Vanadium Market Overview

Vanadium is a grey, soft and ductile high value metal with several unique characteristics that positions it strongly in the steel, alloys and chemicals sectors. Most vanadium is recovered from magnetite and titan-magnetite ores, either as the primary product (17 per cent of global supply in 2016 according to Vanitec) or more commonly as a co-product with iron processed for steel production (73 per cent). It can also be recovered as a secondary product (accounting for the 10 per cent balance of supply in 2016) from fly ash, petroleum residues, alumina slag, and from the recycling of spent catalysts used for some crude oil refining.

The two main traded vanadium products are vanadium pentoxide (V205) and ferrovanadium (“FeV”). V205 is the most common intermediate product from treatment of magnetite iron ores, vanadium-bearing slags and secondary materials, and can be used directly by some non-metallurgical applications and in the production of vanadium chemicals. It is also used as an intermediate product for the production of FeV, the vanadium alloy used as a strengthening/hardening agent in manufacturing of high-strength steel (vanadium’s dominant end use).

Vanadium is not an exchange-traded commodity, pricing is instead negotiated by contract between supplier and customer (often through an intermediary trader). Vanadium pentoxide prices are quoted by US Dollar per pound of V205 (generally on an FOB basis), while ferrovanadium prices are quoted by US Dollar per kilogram of contained Vanadium (with a range of prescribed minimum Vanadium levels, e.g. 50 per cent and 80 per cent).

Source: Bushveld Minerals analysis, Roskill

The vanadium price has seen a significant surge in the last two years, rising by more than 400 per cent from lows of US$13.50/kgV in December 2015 to highs of US$68/kgV by May 2018.

The price increase is driven by a fundamental structural deficit in the vanadium market, arising from robust and growing demand underwritten by the steel sector amidst concentrated and constrained supply with limited new supply in the near future. Approximately 90per cent of vanadium consumption is from the steel industry. The steel market is thus set to continue supporting robust vanadium demand, which is expected to grow at a CAGR of approximately two per cent over the next 10 years, supported by the increased intensity in use of steel in emerging markets, particularly in China, underpinned by the improved enforcement of regulations.

Furthermore, there is significant upside potential from the growing application of VRFBs, with current forecasts estimating that VRFBs will account for 20 per cent of vanadium consumption by 2030. However, there is significant upside of as much as 50,000 mtV demand by VRFBs if they capture 25 per cent of the forecast energy storage market.

While there is growing demand for vanadium, supply remains constrained with very limited new supply expected to come on stream. Over 70 per cent of vanadium produced is through co-production, mostly from China, which is driven by steel fundamentals. The steel market structural changes are expected to continue to adversely impact the economics of vanadium co-producers going forward due to:

  • excess iron ore supply resulting in a low iron ore price outlook in the medium term; and
  • excess steel production capacity in a context of subdued steel consumption growth, with steel price forecasts expected to remain at subdued levels.

Source: Bloomberg. Metal Bulletin, 30 May 2018

Furthermore, a majority of the supply feedstock from China comes from steel plants that process low grade vanadium bearing magnetite ores to produce steel and a vanadium slag which is then further processed through a process similar to the primary production processes – salt roast and leach operations. This source of vanadium is also significantly constrained on account of:

  • high input costs as a result of mining and processing low grade captive ores, relative to the higher quality and low cost seaborne haematite ore;
  • high processing costs of complex steel plants that have to be designed for extraction of titanium and vanadium resulting in operating costs that are significantly higher than simple blast furnace operations processing haematite ore; an
  • no leverage on steel prices as a consequence of the small share of steel production that the high cost vanadium and titanium bearing magnetite ore processing steel plants have.

The points mentioned above, imply that there is limited scope for supply growth from existing co-producers. In addition, although a number of new projects have been announced, most of these are not primary vanadium projects, and they will be facing large capital expenditure driven by factors outside vanadium resulting in a significant share of them not coming online.

The current market dynamics point to a positive price outlook, underpinned by a growing deficit which we believe can only be closed by existing quality primary vanadium producers like Bushveld Minerals, who are in a position to scale up production. This provides a sound basis for the Company’s push to grow into one of the largest, lowest cost, vertically integrated primary vanadium producing companies. Furthermore, through its expansion initiatives at Vametco, as well as targeted brownfield opportunities, the Company is targeting to expand its production platform from 5,000 mtV to more than 10,000 mtV in the medium term. In addition, given Bushveld’s portfolio of assets and vertical integration, the Company is uniquely positioned to benefit from the expected continued strong vanadium market conditions.

