Demand for Vanadium is on the rise - from both traditional steel applications and from emerging battery technologies. There are several factors that will continue to influence the demand for vanadium:
In the Steel Markets...
China's urbanization – China is the top steel producer in the world and will account for about 45% of world steel use in 2011. China’s demand for Vanadium for steel use alone is expected to remain strong for the next 10 to 20 years.
Increased Vanadium content - China and Japan have legislated increased Vanadium content in steel rebar. China uses comparatively low amounts of Vanadium per tonne of steel produced and will need to dramatically increase its use of Vanadium to match the steel quality of regions such as North America and Western Europe. Stratcor, a division of Vanadium giant Evraz estimates that If China were to use as much Vanadium as U.S. steel producers, the Vanadium required would equate to one-third of current worldwide supply per year
- India’s industrialization - India’s steel production is expected to almost double from 65 million tonnes to 124 million tonnes a year by 2011. Steel consumption in India, the world’s second-fastest growing major economy, is being driven by increased usage in airports, railway coaches and automobiles.
- Economic Recovery - Infrastructure projects that were announced by governments around the world in response to the financial crisis of 2008, which will require Vanadium, will, according to analysts, intensively unfold through to 2015. CIBC World Markets estimates total infrastructure spending over the next 20 years at $35 trillion.
- Aftermath of Japan’s Tsunami - Japan will require additional vanadium to rebuild infrastructure, buildings, etc. Other countries susceptible to seismic activity and other natural disasters will seek to strengthen steel used in construction.
In Battery Applications...
With the ever increasing frequency of news about vanadium and VFBs, it is becoming more apparent than ever before that vanadium’s role will be pivotal in the development of battery technology for electric vehicles and more importantly, for large-scale energy storage systems.
- Emerging battery technologies require vanadium - This new demand stream is being driven by vanadium’s role as a “supercharger” in lithium batteries for electric and hybrid cars and as an essential and substantial component in Vanadium Flow Battery storage systems.
- Clean energy government initiatives and mandates - the U.S. has announced $2.3 billion in clean energy tax credits focused on renewable energy production and storage. With the U.S. pledging to double its renewable energy production within the next three years and other governments close to similar commitments, there will be an increase in demand for advanced battery technology. President Obama has commented “next generation energy storage systems will help families and businesses cut down on energy waste, save money and reduce dangerous carbon emissions”.
- VFBs are here – Large-scale vanadium flow batteries are already being used in several markets around the world including the US, the EU, China, Japan, Korea and Australia.
- Prudent Energy describes its VRB-ESSTM as a large capacity, advanced energy storage system with high performance and low operating costs. Given the fact that their Vanadium flow battery’s electrolyte is 100% recyclable, the company claims the total cost of ownership is undoubtedly the lowest for any energy storage system. With installations around the world, Prudent Energy will be adding megawatt (MW) class VFB installations in high-profile locations in the United States and China.
- A 3.6MWh VFB will be installed at one of the largest fresh-cut onion processing plants in the world. Gills Onions, located in Oxnard, California, will use Prudent Energy's VFB to reduce electricity costs and build on its award-winning sustainable energy program, which serves as a model for the food industry.
- A 1MWh VFB will be installed at the China Electric Power Research Institute (CEPRI) in Zhangbei, Hebei province in northern China. This project is part of the National Wind Power Integration Research and Test Center of China (NWIC) owned by State Grid Corporation of China, using 30 wind turbines with at least 78 MW of generating capacity, and 640 kW of solar photovoltaic (PV) capacity and 2.5MW of energy storage. Once completed, the testing center will be the largest such facility in the world and will allow State Grid Corporation of China (the world's largest utility) to develop a combination of concepts for future grid operations ranging from renewable energy grid integration, to intelligent monitoring, communications and control ("smart grid"), representing a significant step forward for China's renewable energy development that includes clean energy storage.
