Supply
Vanadium production is estimated to have dropped by 6,6 % to 113 370 t from 117 274 t in 2021. Like most ferroalloys, vanadium is largely exposed to the market characteristics of steel and specifically to the Chinese steel industry.
Total world crude steel production was 1 878,5 Mt in 2022 – a 4,2% decrease compared to 2021. As a result of China’s zero-COVID policy, together with its faltering property and construction sectors, its crude steel output was down 2,1% in 2022, with the country accounting for 54% of global production.
The Russia / Ukraine war had the largest impact on production outside China in 2022, with output in the Commonwealth of Independent States regions down 18,7%. Europe also saw sharp declines of just less than 10% year-on-year, with the war in Ukraine contributing to rising costs and concerns over energy prices.
Steel production and consumption in developed countries has also been impacted by a deteriorating macro environment as supply disruption concerns earlier in the year gave way to demand destruction fears in the second part of 2022.
Supply Growth
Opportunities for growth in vanadium supply can be considered in two categories:
- Capacity expansions of current producers
- Re-commissioning of mothballed production plants
On a longer-term, perspective, new supply will be required to meet the rising demand expected to come from the VRFB sector. This new supply could come either existing producers or from greenfield projects which are, for the vast majority, are still in their early phases of development.
Demand
Global vanadium consumption dropped by approximately 5% to 112 573 t in 2022 from 118 422 t in 2021.
Increased vanadium demand in steel applications is not only a factor of higher steel output, but because the intensity of vanadium usage in steel has increased over time.
China’s vanadium usage intensity still lags behind that of developed economies – suggesting more support for demand in future, even in a market expecting Chinese steel output to have peaked.
The VRFB sector has created an additional rapidly growing market for vanadium. It has become the second largest user of vanadium after steel.
Project Blue estimates that about 8% of the vanadium consumption came from the VRFB sector in 2022.
In 2022 alone, VRFBs proportion of vanadium consumption in the global market increased to 5,3% from 2,7% in 2021.
In China, Dalian Energy Storage Power Station, which was completed in November 2022, has a battery storage capacity of 400 MWh. This is expected to double, bringing capacity to 800 MWh, and supporting 200 000 residents with their daily electricity needs. Construction has started on a 1 000 MWh VRFB in Xinjiang, which will be completed by the end of 2023.
These developments are part of over 3 700 MWh of VRFB projects either built or announced in China over the last 18 months.
Several forecasting agencies expect China’s VRFB market to grow at 30-50% per annum through 2030.
Market Outlook
These trends will require more capacity from producers, with current estimated feedstock capacity likely to be insufficient by the end of the 2020s.
New capacity will be required – both from existing producers and new projects to meet the growing vanadium demand. With the vanadium demand coming from steel expected to rely primarily on intensity rather than on volume, the main medium and long-term industry driver will be the VRFB market –with upside should the technology expand faster than expected, and downside should alternative storage technologies develop a competitive advantage to VRFBs.
| OVERVIEW | UPSIDE | DOWNSIDE | |
|---|---|---|---|
| Short Term | Vanadium market is expected to stabilise, with an improvement in the Chinese property market only expected in late 2023. The bright spots for demand are aerospace and VRFBs. Demand in the USA is expected to remain relatively robust, while the outlook for European consumption appears more subdued, with macro risks, a perduring conflict in Ukraine and potentially volatile energy costs towards the end of the year. Global supply appears adequate, while inventories have been declining since the end of the first quarter of 2023. | Geopolitics impacts supply. The announcement of multiple large-scale VRFB projects and / or stronger global demand, owing to an improved macro-outlook. Any stimulus announcement by China could have a positive impact on the property market and on the construction sector. | China's growth expectation is clipped by a resurgence of COVID or geopolitical / economic factors. Global inflation / macro environment pushes down demand in the rest of the world. Lower-than-expected demand from battery sector. |
| Medium Term | The market is expected to grow at a CAGR of 4,7%. Demand for vanadium in steel is set to increase at 3,6% per year, supported by higher intensity of vanadium use. 35% per year growth in VRFBs to 2028, with demand to be driven by China. | Geopolitics impacts supply. The announcement of multiple large-scale VRFB projects. Higher-than-expected steel output in China increases demand. | Commercialisation of VRFBs fails to materialise, reducing demand. Chinese steel curbs or macro-related factors reduce demand further. High-case scenario secondary material or higher coal stone output causes over-supply. |
| Long Term | Demand from the steel sector is expected to increase at a CAGR of 1,5%, underpinned by increased intensity of vanadium use in steel, in China and in developing countries. Steady commercialisation of VRFBs from the mid-2020s onwards, growing in scale over the net-zero horison, which will result in a long-term CAGR of 12,6%. | Geopolitics further impacts supply. VRFBs ramp up at a faster-than-expected rate. New applications for vanadium are discovered and add demand pressures. | Commercialisation of VRFBs fails to materialise, reducing demand. Higher-than-expected drops in steel and micro-alloy demand. A few large-scale projects add to supply, flattening the cost curve and stabilising prices. |