Vanadium Overview

Vanadium is a grey, soft and ductile high-value metal with several unique characteristics that position it strongly in the steel, alloys and chemicals sectors.

Vanadium feedstock is derived from 3 sources: co-production, primary production and secondary production.

In 2019, ~90 % of vanadium was recovered from magnetite and titanomagnetite ores, either from co-production or primary production

  • Co-production derived from iron processed for steel production remains the main source of vanadium, accounting for 71 % of 2019 global supply;
  • Primary production involves salt roasting, water leaching, filtration, desilication and precipitation through a salt roast method. It accounted for 18% of global supply in 2019;
  • Secondary production of vanadium is the recovery of material from fly ash, petroleum residues, alumina slag, and from the recycling of spent catalysts used in some crude oil refining. It accounted for 11 % of global supply in 2019.

In 2019, global vanadium production increased by 15 % year-on-year to 111,225 mtV. This increase was supported by higher slag production in China (which increased by 19 % year-on-year), driven by:

  • increased crude steel production. China produced an all-time peak of 996 Mt, representing a 7 % year-on-year increase; and
  • high seaborne iron ore prices (in 2019 the average iron ore price was US$93.48/mt2). As a result, steel mills used more domestic vanadium titaniferous magnetite ore.

Vanadium production in the rest of the world increased moderately across all forms of production. China is the world’s top vanadium producer, with 59 %of global vanadium supply in 2019. Most of its vanadium was derived from co-production. Russia is the second largest producer, accounting for 17 % of 2019 global supply. South Africa is the third-largest producer, with 7 % of global vanadium supply in 2019. Most of its vanadium was derived from primary production from Bushveld Minerals and Glencore.

The most traded vanadium products are vanadium pentoxide and ferrovanadium. Vanadium pentoxide is commonly produced through the treatment of magnetite iron ores, vanadium-bearing slags and secondary materials. It can be used directly in some non-metallurgical applications and in producing vanadium chemicals. It is also used as an intermediate product for the production of ferrovanadium, the vanadium alloy used as a strengthening agent in manufacturing high-strength steel.

Vanadium Market fundamentals


While co-production accounted for the majority of global vanadium feedstock supply in 2019, it continues to face significant constraints, including high input and processing costs where producers have no leverage on steel prices, and environmental-related restrictions that adversely impact producers’ competitiveness.

In 2019, global vanadium feedstock production totalled 111,225 mtV, exceeding the previous peak of 101,791 mtV recorded in 2014, before Evraz Highveld ceased operations. Most of the volume, on a unit basis, came from Chinese slag producers whose production of slag increased as a consequence of greater steel production. This absolute steel production increase has seen Chinese co-producers operate at near capacity, limiting the scope for further production growth.

The fastest growth in supply, however, has come from primary production, which has grown by over 50 % in just 2 years. It increased from just under 13,000 mtV and 14 % of the market in 2017 to nearly 20,000 mtV and 18 %of the market in 2019. The growth has been led by price-elastic primary producers in South Africa and Brazil increasing their output in response to improved vanadium prices and, to a lesser extent, by opportunistic stone coal production, which accounted for about 9 % of China’s production.

This growth in the market share of primary suppliers at the expense of co-producers may appear modest. However, it may be part of a longer-term trend of decoupling vanadium from steel production. Historically, vanadium supply and demand has relied upon or been coupled with steel supply and demand, respectively. The inelasticity of vanadium-producing steel plants to the vanadium price is one example of this coupling that contributes to vanadium’s price volatility. With growth in primary production of vanadium, the dependency of vanadium supply from steel is starting to fall or decouple. The same trend would be likely to follow in vanadium demand, if new uses of vanadium continue to grow faster than steel demand, such as in energy storage applications.