- Cellstrom GmbH, another Vanadium flow battery manufacturer, based in Austria, was acquired in 2010 by a subsidiary of a German-based conglomerate, Gildemeister GmbH. Cellstrom has successfully been selling Vanadium flow batteries since 2008 throughout Europe and most recently into India under the product name CellCubeTM. Cellstrom currently sells a 10kW/100 kWh and 20kW/100kWh VFB designed for uninterrupted power supply for households and factories and plans to launch in 2011 a 200kW/400kWh VFB designed for solar and wind farms. According to Cellstrom, the CellCubes are modular in design and can be easily scaled up in size to reach megawatt capacities, suitable for power-grid applications.
- In February 2011, the CellCube was an integral part of the world launch of BMW’s electric vehicle, the BMWi. Charged with electricity from a wind turbine, the CellCube provided 100% renewable energy for a portion of the media launch.
According to the United States Geological Society (USGS), in 2009, the annual worldwide production and reserves of vanadium was approximately 63 million tonnes (vanadium metal) which equates to 112,000 tonnes of V2O5.
With the anticipated increase in demand for vanadium and limited supply on the horizon, a vanadium supply shortage is looming.
To add stress to the supply, China, the #1 producing vanadium market representing about 40% of the world’s vanadium supply, has gone from being the world’s largest exporter of vanadium to the world’s largest consumer. They have recently announced that the development of the country's vanadium industry will be a top priority in the next five years, which has caused some to express concern that Vanadium may be deemed strategic and no further exports permitted.
Unlike many other commodities, vanadium does not trade on the open market. Buyers and sellers negotiate privately. Prices are then published by independent market consultants. As a result of limited supply that is predominately controlled by two producers, Vanadium prices have been volatile. Vanadium prices have ranged from approximately U.S.$2 per pound to over U.S.$26. More recently, in less than 2 years, Vanadium prices ranged from U.S$17.00 per pound in the summer of 2008 when one of South Africa’s Vanadium mines was off-line due to electricity issues, to a low of U.S.$4.50 per pound in August 2009 as the world’s economies crashed.
V2O5 Market Price History
(London Metal Bulletin monthly midpoint averages)
Today, the spot price for steel-grade Vanadium is in the U.S$7 - $7.50 per pound range. For, battery-grade (high purity) vanadium, the range has been anywhere from U.S$13 to $30 per pound in 2010 – a premium of two to four times. Ferrovanadium, the form of Vanadium used in the steel industry, has had an even wilder price history – U.S.$6.00 to U.S.$58 Today, the price for Ferrovanadium is in the U.S.$14-$15 per pound range. This price volatility can only get worse as demand for Vanadium increases, further stressing supply.
New sources of vanadium are needed to meet this increased demand and alleviate supply shortfalls and Energizer Resources Inc. is preparing to deliver. Our Green Giant Vanadium Project is being positioned to address this price volatility. We will be able to supply Vanadium to meet the growing demand from both the steel and battery markets, which in turn will stabilize Vanadium prices.
The Green Giant Vanadium Project will be able to bring sureness of supply and sureness of price to the Vanadium market
Sureness of Supply and Sureness of Price
As we see more and more evidence in the marketplace of commercial applications of Vanadium-based battery technologies, such as the Vanadium Flow Batteries, a great opportunity exists for vanadium producers who can provide the necessary high purity Vanadium. Energizer’s Green Giant Project is being positioned to meet this anticipated new demand for high purity vanadium, as well as the anticipated 7% annual growth in demand for Vanadium from the steel industry. The sheer size of the Green Giant deposit will allow the Company to scale the project to meet the increase in demand for Vanadium and to provide the sureness of supply and price required by Vanadium end users.
Energizer management is aggressively seeking out strategic partners to participate in the development of the Green Giant Vanadium Project. Strategic partners may take the form of:
- Steel off-take partners – steel manufacturers that will contract in advance to buy vanadium from the Project to ensure sureness of supply and price
- Battery off-take partners – electric car battery manufacturers and Vanadium Flow Battery manufacturers looking to contract in advance to buy vanadium from the Project, which in addition to ensuring sureness of supply and price, will ensure that new vanadium projects will come online to meet this new demand.
- Technical partners – mining, engineering and/or construction companies interested in participating in the construction and operation of the Project.
- Financial partners – financial entities looking to invest money into the Project with a view to participate in the financial success of the Project.