Future Vanadium Demand To Get Boost From Renewable Energy Stimulus

The coronavirus pandemic has hurt commodities across the board, and vanadium is no exception.

But John Meyer of SP Angel believes that as more governments commit to renewable energy post-COVID-19, vanadium demand could see a boost in the coming years.

The battery metal is key in vanadium redox flow batteries (VRFBs), which have the ability to store extensive amounts of energy. Meyer said that rising ferrovanadium prices combined with new orders for VRFBs should create new investor interest as stimulus projects drive demand.

Speaking specifically about what has been happening so far this year in the vanadium space, Meyer said ferrovanadium prices have improved as expected in China, but have disappointed in Europe and the US.

“We now expect the US to start to catch up, particularly if new stimulus funding is approved,” he said. “European prices may remain depressed for awhile longer due to slower economic recovery and a focus on funding automotive in preference to infrastructure.”

He added that Chinese prices may soften for a few weeks due to flooding, but are likely to resume their appreciation from August onward.

Meyer said the most significant news in the vanadium space during the first half of the year has been the growth of Chinese imports of ferrovanadium.

“(This has been) driven by a lack of scrap and by-product supply and a fast recovery of China’s steel sector. Rising Chinese imports will serve to help prices higher in the absence of much new supply.”

Speaking about future supply, the expert mentioned Bushveld Minerals (LSE:BMN) as a company to watch. Bushveld is expected to continue to improve operations at Vametco and its newly acquired Vanchem operation, both in South Africa.

“But this (improvement) is unlikely to offset the fall in by-product sources,” Meyer said.

Looking over the demand side of the equation, he pointed to new stimulus funding, which is being chaneled into renewable energy generation, with US$35 billion committed to offshore wind farms in the first half of 2020 — that’s up 320 percent year-on-year.

“Increased use of wind and solar power generation requires more grid-scale battery capacity,” he said. “VRFBs are a key solution to this problem and should be a significant demand driver in future years.”

As the second half of this uncertain year kicks off, investors interested in the future of energy storage and vanadium should keep an eye on catalysts that could impact these sectors. Meyer pointed to new orders for VRFB installations and rising demand and/or prices of rebar steel as examples.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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