Despite the significant increase in vanadium slag production, several efforts by the Chinese government to rationalise its steel industry and cut pollution may impose further constraints on vanadium coproduction steel plants. These initiatives include the reduction of excess steelmaking capacity targeting highly polluting high-cost plants, and the conversion of more than 200 Mtp.a. of blast furnace operations to electric arc furnace technologies, which will increase the role of scrap iron in steel making and reduce the overall demand for iron ore. Declining domestic iron ore supply and iron ore quality along with environmental restrictions on both steelmakers and co-product vanadium producers can be expected to see a greater reliance on hematite (non-vanadium bearing) iron ore for steel making among co-producers, which will limit vanadium slag production growth. Stone coal production, meanwhile, will continue to be limited by environmental restrictions. The result is a constrained growth outlook for Chinese vanadium production from co-producers, which are already operating at near capacity, and stone coal vanadium producers, a constraint exacerbated by the ban on vanadium slag imports into China.

Secondary production is poised to increase supply in the medium term, as a result of the newly-implemented International Maritime Organisation (“IMO”) 2020 regulations that require the use of more refining catalyst. However, it remains a higher-cost form of production than primary and co-production. The new supply could either displace projects with weaker economics or help meet a growing deficit that would almost certainly result from greater VRFB uptake in the absence of which a larger and more durable surplus could be realised. Secondary production is limited, not by processing capacity, but by both the availability of the necessary feedstock and the high costs of production.

Supply of secondary materials is largely in the form of spent catalysts associated with the processing of crude oils and oil sands, the manufacture of various acids, ash and residues from the combustion of oils and coals, and some residues from alumina production, particularly in India. Supply growth can also be considered across 3 categories: capacity expansions of current producers, restarts of production plants that had been mothballed, and greenfield project development. Capacity expansions have the highest probability of realisation, with the lowest capital and quickest path to production. According to Roskill, this category could add as much as 5,000 mtV in new supply by 2029. Restarts are expected to add a further potential 4,000 mtV – 12,000 mtV in new supply by 2029. New greenfield projects face the most significant hurdles. Most of the recent greenfield projects that have been announced for development are of a co-production or multi-commodities nature, suffer from relatively low grades and require significant capital and a relatively stable and higher price outlook than recent prices indicate.



Total vanadium demand is dominated by the steel industry. It accounted for 92 % of total demand in 2019 and will continue to dominate vanadium demand in future. Global vanadium consumption rose by an estimated 6 % in 2019 to 111,442 mtV, supported by greater compliance with the new high strength rebar standards introduced by the Chinese government in November 2018.

The new rebar standards, introduced to improve construction safety standards, regulate the characteristics of high strength reinforcing bars and impose requirements to use micro-alloys in manufacture of rebar. For example, grades 3, 4 and 5 rebars require approximately 0.35 kgV, 0.6 kgV and 1 kgV respectively to meet the new standards. The new standards were introduced largely to outlaw the quenching and tempering techniques employed by Chinese rebar manufacturers to avoid addition of micro-alloys. As a consequence of these quenching and tempering techniques, China’s vanadium consumption decreased between 2014 and 2016, after growing at twice the rate of steel production growth over the preceding 4 years.

Vanadium consumption from rebar rose by 28 % in 2019. The increase in consumption was primarily driven by larger rebar volumes in China as well as increased intensity of use of vanadium in steel from 0.052 kgV/tonne of steel in 2018 to 0.054 kgV/tonne of steel in 2019. China’s crude steel production rose 7.3 % year-on-year and rebar output surged 19 % year-on-year. In addition, continued growth in vanadium demand from energy storage would increase demand even further.

Going forward, it is forecast that vanadium demand in the steel market will grow at a Compound Annual Growth Rate (“CAGR”) of approximately 2.7 % through to 2029, with global vanadium

demand reaching approximately 138,000 tonnes by 20291. Although forecasts for Vanadium Redox Flow Batteries (“VRFBs”) vary, they indicate that demand from this segment could increase vanadium demand by an additional 6 % per annum. Longer-term demand will be even greater. For example, the World Bank Group forecasts that by 2050 vanadium demand from energy storage alone could consume nearly twice the 2018 global vanadium production. While some forecasts are for flow batteries to capture up to 18 % of the stationary energy storage market by 2027, even a 10 % market share by VRFBs would equate to 55,000 mtV of demand, compared with ~2,000 mtV consumed in 2018.

Thus, even as vanadium demand will continue to be underwritten by the growing intensity of use of vanadium in the steel market, the energy storage industry is expected to offer significant demand upside.

