As the world transitions towards greener and more sustainable energy sources, the demand for certain metals, such as vanadium, has surged. Capital 10X, a leading investment research platform, has identified vanadium as a key strategic metal essential to the energy transition, due to its ability to increase the strength and efficiency of industrial metals, and its role as the main element in the manufacture of vanadium redox flow batteries (VRFBs).
Vanadium’s Demand Drivers
The steel industry has been the main source of vanadium demand, accounting for 92% of total demand in 2021. China remains the largest consumer of vanadium, making up 60% of global consumption. According to Wood Mackenzie, demand for vanadium in the steel market is expected to grow at a CAGR of about 3.1% until 2030.
Vanadium Prices and the VRFB Market
Vanadium prices experienced a high of US$13 per pound in the first half of 2022, driven by concerns over potential supply disruptions from the Ukraine/Russian conflict. However, the prices declined in the second half due to concerns over economic growth and demand slowdowns from China.
In late 2022 and into the new year, vanadium prices have shown signs of life, hitting around $9.80 per pound, approx. 26% above the lows of 2022. The price increases are likely driven by a rebound in demand from the aerospace industry, as well as the installation and interconnection of the world’s largest VRFB battery project in China. Industrial demand for VRFB batteries is picking up steam and is expected to have a significant impact on demand for vanadium in the future.
Large Scale VRFB Installations: A New Driver of Demand
The Dalian Rongke Power VRFB system, in partnership with Pangang Group Vanadium/Titanium Resources, is the largest non-lithium or pumped hydro energy storage project in the world, with a capacity of 100MW/400MWh. The project required ~4% of total annual global vanadium production (~8,000 tonnes of V2O5) and has the potential to lower the peak load on the local grid, improve the reliability of the overall power supply in the entire province, and enhance the opportunity to connect new generation sources (like renewable) energy to the grid.
China plans to build another 1,000 GW of solar and wind capacity by 2030, and VRFB batteries are expected to fill some of the energy storage needs generated by all the new wind and solar capacity. According to S&P Global, new stationary storage deployments may hit approximately 100 GWh/year by 2027, while the World Bank has said vanadium is among the top five metals affected by the energy transition, with 189% of current vanadium production needed globally by 2050 to support the energy transition alone.
Vanadium Market Share and Production
There are three global leaders in primary production for vanadium: Largo Inc. (TSX: LGO) (NASDAQ: LGO), which has a mine in Brazil; Bushveld Minerals (LSE: BMN), which has mines in South Africa; and mining giant Glencore (LSE: GLEN), also in South Africa. Largo Inc. owns the largest producing primary vanadium mine in the world and is more of a pure play on vanadium, while Bushveld and Glencore have exposure to the metal but are more diversified.
Reference:
1) The Increasing Market Potential of Vanadium and Vanadium Flow Batteries – https://capital10x.com/the-increasing-market-potential-of-vanadium-and-vanadium-flow-batteries/
