Vana­dium’s elec­tric fu­ture hob­bled by its in­dus­trial past

Gulf Times Business - - BUSINESS - By Andy Home Andy Home is a colum­nist for Reuters. The views ex­pressed are those of the au­thor.

Last year it was cobalt. The year be­fore that it was lithium. This year it is vana­dium, an­other es­o­teric el­e­ment of the pe­ri­odic ta­ble that is on a wild bull ram­page. Vana­dium prices in China have more than tripled over the course of 2018, al­beit with some re­cent soft­en­ing from their early-Novem­ber peaks.

The share price of South Africa’s Bushveld Min­er­als, one of only a hand­ful of pri­mary pro­duc­ers, has soared from less than 10 pence per share at the start of the year to 42 pence cur­rently.

Vana­dium is the lat­est ex­otic metal to feel the new en­ergy heat. The vana­dium re­dox flow bat­tery (VRFB) is a break­through tech­nol­ogy in en­ergy stor­age, a fast-grow­ing com­po­nent of the in­fra­struc­ture needed to ac­com­mo­date the global shift to re­new­able en­ergy.

Vana­dium’s prob­lem, how­ever, is that there is al­ready a struc­tural short­age of the stuff rooted in its his­tor­i­cal co- dependence on the steel sec­tor. Sup­ply scarcity and the re­sult­ing price volatil­ity are the two big­gest hur­dles to vana­dium’s po­ten­tial bright elec­tric fu­ture.

Vana­dium, named af­ter the Norse god of beauty Vanadis, was only iso­lated in me­tal­lic form in the sec­ond half of the 19th cen­tury.

But its prop­er­ties, par­tic­u­larly its ca­pac­ity to strengthen steel, were quickly ap­pre­ci­ated. Henry Ford’s Model T car used the metal in its steel al­loy chas­sis.

Ad­ding just one kilo­gramme of vana­dium to a tonne of steel has the ef­fect of dou­bling the strength of the steel.

That ex­plains why the steel sec­tor ac­counts for just over 90% of global us­age, ac­cord­ing to an­a­lysts at SP An­gel.

Given China’s dom­i­nance of global steel pro­duc­tion, it’s no great sur­prise that the coun­try is the sin­gle largest user of vana­dium. And it’s China that has laid the foun­da­tions for vana­dium’s spec­tac­u­lar price rally this year.

The coun­try has changed the spec­i­fi­ca­tions of high-strength re­bar con­struc­tion steel to im­prove earth­quake re­sis­tance.

The changes, just im­ple­mented, will drive higher use of vana­dium and al­though the amounts in­volved are tiny, the cu­mu­la­tive im­pact will be to in­crease Chi­nese con­sump­tion by around 10,000 tonnes per year, ac­cord­ing to SP An­gel, cit­ing China’s Iron and Steel Re­search In­sti­tute. That’s the equiv­a­lent of around 12% of global vana­dium pro­duc­tion in 2016.

This one-off de­mand boost is hap­pen­ing just as China is weak­en­ing its own sup­ply ca­pac­ity as part of its drive to in­tro­duce more en­vi­ron­men­tally friendly poli­cies. Vana­dium is a very elu­sive metal. It took two “dis­cov­er­ies”, one by a Span­ishMex­i­can min­er­al­o­gist and a later one by a Swede be­fore ev­ery­one ac­cepted it was in­deed a new el­e­ment.

It is largely pro­duced through the pro­cess­ing of mag­netite iron ore, with around 73% of out­put com­ing in the form of a slag gen­er­ated in the steel pro­duc­tion process. The steel mills that pro­duce it are not the same ones that con­sume it.

Rather, they have his­tor­i­cally been the higher-cost, lower-qual­ity op­er­a­tors feed­ing low-grade mag­netite iron ore into their al­loy mix.

Pre­cisely the sort of ma­te­rial that is be­ing used less by China’s steel pro­duc­ers as they favour higher-grade ore to max­imise ef­fi­cien­cies and re­duce en­vi­ron­men­tal emis­sions.

The gap be­tween high-grade and low­grade pric­ing has been a defin­ing fea­ture of the iron ore mar­ket this year but one that si­mul­ta­ne­ously re­duces vana­dium slag pro­duc­tion. Just to com­pound this evolv­ing sup­ply chal­lenge, Bei­jing has also banned the import of four types of vana­dium slag, cut­ting off around 4,500-5,000 tonnes of an­nual sup­ply from Rus­sia, ac­cord­ing to SP An­gel.

An­other po­ten­tial source of sup­ply, stone coal, is also be­ing re­stricted by China’s war on smog. Chi­nese reg­u­la­tors are re­fus­ing to is­sue per­mits to ex­ist­ing stone coal pro­duc­ers and al­though there is a col­lec­tive at­tempt to up­grade pro­cesses to achieve lower emis­sions, the short-term ef­fect is to re­duce even fur­ther China’s vana­dium pro­duc­tion ca­pac­ity.

China’s moves both to boost de­mand and limit sup­ply have cre­ated a per­fect bull storm for the tiny vana­dium mar­ket. Ex­ports from the coun­try have dried up, stocks ev­ery­where are fall­ing and prices have been on a super-charged rally.

The mar­ket was al­ready in an 8,000-tonne sup­ply deficit last year and SP An­gel ex­pects de­mand to con­tinue ex­ceed­ing sup­ply through 2020.

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