Developed economies such as Europe, Japan and North America have a higher vanadium intensity than developing countries, with China’s surpassing the world average intensity in use, supported by enhanced compliance with rebar standards.

Vanadium market balance

Supply and demand dynamics point to a potential structural net deficit. Supply is concentrated and constrained as:

  • Over 70 % of vanadium comes from co-production, which is driven by steel and iron ore fundamentals;
  • Co-production is primarily driven by steel and iron ore market dynamics rather than vanadium fundamentals, and co-producers are currently operating close to full capacity. China and Russia accounted for 76 % of global supply in 2019. In China, capacity utilisation from slag producers was estimated at 80 to 90 % in 2019, with the top 5 producers operating close to full capacity. Russia was also operating close to full capacity, at approximately 90 %;
  • The steel industry in China has been increasingly relying on imported hematite iron ore, which is non-vanadium bearing;
  • Over the longer term, Chinese vanadium production will be constrained by the decline in domestic iron ore supply and iron ore quality, coupled with environmental restrictions on steelmakers, co-product and stone coal vanadium producers, as well as the ban on vanadium slag imports;
  • Importantly, with most vanadium co-producers, whose economics are primarily driven by steel economics, operating at near full capacity, the ability of co-producers to add new supply volumes to the market is severely curtailed;
  • Lower vanadium prices limit the advent of new greenfield production due to more funding challenges, while also discouraging high-cost, low-grade primary production, such as stone coal. Furthermore, with lower vanadium prices, a historically volatile vanadium price and a majority of greenfield new vanadium projects being high capex co-production plants, the scope for significant greenfield production capacity is even more limited.

Growing demand is underpinned by higher intensity of use of vanadium in steel, which is expected to rise to 0.063 kgV by 2030 compared with 0.054 kgV in 2019. China will drive most of the increase. On top of this, demand for vanadium from energy storage will continue to grow from a base of 2,000 mtV in 2018. The rate of growth from this baseline will have a significant influence on how quickly and to what extent this new demand source puts pressure on the global market.

The global vanadium market has faced a supply deficit since 2015, after a period of oversupply. The deficit encouraged increased output from existing producers, as can be seen by growing output and market share from primary producers. These miners are economic at both prevailing and long-term forecast vanadium prices and were able to increase production at their facilities on a lower-cost, brownfield basis

According to Roskill, the vanadium market will move into a short-term surplus in 2020 as current ex-China steel mill shutdowns continue due to the Covid-19 pandemic. The market deficit is forecast to return between 2021 and 2023, thereafter moving back into surplus, as new supply comes on stream. Roskill applies a probability factor to new vanadium production under development, forecasting an increase in supply of 27,000 mtV between 2020 and 2029. Furthermore, Roskill takes a conservative view on vanadium consumption in energy storage (through VRFBs), forecasting growth in demand between 2020 and 2027 from 500 mtV to 1,463 mtV. (The Rongke Power 200 MW/800 MWh VRFB project in Dalian, when complete, is expected to consume about ~5,000 mtV of vanadium.)

A review of contributions to supply growth from capacity expansions, restarts and new greenfield projects (the vast majority of which are expensive co-production plants) paints varying scenarios of vanadium market balance. If supply forecasts are based on existing production and announced capacity expansions alone, the market can be expected to move into a deeper deficit, reaching 12,600 mtV by 2029. Taking capacity expansions and project restarts into account, the deficit is reduced but still significant at ~8,600 mtV by 2029.

Bushveld Minerals believes, in line with several energy-focused research firms, that the potential vanadium demand from energy storage applications could be significant and result in a deeper vanadium deficit than suggested above.

Prevailing vanadium prices make it more attractive for emerging uses, such as energy storage. Even at higher vanadium prices innovations such as vanadium leases, which take advantage of the non-degrading and thus re-usability characteristics of vanadium electrolyte will continue to support VRFB deployments. Energy storage, while a nascent sector, is growing rapidly, expanding by 50 % per annum globally. Similarly, while current vanadium consumption by energy storage is low at just over 2,000 mtV in 2018, the higher growth rate of this sector could drive significant new demand for vanadium.

