Vanadium use may rise as seismic-vulnerable territories seek safeguards

17th March 2011 By: Terence Creamer - Creamer Media Editor

JOHANNESBURG ( – The consumption of vanadium, which is used to improve the strength properties of structural steel sections, may rise in territories vulnerable to seismic events following the recent catastrophe in Japan, Evraz Highveld Steel & Vanadium CEO Scott McDonald says.

Steel specifications could even be raised in the rebuilding of Japan, where large high-strength steel sections are already commonplace. However, it is also likely that other seismic regions, such as the west coast of the US, could begin to specify stronger steel grades for their building and construction industries.

Besides this potential additional demand source, the JSE-listed group anticipated a solid outlook for vanadium demand and prices. In fact, the group, which reported dismal results for the year to December 31, 2010, with a loss of R549-million, indicated that the results disguised a relatively strong performance from the vanadium unit.

Vanadium’s contribution to earnings before interest, taxes, depreciation, and amortisation rose 30% to R458-million, while steel’s contribution descended to a R721-million loss.

Vanadium-related sales rose to R1,5-billion during the year, as compared with little over R1-billion in 2009, on the back of improved volumes and prices. But vanadium’s R397-million operating profit was insufficient to offset the R1,2-billion operating loss associated with the steel unit, which resulted in an overall operating loss for the year of R823-million.

The losses were amplified by a R230-million impairment charge related to a relatively new channel induction furnace, which McDonald said was not “fit for purpose”. Evraz Highveld had declared a dispute with the supplier of the furnace, Ajax Tocco, of the US, which could result in arbitration proceedings.

The furnace was one of only a handful installed globally and McDonald said it was difficult to understand why Highveld’s previous owner, Anglo American, had decided to invest in the technology in 2007, owing to the high technical risks associated with the decision. The furnace is positioned in the middle of the plant, and had become a “nuisance”.

McDonald argued that vanadium demand was increasing and forecast that usage rates in emerging economies would continue to rise, with the high-growth Asian markets, in particular, increasing their consumption of higher-strength steels. “The outlook for the vanadium market is positive with ongoing urbanisation resulting in increasing demand and higher expected prices.”

Demand could be further boosted as a result of developments in Japan, as well as by the continued development of the vanadium redox battery, which could stimulate demand for vanadium pentoxide. There was ongoing research into the use of the battery in stationary and mobile applications, but it could be some time yet before this research translated into a material source of consumption.

Evraz Highveld was also considering approaches from third parties related to the exploitation of the Vanchem calcine waste facility. But it would only proceed on the basis that it retained control over the vanadium resources within the dump and on gaining approval from the environmental authorities. McDonald said that it would remain accountable for the waste facility even if a reworking opportunity were to be pursued.

Prices, which were currently stable at around $31/kgV, were also expected to improve further during 2011. However, they were likely to remain below their 2008 highs of over $70/kgV.

McDonald said the focus would be on building on the vanadium “competitive advantage”, while “getting steel right”.


The outlook for steel was improving, primarily on the back of restocking activities. However, the performance would only be sustained if South Africa’s anticipated infrastructure spend began in earnest and if imports moderated.

The company was concerned about the level of imports experienced during 2010, which coincided with a strengthening in the rand and which ate into some of its key markets and forced it to swing production towards export destinations. “Just under 51% of our product range was supplied by imports,” McDonald said.

In 2010, 57 000 t of steel sections were imported into South Africa, well up on the 10 000 t imported in 2006. Similarly, hot-rolled coil imports rose to 91 000 t last year, from 50 000 t in 2006, absorbing a domestic market share of 70,4% as against 20% in 2006.

“In my view, once imports come in, they don’t tend to go away,” he said, arguing that, while government saw steel as an uncompetitive market, “in my view, steel is very competitive in South Africa, if you take into account the level of imports”. There were also no duties on the importation of steel.

The increasing threat of imports had forced a review of the company’s commercial strategy, which would be geared towards higher levels of service and dependability. A target of 95% for on-time delivery had been set in a bid to mitigate the short-term price benefit associated with importation, which was eroded over time by the need for higher safety stockholdings.