Vanadium Prices to Stay High on “Fundamental Tightness”

While popular commodities like gold and silver have struggled to retain any price growth in 2018, one resource in particular has experienced steady upward momentum all year and is expected to keep moving higher.

Vanadium, a metal that many outside of the mining sector have never heard of, is quickly asserting itself as one of the energy storage metals to watch. Aside from that, vanadium is also instrumental to the construction industry for its use in steel production.

In January, the gray-toned metal continued its positive pace after a brief plateau period in mid-2017. The price of vanadium pentoxide flake sat at roughly US$12 per pound at the beginning of 2018; today the price is US$29.90 and growing.

“We expect prices to remain at elevated levels for some months to come,” said Jack Bedder, division manager at Roskill. “There is a fundamental tightness in the market keeping prices high, although speculative activities have also helped drive prices higher.”

Valuable vanadium flake is a key component in the energy storage systems now being used in electric vehicles, residential units and even at the grid scale to safely store and then deliver green energy. Growing demand from this sector has contributed to the gains the vanadium price has made — as much as US$10 in just one three-month period.

While vanadium flake prices have experienced an immense uptick, prices for ferrovanadium, which is used to harden and strengthen steel, have also steadily increased for much of the year. They were sitting at US$58 per kilogram in January, but have shot up to US$133.50 currently.

Demand is also the motivation behind ferrovanadium’s price surge, and it is being spurred on by infrastructure growth and the implementation of new rebar guidelines in China.

“As China’s economy transitions, Roskill forecasts steady growth in demand for vanadium in steel, benefiting not only from volume growth in the market, but also from an increasing intensity of use in vanadium,” added Bedder.

He continued, “while usage in China has declined in the past owing to less stringent enforcement and control of building regulations, over the outlook period stricter guidelines are expected to provide a boost to consumption.”

Of course, as vanadium demand from the energy storage industry and the construction sector skyrockets, concerns over supply shortages are being raised.

“The market is very tight at the moment,” Bedder said. “There have been some key supply-side changes to the market in recent times.”

The division manager at Roskill pointed to the closure of Evraz Highveld and the associated Mapochs mine in South Africa in 2015 as a catalyst for impending supply concerns. The Mapochs mine had a total capacity of around 13 kilotonnes per year, accounting for a considerable amount of global feedstock.

However, as prices for both flake and ferrovanadium continue to skyrocket, developers are becoming increasingly enticed to explore, advance and grow vanadium projects.

“High prices should see some more vanadium units come out of the woodwork — there has been a flurry of new announcements regarding projects, both in China and elsewhere,” pointed out Bedder.

“While some projects are relatively advanced in their development, many are years away from producing and face the numerous obstacles associated with project development.”

Uranium producer Energy Fuels (TSX:EFR,NYSEAMERICAN:UUUU) is one of the companies looking to benefit from the stable growth in the vanadium market. In fact, when the energy-focused company restarts production at its White Mesa mill, it will be the only North American vanadium producer.

“We believe we are the best-positioned vanadium company in North America, because we think we will beat everyone else to production, and we are building our longer-term vanadium production profile,” said Curtis Moore, the company’s vice president, marketing and corporate development.

“Over the past several months, we have been working on refurbishing and upgrading the vanadium circuit at the White Mesa mill, and we plan to resume vanadium production from our ponds beginning in November 2018 at a rate we estimate at 200,000 to 225,000 pounds of V2O5 per month, subject to V2O5 prices remaining strong and technical success.”

There is no doubt that increased production anywhere around the globe will be a welcome addition to a market that could see a shortage with the current pace of demand.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Energy Fuels is a client of the Investing News Network. This article is not paid-for content.

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