasons: First, since the end of 2019, vanadium demand in markets outside China has been sluggish mainly due to the crisis in the automobile industry, and then after the outbreak of COVID-19, the terminal demand for vanadium products fell sharply, seriously hindering the sales of vanadium products. The second reason is the strong demand in Chinese market. Despite the impact of COVID-19, China's crude steel production has not decreased. Especially driven by the extremely high output of rebar, Chinese steel mills' demand for vanadium products increased significantly in the second and third quarters of this year. China's stable market demand and its potential ensure that international vanadium products will not appear unsalable.

Asian Metal: What do you think is the resistance for international vanadium products to enter Chinese market?

Mr. Zhang: The first is the problem of the delivery cycle, the delivery mode of most imported vanadium products are forward delivery. The buyers need to lock the price about 1 to 2 month in advance before delivery. Amid the rapid price changes in the vanadium market, this is virtually a big challenge to the buyers. The second is the domestic vanadium price trend, the domestic vanadium price decline will inhibit the forward delivery of vanadium products flow to China. China is a big vanadium producer, but also a big vanadium consumer. Before market demand outside China recovers, China's vanadium price level will be the main factor determining China's imports of vanadium products. Third, domestic buyers generally prefer to purchase spot goods, but most overseas suppliers do not set up spot warehouses in China. Meikai company adopts the mode of spot supply in the bonded area, which is our advantage over other other importers.

Asian Metal: How do you view the current situation that vanadium price in China is obviously higher than the international market? How should import vanadium pricing go?

Mr. Zhang: China's vanadium prices stage higher than the international market. At present, the correlation of vanadium prices at home and abroad is still not strong enough, and China's vanadium price and international vanadium price are still disjointed. After COVID-19, when the economy outside China starts to recover, the demand for vanadium in the international market will return to a normal state. The correlation between the Chinese market and the international market will be enhanced, and prices in different regions will return to the same level. When importing vanadium products, it's the most scientific operation method to take the domestic market price as the guide to reversely restrict the import price.

Asian Metal: Will the large amount of vanadium products that enter Chinese market have a negative impact on the Chinese vanadium market?

Mr. Zhang: COVID-19 has led to a sharp reduction in the use of vanadium products in the international market, so international vanadium suppliers have become more dependent on the Chinese consumer market. It will be an inevitable trend to continuously export vanadium products to China for a long period of time. Even after COVID-19, China will probably remain a net importer of vanadium products for a long time. From the view of the current import volume of various vanadium products, it's far from the negative impact because China's vanadium demand potential is huge. China's vanadium demand in rebar is the main tone of market development, Chinese vanadium market is in the rapid growth period now. Although in the short term, the increase of vanadium import volume will have a negative impact, I believe that with the economic recovery in and outside China, the demand for vanadium will return to normal, and in the long term, there will be no negative impact.

Asian Metal: The specifications and standards of international vanadium products are different from those in Chinese market. Will this hinder the import of vanadium products?

Mr. Zhang: The difference of vanadium product standards is obvious, especially for vanadium used in smelting industry, but it mainly affects the pricing rather than the use. As long as the price difference exists, the difference in product specifications will not hinder the import. In terms of ferrovanadium products, 50#FeV is most commonly used by Chinese steel mills, while 80#FeV is mainly used by European and other Asian steel mills. Although the EVRAZ specifications that we agent can meet the needs of the Chinese market, the products from some other countries and regions still cannot meet the standards of China. Therefore, China's alloy producers choose to import vanadium pentoxide flake to produce national-standard ferrovanadium, and supply to local steel mills. Now some overseas suppliers are also actively producing ferrovanadium according to Chinese standards to meet the needs of Chinese customers.

Asian Metal: How do you think we can further strengthen the link between Chinese and international vanadium markets?

Mr. Zhang: As long as it is economical, goods in domestic and foreign markets can circulate autonomously. As for how to strengthen this link, I mainly focus on the import and export tariffs. Now the export tariffs have been eliminated, but the import tariffs are still about 5%. China is now actively promoting the construction of the Free Trade Area of the Asia-Pacific (FTAAP), which will effectively promote the link of vanadium markets at home and abroad. In fact, the vanadium market is already a very global market, with each large producer having customers and market share in each region. And this market model allows suppliers and steelmakers to optimize their sales and procurement mix.

Asian Metal: What's your company strategic plan in the field of vanadium international trade?

Mr. Zhang: Meiikai will continue to act as the exclusive agent of EVRAZ ferrovanadium to promote better cooperation with major vanadium customers in China.

Asian Metal: Thanks for your sharing.

Mr. Zhang: Thanks for the professional platform provided by Asian Meta.