Roskill: Vanadium Prices to Remain at Current Levels in 2020

The vanadium space is on track to remain oversupplied in 2020, with prices forecast to hold onto current levels, according to Jack Bedder of Roskill.

Speaking at a Mines and Money webinar about what’s been happening in the vanadium market, Bedder explained that it is crucial to look back at 2017.

That year, prices started to climb on the back of a combination of demand- and supply-side factors; the metal reached 10 year highs in 2018 and then corrected quite sharply in 2019.

“On the demand side, by far the most important factor was the high expectation for future demand and prices, owing to new rebar standards in China mandating the use of microalloyed agents like vanadium,” Bedder explained at the online event.

At the same time, there was considerable excitement over vanadium redox batteries, which also supported a very positive demand outlook.

“All that came about amidst the perceived tightening of global supply,” Bedder pointed out. “And all of these factors together pushed prices up.”

But fast forward to 2019, and prices had pulled back significantly, also due to a variety of factors, according to the expert — the main one being that the spike in demand wasn’t as sharp as expected.

“Then on the supply side we saw higher-than-expected output from Chinese co-producers, which actually increased production about 19 percent year-on-year,” Bedder noted. “So more supply than expected, lower demand than expected, therefore prices corrected.”

Looking at what is happening today in the vanadium market, there’s no doubt that it is all very much underpinned by coronavirus-related factors, as with all commodities.

“Our view is that the Chinese steel industry and thus the Chinese vanadium industry will be relatively insulated from the pandemic,” Bedder said. “Whilst in the rest of the world there’s going to be a sharp fall in steel production, which will probably impact demand for vanadium.”

Roskill forecasts that the vanadium market will have excess supply of 6,000 tonnes this year, with prices remaining close to neutral.

“Longer term we’re pretty optimistic, we forecast 2.2 percent annualized growth over the next 10 years for the vanadium market, with growth in steel at a similar rate,” Bedder said. “We expect China to increase its share of vanadium consumption up towards about 60 percent by the end of the decade.”

Looking ahead in terms of demand, Bedder touched on the upside potential of vanadium redox flow batteries, although he said they still face challenges in the path to mass commercialization.

“I think pricing is probably the biggest issue for these batteries out there, compared to the lower power and energy density (of) other technologies, which limits their use in energy storage applications for which of course they are perfect,” he said.

Bedder added that a lot of it may come down to regulation.

“So if we see more governments taking energy storage seriously, then there can be some subsidies to help mitigate that volatile vanadium price that really might help with regards to the commercialization.”

In terms of supply, the outlook is a bit more uncertain, as most output today comes from the co-production routes, with about 70 percent of supply coming from that segment.

“Maybe there could be a bit more primary production, and that currently accounts for just under 20 percent of global supply, but we think probably ramp ups and expansions will be limited,” Bedder said.

“Then of course there’s a significant number of vanadium projects that remain in the pipeline,” he added. “And a number of these are probably going to need to come on stream over the next decade if supply is going to meet demand.”

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