This large upside from energy storage is a key rationale for Bushveld Minerals’ vertically-integrated business model, along with the positioning of the Company to unlock two critical hurdles for VRFB adoptions – vanadium security of supply and input costs. It will also provide a natural hedge against vanadium price volatility, with greater value created at high prices in mining and processing and at low prices in energy storage. Through Bushveld Energy’s activities in electrolyte component manufacturing, VRFB investment and energy storage project development, the Company can support this demand growth while capturing significant value from its upstream mining and processing and downstream battery-related businesses.

Structural advantages enjoyed by low-cost primary vanadium producers (low capex and shorter timeframes for capacity expansion and the ability to leverage positive cash flow margins even in a low vanadium price environment) allow them to scale up production on a brownfield basis. This positions them to respond to any market deficits.

Vanadium price

The vanadium price rose to a high of US$127/kgV in November 2018, before settling to trade at an average of US$41.6/kgV in 2019. The price correction in 2019 was influenced by a number of factors, including:

  • Introduction of the new rebar standard in China from November 2018, which was enforced gradually, rather than immediately;
  • Increased ferroniobium imports into China, allowing for substitution of vanadium in rebar when vanadium prices are approximately 3x higher;
  • Increased slag production in China due to high seaborne iron ore prices;
  • Some opportunistic supply additions from stone coal producers in response to high vanadium prices.

During the second half of 2019:

  • Vanadium recovered market share in China, as the softening in the vanadium price relative to ferroniobium meant vanadium offered several advantages over ferroniobium in steel applications, and reduced substitution with ferroniobium;
  • The softening in the vanadium price reduced the incentive for stone coal production;
  • Increased enforcement of the new rebar standard in the second half of 2019 in China supported demand growth, making China a net vanadium importer in 2019.

Covid-19 impact on outlook

Covid-19’s impact on the global economy is evolving. Consensus, however, is that the world will experience an economic recession. The questions are how deep, for how long and what shape the recovery will assume.

In the first quarter of 2020, Chinese steel production rose by 1.2 % year on year. The vanadium price started to recover during the first quarter of 2020, however the global Covid-19 pandemic resulted in price consolidation and could cause continued short-term volatility.

Governments around the world have announced different measures to revive their economies after the impact of Covid-19. The Chinese government took measures to stimulate demand recovery in late March, two months after the initial lockdown of Wuhan. It announced that it will support its economy through infrastructure investment and will use this tool to stimulate growth in 2020. Increased infrastructure spending would result in more steel and rebar production and consumption, supporting vanadium demand. This trend is already evident in the first half of 2020, as China continues to be a net vanadium importer.

The Chinese government is aiming for RMB 3.75 trillion approximately US$500 billion) in local government special bonds to encourage infrastructure investment. As China shifts from a manufacturing-driven economy to a service and consumption-led economy, it has set targets for information infrastructure such as 5G networks, large data centres, as well as ultra-high voltage power transmission, urban mass transit and high-speed rail, new energy and vehicle charging stations.

While China emerged from the lockdown ahead of most countries and its economy is currently normalising, other countries have gradually reopened from lockdowns since mid-May. The global steel industry is now, more than ever, dependent on the Chinese construction industry.

The World Steel Association expects Chinese steel demand to increase by 1.0 % in 2020 and anticipates that the benefits of infrastructure projects initiated in 2020 will carry over and support steel demand in 2021. As more than 90 % of vanadium utilisation is in steel manufacturing, and demand normally tracks trends in the steel market, we expect vanadium demand will remain robust in the medium- to long-term.

Furthermore, growing calls to take advantage of the waves of fiscal stimulus programmes expected in the wake of the Covid-19 pandemic to accelerate, rather than delay, the energy transition to a low-carbon energy future will provide a boon for the nascent and growing stationary energy storage industry and, with it, for VRFBs.

Energy Storage Overview

Electricity’s share of global energy consumption is growing rapidly. It doubled from 10 % in 1980 to 20 % today and is expected to account for about 45 % by 2050.

Energy storage is essential to support growth in electricity demand while enabling the world to make the transition to zero-carbon, since:

  • Alternating current cannot be stored, so other solutions are required;
  • Penetration of variable and decentralised renewable energy generation, such as wind and solar, is increasing rapidly, creating a greater need for balancing, time-shifting and power system optimisation;
  • The transition towards a zero-carbon world is making fossil fuel-based generation and balancing technologies, such as coal, gas or oil, unbankable while stricter environmental regulation is limiting deployment of pumped hydro storage schemes.

