A bull market storm brewing for vanadium
Traditionally used for steel production, the world is waking up to vanadium for clean energy solutions as pressure mounts to address climate change on a global scale – and some countries already have a strong foothold in the market. China and Russia have been producing the largest quantities of vanadium since the 1960s. China has produced 84,000 tons, up 3.1 percent from 2017, and it is expected to grow 3.5 percent per year. As the country grapples with modernizing its own infrastructure to capture intermittent power from renewables, it is in a unique position to control the market for vanadium redox flow batteries (VRFBs).
China has driven up demand for vanadium by imposing new national standards for steel rebar in September of 2018, which led to an increase in the amount of vanadium required to harden the metal. China has also prohibited the import of vanadium slag into the country. Increased Chinese environmental concerns led to unfavorable regulations, which in turn have additionally put pressure on the historic supply chain in the country itself, further squeezing the supply in global markets.
The global inventory surplus of vanadium products out of production in Highveld’s and other mining before closure has since been depleted in 2018, which leaves direct consumption to be limited by new production of vanadium. Vanadium producers have announced additional production volume is coming online, but increases in production are not matching anticipated demand for vanadium products going forward.
Additionally, China’s understanding of the next major use segment of vanadium in VRFBs, which has been manifested in the country’s five year planning, fuels demand for vanadium to mitigate power grid instability at its own high growth build-out of renewables like wind and solar in the power sector. VRFBs are considered a strong new market segment for vanadium off-take. Energy Storage markets are forecasted with above 40 percent CAGR for the next decades, and VRFBs will play a major role in the design of a renewable energy infrastructure.
The financial markets have also been noticing the tightening Chinese market and the growing demand for vanadium. Vanadium is on the U.S. National Security List as being a critical mineral to the economic and national security of United States and Europe. The price of vanadium has increased by 500 percent since 2016, outperforming any other battery metal. Investors are paying attention to vanadium companies, and mining exploration companies have turned their attention to finding vanadium-rich properties. V23 Resource Corp is an example of an exploration company that has 4,115 acres of pure play vanadium in North America, and is not dependent on China or Russia for production. It is plants like this that are making vanadium become the new battery metal story, similar to lithium and cobalt boom we witnessed in the past few years.
As climate change forces industries to recalculate, investors should be mindful of which countries are in position to meet aggressive clean energy targets – and the technology that will get them there.
(Written by Stefan Schauss, President of CellCube)