For many investors, Vanadium remains one of the markets lesser known metals. Until fairly recently, Vanadium was mostly used as a hardening agent in steel. Adding as little as 0.15% vanadium to steel can increase the strength of the metal, while also using 30% less of it. But the way we use Vanadium’s is changing nowadays. The metal is increasingly being used in both the automotive and construction industries. 20 years ago, hardly any vanadium was used in cars, compared to around 50% percent today. Some estimate that by 2025, 85% of all vehicles will use vanadium alloys in order to reduce the vehicle weight thereby increasing fuel efficiency. But it is future demand from the renewable energy sector, where vanadium is being heralded as the answer to clean energy production, where the metal’s extraordinary electro-chemical structure is set to be exploited in the production of very stable batteries. Here are a few things to consider before making an investment in Vanadium.

History

Vanadium was discovered twice; first by Andres Manuel del Rio in 1803, a professor of mineralogy in Mexico City, while examining mineral samples sent to him. Nils Gabriel Sefström, a Swedish chemist, stumbled upon vanadium while studying the resilience of steel. Named after “Vanadis“ – goddess of beauty in Scandinavian mythology, Vanadium was used long before being discovered, with trace extracts of vanadium found in weapons dating as far back as the 3rd century BC, and lasting through the 18th-Century. Its durability and heat resistant properties were used to make artillery pieces and body armour during World War I; adding just one pound of vanadium to a tonne of steel doubles its strength. Which is why vanadium is used in drill bits, engine turbines as well as other moving parts that generate heat. Today, much of the demand for vanadium comes from the construction industry as it is commonly found in structural steel and rebar concrete. However, as more renewable energy grids come online, demand for vanadium is increasing as the metal’s unique chemical properties are being used to produce vanadium redox batteries.

What Is A Vanadium Redox Battery?

Vanadium redox flow battery’s, or VRB, is a type of flow battery. It consists of two tanks of vanadium solution, split into positive and negative, with one or more cellcubes between them. The cellcubes function as the engine of the battery. A positive electrolyte solution is pumped from the tank on one side of the battery through the cellcubes, while a negative electrolyte solution is pumped from the tank on the other side of the battery. A thin membrane in the center of the cellcubes keeps the two solutions from mixing together. The battery produces an electrical current as the solutions are pumped past electrodes on each side of the battery, generating a current.

Reduction flow batteries can be discharged and recharged 20,000 times without much performance loss, which makes them infinitely more durable than lithium batteries which are likely to die after 1,000 recharges or so. VRB’s are thought to last for decades, even though they have not been around for this to be demonstrated. Lithium batteries cannot scale up to the size required in order to generate energy for an entire community over several hours. Vanadium batteries, by contrast, can be configured to store more energy by simply adding bigger tanks containing the electrolyte. They can release energy as needed, unlike conventional batteries where greater storage translates to greater output.

How Will Vanadium Redox Batteries Help Renewable Energy?

In response to rising energy costs, solar and wind power have both experienced explosive growth in the last decade. While the amount of solar and wind energy coming online is truly remarkable, energy generation companies have discovered two problems with renewables. For starters, solar and wind energy generation does not marry well with demand for electricity. The majority of power generated by solar, for instance, happens between noon and 4 pm; this does not meet peak demand for electricity, which typically comes in the late afternoon and evening hours when most people return home and turn on their appliances. So power generation companies need some kind of way to store the daily solar energy surplus for a few hours, or during times the wind does not gale.

But solar and wind panels do not simply generate electricity at the wrong time; the energy they do produce is at a low voltage. Generally speaking, a traditional power grid is built in such a way which energy flows from high voltage transformers to low voltage transformers and not the other way around. This means that renewable energy generated by solar and wind panels can only be shared between a few households; generally speaking a block or two of homes that share the same station plugging them into the larger grid. Vanadium Redox Batteries are helping power generation companies flatten out the supply between peaks and troughs of energy demand, delivering electricity at a lower cost when called upon.

Supply/Demand

Like many metals markets, vanadium has been in a deficit for years. There are also a few factors that could make the deficit worse in 2018. A lower price of vanadium has led to mine closures as well as a lack of new mining developments. At the time of writing, the global vanadium market stands at a petty 80,000tpy. According to Azure International, demand for vanadium redox flow batteries in the top 10 nations is growing at 80 percent CAGR, with an expected 7000 MW of VRB’s needed in 2020. Given that it takes 15 tonnes of vanadium to build just 1.6 MWh of vanadium redox flow battery capacity, this in itself requires a lot of vanadium.

In addition to dwindling inventories and growing demand, China’s anti-pollution measures are curtailing vanadium supply even further. China, by far the world’s largest consumer of vanadium, has until recently been producing vanadium as a by-product of extracting it from iron ore. This process is extremely dirty, especially when extracting vanadium from low-quality slag. Coming into effect late last year, a scrap import ban has cut approximately 5000 tonnes of such material. Further to this, changes to China’s rebar standards could cause increases in vanadium consumption. The enforcement of these regulations is playing a role in vanadium’s recent price gains. In the last year, vanadium’s price has outperformed those of cobalt, lithium, and nickel. The immediate pressure on supply comes with the birth of the vanadium battery business just as China is increasing their demand for vanadium steel.

Final Thoughts

Vanadium is a super metal – it makes steel stronger; that is why over 50% of the vanadium in the world is used in rebar. Looking at the supply fundamentals in the world at this time it would appear supply is considerably below the current demand level. If there is any further uptick in demand, that spread just becomes worse. When you compare that supply and demand information with inventory, the data suggests the world has been digging into inventory to meet the difference between supply and demand for a short while. While predicting where the price could be in a few years is a lot like reading tea-leaves, Vanadium’s supply being lower than demand will catch up to the market sooner or later. Every time this has happened in the past, if you plot the history of any resource, metal or commodity, we could be on the verge of seeing significant price increases in Vanadium.

Legal Stuff

The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. I am a not financial advisor and I do recommend you consult with a financial professional before making any serious financial decisions.