As a result, stationary energy storage is expected to exceed 100 GWh and become a US$50 billion market by 2027, rising to 2,800 GWh by 2040

Trends in stationary energy storage

Stationary energy storage demand is forecast to be the fastest growing type of storage, at a rate of 58 % per annum and will exceed 100GWh by 2027 1. Over 90 % of the demand for storage to absorb renewable energy and balance the power system is forecast to be for long-duration (greater than four hours, and mostly 6 to 10 hours). VRFBs are well-positioned to meet this need since they become relatively cheaper for long-duration applications and their water-based chemistry is inherently fire-safe.

They also offer other benefits for the energy transition, such as:

  • Long lifespans of 20 or more years with minimal degradation;
  • Easy recoverability of vanadium from the electrolyte at the end of battery life; and
  • Up to 30 % lower carbon dioxide intensity compared with other battery technologies.

Stationary energy storage applications include:

  • Enhancing the stability of a power grid that uses large amounts of variable renewable energy sources;
  • Smoothing a power system’s load distribution by shifting power demand from high peak areas to low peak areas (load shifting);
  • Storing excess power generated during off-peak periods to use during peak demand periods; and
  • Supporting remote electricity users without access to transmission infrastructure to connect to the main grid.

Evolving trends in stationary storage include:

  • The growing need for long-duration energy storage solutions, typically offering 3 to 10 hours of daily storage capacity. Long-duration applications are expected to account for up to 90 % of energy storage deployments by 2027 (excluding pumped hydropower). To date, most battery energy storage installations have been for short duration, i.e. 15 to 60 minutes;
  • Energy storage systems are being deployed for more than one application. Traditionally, batteries have only provided frequency control, since they can respond to power fluctuations almost immediately. This is increasingly being coupled with other use cases, such as to provide system reserves and peaking capacity, to defer transmission and distribution expansion and for ancillary services; and
  • In a maturing industry, the focus is shifting from pure technical and financial capability to safety. Fires in South Korea from 2017 to 2019, and numerous high profile fires in Europe and the United States at large battery sites using lithium-ion technologies provided by well-established developers and manufacturers, have highlighted the focus on safety in stationary energy storage. The potential damage and human harm from fire and smoke is significantly greater from larger stationary energy storage installations than car or computer batteries, increasing the focus on safety in technology selection.

Energy storage opportunities in Africa

Although the energy storage market is global, Bushveld Energy has, from the outset, focused on the African market, which is traditionally underserved but offers immense growth potential.

In sub-Saharan Africa, there are over 600 million people without access to electricity, and grid infrastructure is poorly developed or weak, leaving many industries to self-supply electricity. At the same time, the continent possesses considerable potential for solar and wind generation, presenting an attractive opportunity for both the energy transition and greater use of energy storage.

3 important recent developments reinforce our African focus:

  1. The World Bank Group announced a US$1 billion programme to support the deployment of energy storage in low- to middle-income countries. The programme is expected to mobilise a further US$4 billion in concessional climate financing and public and private investments to deliver 17,500 MWh of energy storage in these countries by 2025.
    Since typically over one-third of World Bank funding is directed towards sub-Saharan Africa, the programme could expect to deliver 5,000-6,000 MWh of storage in Africa alone, or an average of 1,000 MWh per year. Most of the storage deployed for future projects under the programme will be to ensure greater integration of renewable energy, which requires daily, long-duration storage, matching the technical and commercial advantages of VRFB technology.
  1. In 2018, South Africa’s power utility, Eskom, announced it intended to install 1,400 MWh of battery energy storage as part of the World Bank programme. The first phase of that programme is expected to start during 2020. The programme could propel South Africa into one of the top 5 energy storage markets globally. Although the structure of the programme and its projects have not yet been made public, the country’s characteristic demand profile, which lasts for 6 hours a day and peaks twice a day, makes the economics especially favourable for long-duration, nearly limitless recycling technologies such as VRFBs.
  2. In October 2019, South Africa’s Department of Mineral Resources and Energy released the Integrated Resource Plan (‘IRP’), outlining the country’s future electricity needs and required technologies. The IRP supports more renewable energy, especially wind and solar, and acknowledges the need to support integration of variable generation through storage technologies.

