The government’s selection of critical metals shows that vanadium production in the United States could be a strategic move for both the economy and national security.
Vanadium production in the United States could play a strategic role in the powerful nation’s economy and national security plans.
Vanadium is essential to steel and emerging energy storage markets and is now deemed a critical mineral by the Trump administration. The US produces very little of its own domestic supply of mined vanadium, and this could pose a security problem for not only industry but national security as well.
Though recent softness in the global economy is starting to increase the risk of a global downturn, long-term prospects for vanadium demand in the coming decades are quite positive. Currently, about 90 percent of vanadium is used in the manufacturing of steel products like axles, tools and rebar. It is used to harden steel products and has significant potential as a component of energy storage solutions.
Electric vehicle (EV) manufacturing and related battery components are anticipated to surge in the coming decades. According to BloombergNEF, as many as 30 million EVs could be on global roads by 2030. In light of this, Wood Mackenzie has indicated that when EV battery production doubles, costs will then fall by 5 to 8 percent. They also anticipate battery demand for transportation to increase by almost 40 times in the next two decades. In 2017, roughly 1.1 million EVs were driving on roads globally.
So what do EVs and lithium-ion batteries have to do with vanadium? Lithium-ion technology is essentially the first horse out of the gate. The market for mass energy storage technology is growing rapidly and understanding where the market could go means understanding where things are at currently.
Vanadium’s role in the energy-efficient economy
Currently, the transportation sector is taking the world’s first step toward electrification and away from fossil fuel derived products like gasoline and diesel. The EV industry, and the rechargeable batteries within them, is currently dominated by lithium-ion technology. The application of this same technology is already being tested out in other areas of the transportation sector, like aviation and shipping. Lithium-ion batteries have even been applied successfully to manufacturing and now utility sectors, but to a smaller extent.
However, there is a growing problem: lithium and cobalt, two key inputs to lithium-ion technology, are becoming difficult to source relative to the pace of growing global demand. Cost, supply chain risk and ethically dubious sourcing is pushing innovators towards reducing amounts of those minerals or finding battery alternatives.
Solid-state and vanadium redox flow batteries (VRFBs) are two solutions that are currently being explored as lithium-ion alternatives in EVs and utilities markets. Solid-state battery cost and performance may not be competitive until 2030. Toyota has even suggested that although solid-state batteries may be available in the early 2020s, it will be for pilot purposes only and not mass market uptake. However, the VRFB commercialization in the utility sector is occurring much sooner and will likely provide stiff competition to lithium-ion technology.
Last year, when Elon Musk successfully constructed the 100 megawatt Hornsdale Power Reserve, the world’s largest energy storage system, to resolve South Australia’s electrical grid woes, he showed the potential for energy storage technologies in the utility sector as a whole, and not just the potential of lithium-ion technology. Meanwhile, the China National Development and Reform Commission has set up programmes to develop large VRFB utility projects in excess of 100 megawatts each. Currently, a 200 megawatt VRFB installation is being constructed in Dalian, which will host double the capacity of the Hornsdale Power Reserve.
According to Cairn Energy Research, global stationary energy systems are anticipated to increase from 3.7 gigawatt hours to in excess of 87 gigawatt hours in 2027. According to Benchmark Minerals, a third of the cost of vanadium redox flow batteries comes from raw vanadium pentoxide that comprises the liquid electrolyte. They also suggest the global stationary energy storage could hit 100 to 120 gigawatt hours by 2028. To put that into perspective, a single gigawatt is equal to the electrical output of 9,090 Nissan Leafs.
So how do vanadium redox flow batteries compare to lithium-ion batteries? They can hold extensive amounts of energy and can be re-charged thousands of times without losing capacity. Unlike lithium-ion technology, the electrolyte is non-flammable. Even though the application of VRFB technology may be limited to the utility and manufacturing sectors — and not EVs and smartphones — the global scale of these sectors is massive. So too is the opportunity for investors.
Vanadium: Current state and outlook
In 2017, vanadium was the world’s best performing battery metal due, partly, to tightening supply amid strong demand from the steel industry. China’s new requirements for use of higher quality rebar for improved building construction is considered a key factor and clue for a long-term outlook: global demand for ferrovanadium in steel products is not going away and will likely accelerate as developing economies modernize in the coming decades. There are also few substitutions for vanadium to harden steel.
Growing demand is also likely to come from the utility and manufacturing sectors, where VRFB technologies could be the keystone that allows large clean energy projects to be seamlessly integrated into electrical grids where intermittency is no longer an issue. In 2014, vanadium use in battery technologies amounted to just 1,000 tons compared to a global production of 93,400 tons. Roskill estimates that vanadium demand for VRFB markets could rise to 31,000 tons by 2025, amounting to a rise of 3,100 percent in a decade.
China produced just over half of global mined vanadium, which totaled about 80,000 tons globally in 2017. The US produced none. Vanadium can also be recycled from other secondary industrial processes — catalysts, ash and residues. The type of vanadium used for VRFBs can come from mined or recycled sources, but purity needs to be in excess of 99.5 percent.
Between 2013 and 2016, the US imported about 10 percent of its vanadium pentoxide from China. As internal Chinese demand for VRFBs increases, the US would be well positioned to find domestic sources that can weather supply constraints and geopolitical tensions that may arise.
Vanadium production in the United States
With long-term US vanadium imports potentially being challenged in some way by tight supply and geopolitical tensions with China, work is already underway to move the US away from complete import dependency of mined vanadium. By the end of 2018, Energy Fuels (TSX:EFR,NYSEAMERICAN:UUUU) expects to commence mined vanadium production at their White Mesa Mill near Blanding, Utah. It will be the only facility in the US capable of producing conventional mined vanadium.
The vanadium will initially be sourced from nearby pond solution, which is estimated to contain 4 million pounds of vanadium pentoxide at a recovery rate of 200,000 to 225,000 pounds per month. Long-term supply will be sourced from the La Sal mine. A test mine program is currently underway and is expected to wrap up sometime next year.
Another impressive and friendly source of vanadium lies just north of the border in Canada. Alberta’s oil sands have produced a wide array of by-products from upgrading and refining, one of which is over 100 million tonnes of petroleum coke that contains not only nickel, cobalt, but also vanadium. MGX Minerals (CSE:XMG) recently completed a petroleum coke-to-hydrogen study that included extraction of a vanadium concentrate.
While it may be tempting to position growth in vanadium demand as centred on storage solutions like VRFB, traditional uses for vanadium will still be needed as emerging economies continue to modernize, particularly in Asia and Africa. Vanadium producers and exploration companies will stand to benefit from growing global demand for traditional uses in steel, but also the sizable VRFB applications that are on the horizon.
This article was written according to INN editorial standards to educate investors.