The Energy Storage Market Opportunity for Vanadium

The energy storage market has seen aggressive growth in the past few years and can well be considered to be at a tipping point.
While consumer electronics and electric vehicles have attracted more media coverage in the past, stationary applications, particularly in utility scale applications are growing and are expected to claim a significant share of the overall energy storage market, with recent studies showing that:

  • Stationary energy storage demand is growing rapidly and will exceed 300GWh by 2030; and
  • While actual forecasts vary, most point to 20-40GWh of storage deployed annually by 2025.

In this market, the VRFBs are well positioned to take a significant share of the stationary energy storage market, on account of unique features that give them an edge in large scale, stationary and long duration energy storage applications. VRFB deployments continue to grow globally, led by China. Market intelligence points to two
more ~400MWh sized VRFBs being procured in China in addition to the 800MWh system by Rongke Power and ~400MWh system by Pu Neng, which were announced in 2016 and 2017, respectively.

The opportunity for stationary energy storage applications lies in both grid-connected and off-grid settings. For grids, energy storage’s proposition includes peak shaving, load shifting, transmission loss reductions, integration of renewable energy and frequency regulation. In non-grid settings, energy storage can be deployed in conjunction with local generation to separate from the grid, creating an islanded micro-grid with secure continuous
energy supply.

The use of vanadium in energy storage, through VRFBs, has increased over the years and accounted for two per cent of vanadium consumption in 2017. Current forecasts estimate that VRFBs will account for 20 per cent of vanadium consumption by 2030, but with significant upside of as much as 50,000 mtV demand by VRFBs if they capture 25 per cent of the energy storage market within the next 10 years.

In South Africa, demand for energy storage systems continues to rise, evidenced both by greater enquiries for provision of single-acid vanadium electrolyte or direct projects that require energy storage for at least four hours per day. The new government in South Africa and the renewal of investor confidence has brought encouraging signs that suggests a move towards increased regulatory clarity over the treatment of energy storage, the renewable energy programme and the direction of the country’s energy policy as published in the Department of Energy’s Integrated Resource Plan.

In a sign of market maturity, the South Africa Energy Storage Association (SAESA) was created earlier this year with a mission to create a more resilient, accessible, efficient, sustainable, and affordable energy system in Africa by educating stakeholders, advocating for public policies, accelerating energy storage growth, and adding value to the energy storage industry.

VRFBs challenges and opportunities
The growing adoption of VRFBs must overcome two key hurdles to be sustainable: security of supply and stability of vanadium input cost. Bushveld believes that the key to capturing this opportunity lies in a vertically integrated vanadium business model that provides both upstream and downstream enablers for the success of VRFBs in the global energy storage industry:

  • Security of supply
    A 1 GWh VRFB system requires approximately 5,000 mtV in electrolyte, more than six per cent of current annual global vanadium consumption. As an example, if VRFBs capture even 25 per cent of the Bloomberg New Energy Finance forecast annual energy storage deployment of nearly 40GWh in 2027 it would indicate a vanadium demand of over 50,000 tonnes for energy storage alone. Accordingly, the ability to guarantee supply of vanadium for VRFBs will be key to the success of these systems.
  • Stability of vanadium costs
    Vanadium makes up between 30 to 40 per cent of the cost of a VRFB system. The adoption of VRFBs thus depends on the relative and absolute vanadium price. Low cost primary producers with significant production capacity are well positioned to address price volatility. While such solutions could guarantee supply at fixed prices for a longer period,
    others include the option of never fully selling the vanadium and rather leasing or renting it out over the life of the VRFB or energy storage project. Moreover, there is significant economic value in the VRFB value chain to justify the downstream integration that would unlock these solutions.


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Bushveld Minerals is pleased to release its Annual Report and Financial Results for the year ended December 2018.

The Annual Report for the year ended 31 December 2018 can be downloaded here.  

The Annual General Meeting will be held on Tuesday, 2nd July 2019 at 11 a.m at:

18-20 Le Pollet, St Peter Port, Guernsey, GY1 1WH

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