Vanadium: Longer Life, Inspired Investment?
In the last article of this series, we began exploring the battery metals behind the EV economic revolution. Click here to read about the raging ethical debate that will affect every investor’s dealings with cobalt. In this article, it’s time to take a step away from the cultural hurricane of opinions and instead look at the technological tornado surrounding another battery metal.
Vanadium has been a useful industrial metal for many years. It has been used in nuclear reactors, superconducting magnets, catalysts, gears, axles and jet engines. The concept of a vanadium redox battery had been problematic throughout much of the 20th century, with Pissoort, Nasa, and Pellegri and Spaziante all being unsuccessful in their attempts to create one. However, since the first successful all-vanadium redox flow battery in the 1980s, companies have been clamouring to explore the immense possibilities generated by a battery that has a lifespan far longer than current solid batteries.
Higher than expected supply and lower than expected demand has resulted in a downward price trajectory for uranium in 2019 after the record highs and growth of the sector in 2018. However, the vanadium market worldwide is projected to grow by $17.5 Billion. (1) A primary reason is the predicted growth of iron and steel, not the green revolution. Eventually, when the technology standards for VRFB have been agreed, vanadium will find applications for longer-term energy storage in towns and cities to regulate peak-energy surges and provide domestic whole-home use and remote off-grid use. Vanadium will be able to compete in terms of cycle life, safety, and reliability for stationary applications. However, lithium-ion will continue to own the mobile energy market such as automotive (EV) and electronics.
Despite higher upfront costs and lower energy density, VRFBs potentially have a shorter payback time because of capacity retention even after many thousands of cycles. This potential also exists because of their ability to recycle core components more easily than other battery chemistries. Very few VRFBs are in commercial use so investors must take the claims of vanadium companies aligning their success to that of VRFB with a pinch of salt. However, that is the cherry on the cake. Right now, the vanadium producers’ economics are 90% aligned to the steel market.
Lithium-ion batteries will suffer a setback from the emergence of utility-grade flow batteries, which will contribute to easing the pressure on lithium resources that are more needed for electric mobility applications. One final interesting remark is that, with notable exceptions, a sizeable portion of the RFB industry is located in Europe and the US.
Vanadium Flow is in developmental infancy relative to its older brother, lithium-ion, but is on an upwards trajectory. Wattjoule predicts an increase of 30% for the total Substantial Storage Market by 2025. (2) Vanadium-Flow offers a fully containerised, non-flammable, compact product that doesn’t degrade; therefore, it can be reused. It seems to be an infinite supply! I am attempting to understand if this is a good thing or a bad thing as an investor as scarcity drives prices up and oversupply drives prices down. Investors may also be interested to hear there is significantly more Vanadium in the earth’s crust than lithium; currently, twice as much Vanadium is produced each year.
However, investors so far have been deterred by the economics of vanadium, and commercialisation of the batteries has suffered as a consequence. The benefits are not yet understood by the retail market, so regardless of their promise, they are yet to bear fruit. Vanadium-flow batteries remain less effective than others in terms of energy-to-volume ratio and round-trip efficiency. They are also heavy, which restricts the flexibility of their application to mobile solutions. Lastly, the toxicity of vanadium oxides renders the batteries more dangerous than competitors. The industry needs to assure investors they have a solution for this or they will suffer the same push back that Nuclear energy is getting from some quarters, despite the zero-carbon claims.
Vanadium is produced in a variety of ways for many applications. Vanadium pentoxide (V2O5) always contains 56% vanadium by mass. (3) One of its uses is as a cathode in primary and secondary rechargeable lithium batteries, and in VRFBs, both of which are a key part of the EV revolution. It is also utilised in air treatment, automotive manufacture, paint, flooring materials and as a catalyst or colourant, along with many other uses.
Another popular variant of vanadium is called ferrovanadium (fEv). Ferrovanadium is a master alloy/universal hardener used in ferrous alloy production, such as stainless steel, that is formed by combining vanadium and iron; it has a vanadium content range of 35%-85%. Vanadium is also sold as a nitride that can be used in cutting materials or hard coatings.
57% of vanadium is produced in China and 18% in Russia. India, South Africa and Brazil are also large producers. The USA produces ≅3%. (4)
The spot price of ferrovanadium is ≅$31/kg in China and ≅$21/kg in Europe. The price of vanadium pentoxide flake is ≅$14.55/kg in China and ≅$10.47 in Europe. Historically venadium pentoxide flake has been as low as $2.43/kg in worldwide markets in 2002, and as high as $74.74.kg in November 2018. Ferrovanadium reached a height of $143.50/kg in October 2018 and a low of $6.20/kg in early 2002. (5)
Crux Investor recently took the opportunity to interview Largo Resources (https://youtu.be/TsWIAvM24Ww), Energy Fuels (https://youtu.be/Kf4WwL-VNac), Australian Vanadium (https://youtu.be/5kZaEG2y_ns) and BlueSky Uranium (https://youtu.be/lhFSQ0c56Pg) about vanadium. They helped shed light on the expanding market of vanadium and shared useful information for investors. It is important to decipher the difference between what the CEO says versus what is a reality today. They need to paint a picture of a growth story for investors. We must work out what is real and what is wishful thinking.
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