Vanadium is used in a variety of industries, including steel production, electric vehicle batteries, chemical catalysts, aerospace and medical industries. Of these, the majority of vanadium is used in the Chinese steel industry, particularly in the manufacture of high-strength, low-alloy steels used to make construction rebar. However, as the clean energy transition accelerates, vanadium metal’s role in batteries is also gaining prominence, attracting more investor interest.
At the beginning of 2023, the vanadium market, one of the raw materials used in steelmaking, was booming as expectations for China’s economic recovery were high due to the country’s end of its zero-COVID policy. However, by the end of the first quarter, concerns about China’s economic growth began to mount along with weakness in the construction and manufacturing markets and a decline in steel production. Vanadium prices were essentially in a continuing downward trend after peaking in March.
Outside of China, the impact of inflationary pressures and rising interest rates on the economy was evident. Demand for vanadium from the Chinese steel industry continued to weaken into the second half of the year. One of the few bright spots has been the increased demand for large scale vanadium redox flow batteries (VRFBs) for energy storage in China and the wider aerospace sector, which has provided some support to vanadium prices.
Todd Richardson, chief operating officer of Australian Vanadium, said vanadium demand in 2024 would continue to be driven by steel production capacity around the world. Prices could be boosted when a number of existing and new vanadium installations move to the battery market.
Going into 2024, all eyes in the vanadium market will be on China’s steel industry and demand for rebar.CRU Group’s Willis Thomas told INN that what is true for the steel industry is also true for vanadium demand. China is the global leader in vanadium production, but more importantly consumption. This demand is highly correlated with rebar, so as China’s construction sector slows, vanadium demand is sure to suffer.
At the same time, Project Blue analysts believe that the decline in demand will be very limited. The company is currently taking a “wait and see” approach to the recovery of vanadium demand in China’s rebar industry, believing that the recovery will largely depend on the effectiveness of the country’s economic stimulus measures. Analysts point out that the Chinese government seems likely to eventually adopt more fiscal measures to boost the property sector, such as lowering the downpayment ratio for mortgages and increasing various personal income tax exemptions.
But the fact remains that the steel industry is not the only major driver of the vanadium market. In recent years, the growing need for large-scale energy storage solutions in order to move away from fossil fuels has increased the demand for vanadium redox flow batteries. Vanadium redox flow batteries are seen as ideal for large-scale energy storage due to the ability to deliver hundreds of megawatt-hours of energy on a grid scale.
As a result, several analysts have identified the battery sector as another area to watch in 2024. According to CRU’s research, vanadium demand growth over the next decade will be driven primarily by an increase in VRFB installations, and the Chinese government is very supportive of the use of VRFB technology in long-duration energy storage.
Project Blue analysts added that investors should keep a close eye on VRFB capacity announcements in China and the rest of the world this year as part of a global push to promote renewable energy with the goal of achieving net-zero emissions. On the supply side, the analysts said investors should keep an eye on “the progress of greenfield projects, particularly advanced stage vanadium projects in Australia”. Australia has the world’s third-largest vanadium reserves and has become a global hotspot for vanadium exploration.
