The Vanadium Market is Coiled like a Spring
This decade’s most important theme in the eyes of commodity investors is the rise of electric vehicles and renewable energy.
These two revolutions in how we move and generate power are forecast to drive acute supply shortage across multiple commodities such as copper, nickel, lithium, silver and cobalt.
Though we believe shortages will create opportunities in the most well known electric metals, the real money will be made by those who identify the lesser known materials facing the same shortages.
One of those materials is vanadium.
Vanadium Demand is Being Flipped on Its Head
Vanadium, more than any other metal, stands to have its supply chain completely remade by the growth of renewable energy.
Historically vanadium has been used as an important strengthener of steel and a catalyst for various industrial processes. More than 90% of vanadium produced goes into the construction sector currently, with only 1% going to battery storage.
Uses for Vanadium
Source: Bushveld Minerals
But this is about to change.
Vanadium Market Overview
Source: Texas A&M University
The growing need for industrial scale energy storage solutions and the rising popularity of the vanadium redox flow battery (VRFB) are set to drive explosive demand growth for vanadium through this decade.
Looking at the current and forecast supply and demand for vanadium will put the opportunity from vanadium batteries in perspective.
The world currently consumers 130,000 tons of vanadium pentoxide. Demand is expected to grow to 180,000 tons over the next 8 years, 4% annual growth and drive a growing supply deficit expected to reach 14% of demand by 2030.
Source: Largo Vanadium, Vanitec, Wood Mackenzie,Bloomberg, World Bank
But even this positive demand outlook fails to account for potential demand from the battery industry, which is the real game changer.
Source: Public Press Releases
China, the leader in the buildout of VRFBs is aggressively ramping up battery deployments. The largest flow battery in the world, with a capacity of 400MWh was installed in China near the end of 2022 by Dalian Rongke Power and another 500MWh project is currently under construction by VRB energy in China’s Hubei Province. Dalian Rongke also plans to double their battery’s current capacity over the next 5 years to more than 800MWhs.
Each GWh (1,000 MWhs) of vanadium battery capacity requires 10,000 tons of vanadium, 8% of all vanadium pentoxide produced globally in a year. 180 GWh’s of vanadium batteries are estimated to be built by 2030 and would consume 100% of all global vanadium supply produced from now until 2030.
If China constructs even half of its planned vanadium storage projects over the next seven years, China would move from the largest exporter of vanadium in the world to a net importer. Upheavals like this rarely happen in commodity markets which is why we’ve taken notice.
Global Vanadium Battery Deployment Forecast
Source: Vanitec, Public Filings
Historically, even a small shortage of vanadium leads to extreme moves in prices. In 2018 and 2019, stricter rebar standards in China led to demand exceeding supply by only 10%, yet the price of vanadium went up almost 6 times, hovering near $30/lb.
Vanadium battery demand is set to push the vanadium market into a more severe deficit than what we experienced in 2018 within only a few years, telling us that higher vanadium prices are a must to incentivize supply to meet demand later this decade.
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