About 90% of vanadium consumption globally is in the steel industry where it is used primarily in the form of ferro-vanadium. Ferrovanadium is an alloy for high strength steels including those used for oil and gas pipelines, tool steels, jet engines, axles & crankshafts and reinforcing bars for the construction industry. Vanadium is added in low concentrations (~ 0.1% V w/w) to significantly increase the strength and hardness of the steel. Another emerging application is energy storage using vanadium redox flow batteries (VRFBs). These rechargeable batteries can be used for large scale applications including back-up storage for electrical power grids.
The schematic below provides an overview of the vanadium industry and identifies the main vanadium raw materials and intermediate products in the supply chain as well as the main consumer industries.
Global vanadium supply in 2018 was 88,905t V (tonnes of vanadium equivalent) and was dominated by China (57%), South Africa (10%) and Russia (9%). Supply is primarily based on the production of vanadium from slag generated from the production of steel using vanadium titanium magnetite (VTM) as feedstock.
The chart below describes the main applications for vanadium including high-strength low allow steels, such as those used in steel reinforcing bars. The largest single market for vanadium is the Chinese high-strength steel reinforcing bar (“rebar”) market which accounts for approximately 77% of Chinese vanadium consumption and 38% of vanadium consumption globally.
Vanadium demand growth over the past 15 years has been driven predominantly by Asian demand, especially in China where steel production and consumption has risen dramatically. China now accounts for nearly half of vanadium demand globally.
Vanadium is not currently traded on any commodity exchanges such as the LME. Prices are settled in private negotiations between sellers and buyers. During the last 15 years there have been periods of vanadium price volatility due to fluctuations in the supply/demand balance. Prices have ranged from as low as US$16/kg V (US$4/lb V2O5) to more than US$120/kg V (> US$30/lb V2O5).
Monthly average prices for V2O5 have increased materially since January 2016. This is largely due to industry rationalizations that occurred during 2014 – 2016 and resulted in a significant decrease in production capacity. Since this time demand for vanadium has grown steadily and inventory in the supply chain has reduced to very low levels.
A new policy implemented in China in November 2018 will have the effect of significantly increasing global vanadium consumption. This policy requires Chinese steel mills to eliminate the production of 235 and 335 megapascal (MPa) tensile strength rebar and replace with higher strength 400, 500 and 600 MPa tensile strength rebar. These grades have better earthquake resistance and require vanadium concentrations in the steel of 0.03% V, 0.06% V and >0.10% V respectively. In doing so, the policy encourages domestic Chinese mills to utilize greater volumes of alloys such as ferro-vanadium to meet the revised strength requirements.
This new policy, coupled with a higher vanadium intensity of use for harder, stronger, higher quality steels generally, will result in strong vanadium demand growth. According to CRU the forecast CAGR for steel industry vanadium demand over the next decade is 3.3%.
It is expected that this strong growth will contribute to a significant vanadium supply deficit and will require the development of new primary sources of supply. Without new greenfield capacity there will be a shortfall of supply.
In this environment, where demand is expected to exceed supply, the price of vanadium is forecast to remain above historical levels.
