Vanadium started off 2023 on a high note with prices rising alongside a post-COVID economic rebound in China, but they have since fallen back as a new global economic downturn has emerged.
Most vanadium is used in China for steel applications, particularly the high-strength, low-alloy steel used to make construction rebar. However, the metal has a growing role in batteries that is attracting interest as the clean energy transition picks up steam.
As the year comes to an end, what can investors expect for vanadium in 2024? Read on to learn more about vanadium’s performance in 2023, as well as what analysts and market watchers are forecasting for next year.
How did vanadium perform in 2023?
At the start of the year, positive sentiment prevailed as the vanadium price rally of 2022 continued 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 its economic growth.
However, that boon was short-lived and by the end of the first quarter China’s economic woes returned alongside weaker construction and manufacturing markets and declining steel production.
As the year unfolded, rising inflationary pressures and higher interest rates have weighed on China as they have for much of the rest of the world. In turn, demand for vanadium from the Chinese steel industry has continued to soften into the second half of the year.
Nonetheless, vanadium prices had some support from increased demand for large-scale storage vanadium redox flow batteries (VRFB) 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.
CRU expects to see lower Chinese crude steel production being more than made up for by global production outside of 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.
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 sector. This would prove price supportive, 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 down payments 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 key 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 vanadium redox flow batteries. VRFBs are seen as ideal for large-scale storage, because they are able to provide hundreds of megawatt hours at grid scale.
Both CRU Group 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 said. “The build-out of electrolyte capacity will dictate the ability of the battery market to continue growing.”
According to CRU research, demand growth for vanadium over the next decade will largely be driven by the rising installation of VRFBs.
For its part, Project Blue relays that much of the VRFB capacity installed globally in 2023 happened 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,” stated the Project Blue team.
On the topic of supply, Project Blue says 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.
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.