Vanadium demand3 Dec 2020 09:32
if uptake of battery power storage surges where will new production come from China has reducing reserves.
Vanadium market balance
Supply and demand dynamics point to a potential structural net deficit. Supply is concentrated and constrained as:
Over 70 % of vanadium comes from co-production, which is driven by steel and iron ore fundamentals;
Co-production is primarily driven by steel and iron ore market dynamics rather than vanadium fundamentals, and co-producers are currently operating close to full capacity. China and Russia accounted for 76 % of global supply in 2019. In China, capacity utilisation from **** producers was estimated at 80 to 90 % in 2019, with the top 5 producers operating close to full capacity. Russia was also operating close to full capacity, at approximately 90 %;
The steel industry in China has been increasingly relying on imported hematite iron ore, which is non-vanadium bearing;
Over the longer term, Chinese vanadium production will be constrained by the decline in domestic iron ore supply and iron ore quality, coupled with environmental restrictions on steelmakers, co-product and stone coal vanadium producers, as well as the ban on vanadium **** imports;
Importantly, with most vanadium co-producers, whose economics are primarily driven by steel economics, operating at near full capacity, the ability of co-producers to add new supply volumes to the market is severely curtailed;
Lower vanadium prices limit the advent of new greenfield production due to more funding challenges, while also discouraging high-cost, low-grade primary production, such as stone coal. Furthermore, with lower vanadium prices, a historically volatile vanadium price and a majority of greenfield new vanadium projects being high capex co-production plants, the scope for significant greenfield production capacity is even more limited.
Growing demand is underpinned by higher intensity of use of vanadium in steel, which is expected to rise to 0.063 kgV by 2030 compared with 0.054 kgV in 2019. China will drive most of the increase. On top of this, demand for vanadium from energy storage will continue to grow from a base of 2,000 mtV in 2018. The rate of growth from this baseline will have a significant influence on how quickly and to what extent this new demand source puts pressure on the global market.
The global vanadium market has faced a supply deficit since 2015, after a period of oversupply. The deficit encouraged increased output from existing producers, as can be seen by growing output and market share from primary producers. These miners are economic at both prevailing and long-term forecast vanadium prices and were able to increase production at their facilities on a lower-cost, brownfield basis
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