The growing premium in China's molybdenum and vanadium alloy prices to Europe has sparked a price rebound in western-grade material as this signals a potential increase in export demand from Asia-Pacific.
A shortage of molybdenum concentrates' supply in China lifted the ferro-molybdenum market, while the rising cost of vanadium pentoxide, the raw material used to produce ferro-vanadium, pushed vanadium alloy prices higher.
This also resulted in a sharp increase in Chinese export prices, which creates an opportunity for international markets to take advantage of the widening price arbitrage to China. European sellers are witnessing increased purchases of ferro-molybdenum from Chinese steelmakers. China is the world's biggest producer and consumer of molybdenum.
In the ferro-molybdenum market, Chinese export prices have surged by almost 13pc since the beginning of July, and this in turn has boosted prices elsewhere, particularly in Europe. By comparison, prices for 65-70pc grade alloy rose by 1.7pc over the same period, Argus data show.
The price differential is likely to encourage Chinese participants to buy directly from Rotterdam, or to see South Korea diverting alloy to China, thus alleviating supply pressures in Europe.
Despite the duty on exports to China, European sellers and Chinese buyers are likely to achieve profits as the price difference rose to $5/kg on 1 August, which is the widest spread since August 2017, Argus data show.
A similar trend took place in the international vanadium market after the first half of this year was marked by steep falls in European prices.
China's 80pc grade ferro-vanadium alloy export prices jumped to $37.85/kg on 1 August, widening the spread to Europe to $6.35/kg. The price arbitrage reached a year-to-date high of $7.10/kg on 30 July, Argus data show.
Rising domestic ferro-vanadium prices in China also raised the possibility of a rebound in demand as the country steps up efforts to enforce new high-strength rebar standards that use more vanadium during production.
Ferro-vanadium exports from China dropped by nearly 44pc on year to 1,152t in the second quarter of 2019, compared with 2,050t in the same quarter in 2018, Chinese customs data show.
