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MNI INTERVIEW: NPC Signals Steel Rebound, Vanadium To Rise

A China commodity expert expects Beijing's stronger fiscal policy will support steel demand this year
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MNI (BEIJING)
China’s stronger fiscal stimulus will see steel rebar demand bottom out this year after falling 20% since 2020, driven by greater near-term demand for infrastructure, a Chinese commodities expert told MNI, noting vanadium appetite could also rise sharply over the next few years. 
 
Rebar output will stabilise around last year's 210 million tonnes, fuelled by greater infrastructure investment for the first time since 2020's 260 million tonne record, and despite ongoing sluggishness in the property sector as the nation absorbs excess housing inventory and new starts remain subdued, said Beijing-based John Johnson, senior advisor and former CEO of global commodities research firm CRU.
 
This week’s National People’s Congress announcement to increase the budget fiscal deficit to 4% from last year’s 3%, alongside increased local government special bond issuance to CNY4.4 trillion from 2024's CNY3.9 trillion will drive the rebound, he added. (See MNI:PBOC To Buoy Assets, As Stocks, Property Added To Mandate)  
 
China issued CNY596 billion in new local government special bonds during the first two months of the year, up from CNY403 billion over the same period in 2024. 
 
However the potential for a sharp spike in vanadium prices – an element used to harden steel – remained low despite the government mandating its higher use in rebar production to make buildings and infrastructure more resistant to natural disasters, Johnson continued. "The enforcement will raise vanadium demand by 20%, but with ongoing property weakness, supply will prevent a repeat of the 130% price spike seen in 2018-19 when the standard was first recommended and the real-estate sector was prospering," he said.
 
VANADIUM PRESSURE  
 
China consumes about 80,000 tonnes a year, mainly from steel rebar, but this could triple by 2040 as the country adopts vanadium redox flow battery (VRFB) storage, which uses a vanadium-based electrolyte solution to enhance solar and wind energy storage significantly, he noted.  
 
While current supply can meet the property sector’s demand, the green industry will replace construction as the main driver as Beijing implements its plan to roll out the batteries nationwide by 2027 aiming for 12 GWh of storage, up from 1.8GWh last year, he said. 
 
Johnson noted the rapid increase posed a significant risk of supply shortages towards the end of the decade if industry failed to respond. “The market has yet to fully appreciate the China and worldwide demand potential given the advantages of VRFB for long duration and safe energy storage,” Johnson said. 
 
Despite China producing 65% of the global supply and maintaining a surplus, the country was projected to face a deficit starting in 2026 based on current plans, he added. "If domestic supply concerns prompt Beijing to impose future export controls on the substance, it could have significant geopolitical ramifications given Russia and South Africa are currently the only other major suppliers, while Australia holds substantial reserves but has limited production," Johnson noted.
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MNI (BEIJING)
China’s stronger fiscal stimulus will see steel rebar demand bottom out this year after falling 20% since 2020, driven by greater near-term demand for infrastructure, a Chinese commodities expert told MNI, noting vanadium appetite could also rise sharply over the next few years. 
 
Rebar output will stabilise around last year's 210 million tonnes, fuelled by greater infrastructure investment for the first time since 2020's 260 million tonne record, and despite ongoing sluggishness in the property sector as the nation absorbs excess housing inventory and new starts remain subdued, said Beijing-based John Johnson, senior advisor and former CEO of global commodities research firm CRU.
 
This week’s National People’s Congress announcement to increase the budget fiscal deficit to 4% from last year’s 3%, alongside increased local government special bond issuance to CNY4.4 trillion from 2024's CNY3.9 trillion will drive the rebound, he added. (See MNI:PBOC To Buoy Assets, As Stocks, Property Added To Mandate)  
 
China issued CNY596 billion in new local government special bonds during the first two months of the year, up from CNY403 billion over the same period in 2024. 
 
However the potential for a sharp spike in vanadium prices – an element used to harden steel – remained low despite the government mandating its higher use in rebar production to make buildings and infrastructure more resistant to natural disasters, Johnson continued. "The enforcement will raise vanadium demand by 20%, but with ongoing property weakness, supply will prevent a repeat of the 130% price spike seen in 2018-19 when the standard was first recommended and the real-estate sector was prospering," he said.
 
VANADIUM PRESSURE  
 
China consumes about 80,000 tonnes a year, mainly from steel rebar, but this could triple by 2040 as the country adopts vanadium redox flow battery (VRFB) storage, which uses a vanadium-based electrolyte solution to enhance solar and wind energy storage significantly, he noted.  
 
While current supply can meet the property sector’s demand, the green industry will replace construction as the main driver as Beijing implements its plan to roll out the batteries nationwide by 2027 aiming for 12 GWh of storage, up from 1.8GWh last year, he said. 
 
Johnson noted the rapid increase posed a significant risk of supply shortages towards the end of the decade if industry failed to respond. “The market has yet to fully appreciate the China and worldwide demand potential given the advantages of VRFB for long duration and safe energy storage,” Johnson said. 
 
Despite China producing 65% of the global supply and maintaining a surplus, the country was projected to face a deficit starting in 2026 based on current plans, he added. "If domestic supply concerns prompt Beijing to impose future export controls on the substance, it could have significant geopolitical ramifications given Russia and South Africa are currently the only other major suppliers, while Australia holds substantial reserves but has limited production," Johnson noted.