Vanadium Market Forecast: Top Trends That Will Affect Vanadium in 2024

How did vanadium perform in 2023?

At the start of the year, positive sentiment prevailed in the vanadium sector, with 2022's price rally continuing into the early months of 2023. Demand from China’s steel sector was outperforming expectations as the government reversed its zero-COVID policy, providing a much-needed jolt to the country's economic growth.

However, that boon was short-lived, and by the end of the first quarter China’s economic woes had returned alongside weaker construction and manufacturing markets and declining steel production.

“Vanadium prices peaked in March as economic news started to fall short of expectations, suggesting that demand could stall,” Project Blue Principal Analyst Erik Sardain explained to the Investing News Network (INN) in a mid-year email. “Moreover, it is likely that the rising prices earlier in the year were also driven by inventory rebuilding.”

As the year unfolded, inflationary pressures and higher interest rates weighed on China as they did elsewhere in the world. In turn, demand for vanadium from the Chinese steel industry continued to soften in the second half of the year.

“Prices this year have been impacted by weak demand, particularly in China relating to its struggling property sector and thus weak construction market,” explained the team at Project Blue in a December email to INN. “Supply has additionally been ample, a situation that has not changed through the remainder of the year.”

Nonetheless, vanadium prices had some support from increased demand for large-scale storage vanadium redox flow batteries (VRFBs) in China and in the broader aerospace sector.

What is the vanadium supply and demand forecast for 2024?

Moving into 2024, all eyes will remain on China's steel sector and rebar demand.

“As goes steel, so goes vanadium demand,” Willis Thomas of CRU Group told INN. “China is the global leader for vanadium production, but more importantly the consumption leader. This demand is highly linked to rebar, so as Chinese construction slows, vanadium demand will surely be impacted.”

CRU expects lower Chinese crude steel production to be more than made up for by global production ex-China.

“This increase year-over-year will support vanadium demand, though much crude steel production gains will be seen in markets with traditionally lower vanadium intensity, though intensity will rise through the forecast to 2030 in these markets,” Thomas noted via emailed comments.

Project Blue also believes that the downside to demand will be very limited. For now, the firm’s analysts are taking “a wait-and-see approach” when it comes to demand recovery for vanadium in China's rebar steel sector.

While Project Blue doesn’t see much demand upside coming from Europe, the market may experience an uptick in Chinese demand as early as Q1 2024, spurred on by a rebound ahead of the spring construction period.

This would prove supportive for vanadium prices, the analyst team explained. “Vanadium inventories are currently low, and any demand recovery could also trigger some restocking,” they said. "(However), this largely depends on the effectiveness of any Chinese economic stimulus measures.”

In response to its stumbling economy, the Chinese government released a new stimulus package in mid-2023 aimed at bolstering the property, consumer goods and auto sectors.

Further targeting the property sector, the People’s Bank of China and National Administration of Financial Regulation announced cuts to minimum mortgage downpayments for first-time and second-time buyers. “It appears that the Chinese authorities may finally adopt more fiscal measures to boost the property sector, such as reducing minimum mortgage down payments and increasing various personal income tax allowances,” Project Blue commented.

What's ahead for the vanadium market in 2024?

The steel sector isn’t the only driver of the vanadium market. In recent years, the growing need for large-scale energy storage solutions for the transition away from fossil fuels has increased demand for VRFBs. VRFBs are seen as ideal for large-scale storage because they are able to provide hundreds of megawatt hours at grid scale.

Both CRU and Project Blue are looking to the battery sector as another key theme to watch in 2024.

“As renewable energy projects continue to be rolled out in 2024, especially in China, what batteries will be used in each project and how large they will be is something to watch for,” CRU’s Thomas told INN. “The buildout of electrolyte capacity will dictate the ability of the battery market to continue growing.” According to research from CRU, demand growth for vanadium over the next decade will largely be driven by the rising installation of VRFBs.

Project Blue said much of the VRFB capacity installed globally in 2023 was in China, and that trend is expected to continue in 2024. The Chinese government is highly supportive of VRFB technology for long-duration energy storage.

“Investors should keep an eye on the continued announcements of VRFB capacity in China and the rest of the world as part of the global push to support the rollout of renewable energy capacity to help meet net-zero targets,” said the firm.

On the topic of supply, Project Blue said investors should follow “the advancement of greenfield projects, particularly in Australia, where some of the most advanced projects are located." Home to the third largest vanadium reserves in the world, Australia has become a global hot spot for vanadium exploration.