The answer: almost completely, at least for the immediate-term.
According to data supplied by Bushveld Minerals Ltd (LON:BMN), a major producer of vanadium, steel production accounted for around 92% of total vanadium demand in 2019. Steel production will continue to dominate vanadium demand for the foreseeable future too, although long-term there will likely be increasing use in vanadium redox-flow batteries, which are used to store grid power, amongst other things.
The benefits of using vanadium in steel are universally recognised. Adding vanadium refines the structure and grains of the steel, which reduces its sensitivity to overheating, and increases its strength and toughness. During the heat treatment of steel, the compounds produced by vanadium, carbon, and nitrogen prevents the grains from growing, resulting in steel with high strength and good plasticity and toughness.
It’s in this context that the Chinese government introduced new regulations on steel manufacturing in November 2018. These mandate higher strength for rebar, and have underpinned the ongoing recovery in vanadium prices.
“Vanadium demand remains robust, and prices are expected to remain stable for the remainder of the second quarter of 2021, Bushveld stated in an operational update released mid-May.
In the first quarter of 2021 the London Metal Bulletin Ferrovanadium price averaged US$30.9 per kgV, up from the first quarter average in 2020 of US$26.5/kgV). The current is approximately US$32 per kgV.
Looking ahead, China is expected to install around 30-60GWh of new energy storage capacity by 2030, corresponding to between 28,000 and 56,000 tonnes per year of extra demand for vanadium pentoxide.
So, ultimately, the demand balance is likely to shift, somewhat, towards batteries. For now, though, it’s steel that’s driving the price, and encouraging vanadium companies to be more ambitious.
Thus, Largo Resources (TSE:LGO) is boosting output, and will shortly list on Nasdaq, and Neometals (ASX:NMT) is seeking a dual listing on Aim.
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