Navigating the Vanadium Market: Sex Appeal Versus Lasting Attraction


"Vanadium is finding a new niche in storing and distributing electrical energy through the use of vanadium flow batteries, having previously been used almost entirely in steelmaking."

Metals within the natural resource sector are described in numerous ways—some of them more profane than others, given current markets—but "sexy" is rarely one of them. Yet the term has been bandied about with impunity over the past several months where vanadium is concerned, thrown out with such frequency that one begins to wonder whether commentators are referencing the hard gray element or an extremely poorly chosen stripper's stage name.

And while the browbeaten tone of many resource sector followers would suggest that most could probably use an ill-advised night out, more to the point is the question of whether vanadium's sex appeal will hold up with time.

Gauging the sustainability of the vanadium buzz begins, essentially, with an examination of its sources. And while such factors for other resources are often intangible-take, for example, the dizzy dance of gold around inflation fears—vanadium in this sense has a solid pair of legs to stand on, fishnet-clad though they may momentarily be. The basis of this relative stability lies, refreshingly, in the changing landscape of the element's end use—and its subsequent influences on basic, downright matronly supply and demand.

Previously centered almost entirely around the steel industry, vanadium has emerged as a key player in the pursuit of manageable alternative energies. The tipping point of global fossil fuel dependence is placing increasing emphasis on renewable energy sources, and in turn necessitating grid energy storage as a means of storing and distributing energy from wind, solar, and hydro operations. And among the frontrunners of grid storage solutions is the vanadium flow battery.

The technology itself has decidedly passed the speculative stage and entered into active implementation, marked by a project commission by major food processor Gills Onions in April that brought the world's largest vanadium flow battery online in the U.S. Gills Onions unveiled the battery technology to the public last week, noting anticipated energy-cost savings of "hundreds of thousands a year," according to Prudent Energy Corp. President Jeff Pierson, via a system that generates power by mixing a chemical solution, charging it with vanadium electrolytes that conduct electricity, and storing the resulting megawatt-hours.

Such industrial applications, aided and abetted by their economic attraction perhaps more so than their green angle, underscore a key aspect of vanadium's current and future charm-the allure lies with the higher-value electrolyte, powders, crystals and oxide pellets rather than with the previous standard of steel-strengthening "purple flake." This distinction is progressively becoming recognized as a benchmark of value potential: American Vanadium Corp., currently developing the only domestic U.S. vanadium mine, announced a shifted focus to premium vanadium products on July 13. American Vanadium President & CEO Bill Radvak noted an "overriding corporate objective. . .to build the vanadium flow battery business in the U.S. through partnerships with global technology leaders."

With battery-driven demand thus steadily rising, global supply channels are also critical factors. The US, at present, imports 100% of its raw vanadium projects for use in chemical industries, and the dominance of China as a supplier has many end users looking for an easily obtainable alternative source. Given this textbook conflation of supply and demand, "sexy" is suddenly not quite such an outlandish description.

Yet the vanadium market, like any other, continues to require tact: Cost reduction and labor force reorganization prompted a strike on Monday that effectively suspended operations at Russian steelmaker Evraz's vanadium asset in South Africa. Perhaps to an even greater extent than any other metal of recent note, vanadium contains multitudes-its newer applications have generated a great deal of glitter and thrill, though no amount of sex appeal grants total immunity from the complexities and complications of the natural resource sector as a whole.

Accurate determinations of sustainable value must therefore be made on a more individual basis, accounting not only for economic project viability but for intended end-use and corresponding demand. There are, after all, a number of passing beauties—but some will age better than others.

Sara Patterson

Sara Patterson specializes in viewing the operations of junior exploration companies in North America and Europe and generating market commentary. She is the President of an Investor Relations firm specializing in the natural resource sector, and holds a degree in Journalism and Mass Communication and Geology from the University of North Carolina at Chapel Hill. The companies mentioned within this column represent the opinions and interests of the author and do not constitute buy/sell recommendations.

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