The 2019 IRP is largely favourable for energy storage in South Africa. For the first time, it included a dedicated allocation for energy storage and promises to accelerate its roll-out.

  • The IRP allocates 2,088 MW of new energy storage over two tranches: 513 MW by 2022 and 1,575 MW by 2029;
  • Further storage could be co-located with new renewable energy generation, such as solar photovoltaics (“PV”) and wind. Solar PV is expected to add a further 6,800 MW of generation up to 2030, and wind is expected to add almost 16,000 MW of power generation in the same period;
  • Embedded generation, which is uncapped for the next 3 years, is an opportunity for medium-sized storage (such as the Vametco mini-grid).

The inclusion of cost-effective storage in the IRP will enable South Africa to advance its power sector into the future. In addition, the South African Renewable Energy Independent Power Producer Procurement Programme has been restarted and will continue to add renewable energy to the grid, creating opportunities for long-duration battery storage, either as stand-alone facilities or co-located with solar or wind generation.

Vanadium Redox Flow Batteries

VRFBS – Challenges And Opportunities

The VRFB market opportunity is attractive, not only because it diversifies and underscores vanadium demand, but also because it offers an attractive commercial opportunity. For this purpose, Bushveld Minerals established Bushveld Energy to exploit the multi-billion dollar commercial opportunity presented by the energy storage industry.

According to Navigant Research, global stationary energy storage demand is forecast to grow to 100 GWh in annual deployments by 2027.

VRFBs must overcome two key hurdles to achieve sustainable success: security of supply and stability of vanadium input costs.

  • Security of supply: should VRFBs achieve the 18 per cent Navigant Research forecast share of the annual stationary energy storage deployments of 100 GWh by 2027, it would indicate a vanadium demand of over 80,000 mtV for energy storage alone. The ability to guarantee supply of vanadium for VRFBs will be key to the success of these systems;
  • Stability of vanadium input costs: vanadium can range between 30 and 50 per cent of the cost of a VRFB system, depending on the battery size and vanadium price. The adoption of VRFBs depends on the relative and absolute vanadium price. Low-cost primary producers with significant production capacity are well positioned to address price volatility by potentially providing long-term, stable pricing. Furthermore, taking advantage of the VRFB chemistry and never selling the vanadium to a customer but rather renting it for the life of the VRFB or project can materially impact the cost-competitiveness of VRFBs, while guaranteeing re-circulation of the vanadium.

Bushveld Minerals is uniquely positioned to tackle these hurdles, owing to its large, high-grade resource base and low-cost processing facilities and capitalise on opportunities from rapid growth in vanadium chemicals demand and VRFB deployments. In 2019, Bushveld Energy made significant progress in all its key areas of focus. It advanced development of electrolyte production capacity, deployed its electrolyte rental model, started to create its project pipeline eying large energy storage mandates, installed its first VRFB and launched the VRFB Investment Platform as part of its strategy of developing partnerships for VRFB assembly/manufacturing.

Covid-19 impact on outlook

Covid-19 has impacted the 2020 outlook for energy storage and VRFBs, but we do not believe it has impacted the outlook for 2021 or later years. Investment and construction have slowed in some regions for all types of energy projects, however, current thinking is that there will be a fairly rapid rebound. Most projects in energy storage systems continue to advance, including the Eskom Energy Storage Systems tender. Due to a reduction in electricity consumption and less pollution, especially in Asian countries, there is a sense that Covid-19 may accelerate the energy transition, as some coal and gas plants may go bankrupt due to lost revenues over this time. This could result in a faster deployment of storage systems.

Overall, our view of the situation is consistent with a recent assessment by HIS Markit “despite a subdued year in 2019 and a challenging start to 2020 caused by the Covid-19 outbreak, the outlook for energy storage remains strong, with cumulative installations of grid-connected battery energy storage predicted to reach 64.3 GW/179 GWh in 2025”.


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