Vanadium and niobium markets show many similarities with both driven by steel but both increasingly exposed to energy transition.

Vanadium and niobium markets show many similarities: the steel industry takes about 90% of both metals’ consumption, both contribute to increase steel strength and resistance, and both will benefit from the decarbonisation trends, although with their own specifics. In their search for diversification, their paths may diverge over the coming years, with much uncertainly coming from technology, regulatory environment, and economics. But both vanadium and niobium are poised to benefit from the energy transition trend.

Vanadium and niobium: similar but different

Vanadium and niobium have a quasi-identical market value, respectively US$2.3Bn and US$2.1Bn in 2022. Both metals are used as micro-alloys for strengthening steel and increasing its resistance. Grain refinement and precipitation strengthening are the main mechanisms observed in niobium-steel and vanadium-steel, with the average grain size of niobium-steel being smaller. Meanwhile, Vanadium’s higher solubility allows lower reheating temperatures, and therefore lower energy usage, for rolling or forging. But, excluding chemical specifics, both vanadium and niobium, when added to steel, enhance safety standards for buildings and structural works. For automotive applications, they allow a higher strength with a lower weight, thus increasing fuel efficiency. By reducing the amount of steel required for a given strength, vanadium and niobium contribute indirectly to lower carbon emissions of the steel industry. Therefore, they are often labelled as ‘green metals’.

Steel usage accounts for about 90% of consumption for both vanadium and niobium. Despite this steel exposure, the R² between their respective 2013-2022 apparent consumption is only 0.715, indicating an imperfect correlation. The main reason is that vanadium has a higher exposure to China and the rebar segment, while the niobium market is more geographically diversified and more balanced in terms of steel between long and flat products. Vanadium has therefore benefited more greatly from China’s steel production increase and from the 2018 regulatory changes on the country’s construction standards. China is the major market for vanadium, accounting for about 56% of consumption, while niobium is more diversified with China, Europe, and North America accounting respectively for 35%, 20% and 18% of demand.

Another key difference is the type of steel products which use ferro-vanadium or ferroniobium. Rebar accounts for about 80% of the vanadium consumed by the steel industry in China, and on a global basis, rebar and infrastructure-related steels account for 75% of the vanadium consumed in steel. As for niobium, its lower exposure to China and to long products translates into a more diversified scope of applications between infrastructure, automotive and oil and gas. This difference in the type of steel is partly related to the geographical exposure discussed above. With China’s steel consumption highly geared to construction, and China’s vanadium production primarily coming from steel co-generation, the large usage of ferrovanadium in China appears logical. Also, the high solubility of vanadium offers a competitive advantage as it requires a lower temperature at the rolling level.

Unsurprisingly, vanadium has benefited from this double advantage of geographical and construction exposure, and ferrovanadium's apparent consumption has outperformed ferroniobium’s. Over the 2013-2022 period, the respective CAGR of ferrovanadium and ferroniobium was 4.4% and 2.6%. The gap is also largely driven by the rebar standards implemented in China in 2018, which caused a spike in vanadium demand.

Substitutes but complementary

These differences between vanadium and niobium do not exclude substitution between the two metals. In 2018, China’s implementation of improved rebar standards caused vanadium prices to increase 135% between January and November. As a result, Chinese mills switched from ferrovanadium to ferroniobium, including for rebar making. The price factor remains a key element for potential substitution between the two alloys in China. On this basis, niobium has a competitive advantage compared to vanadium as its price displays a lower volatility. The vanadium coefficient of variation (CV=standard deviation: mean) was 0.59 for observations between 2013 and 2022 compared to 0.13 for niobium. This difference is due to the market structure, largely dominated by Brazil’s CBMM for niobium production, and more diversified for vanadium. However, substitution also depends on other factors such as the carbon or nitrogen content in steel. For some applications, such as HRB 500 type rebar, combining vanadium and niobium can increase the steel strength by using a lower quantity of both metals, making them complementary.

Over the past two decades, the steel industry has been dominated by China’s industrialisation and urbanisation, translating into a large increase in structural steel production. This, combined with a rising intensity usage of vanadium, has driven China’s vanadium consumption. Intensity usage is the amount of vanadium consumed per tonne of steel. With China’s economy maturing and shifting from fixed assets investments to domestic consumption and services, crude steel production is plateauing and is forecast to gradually decline towards the end of the decade with rebar production declining faster, in line with lower infrastructure spending and a structurally weaker construction activity. China’s usage of ferrovanadium will continue to increase due to a higher intensity – Grade IV rebar consumes twice as much vanadium than Grade III – and higher consumption in the non-rebar segment, but the growth rate will be impacted due to lower rebar production.

Vanadium and niobium will increasingly benefit from decarbonisation.

Both vanadium and niobium will benefit from the current decarbonisation trend. As mentioned, both metals, through enhancing steel strength and resistance, allow lower volumes of steel production for a given strength, and implicitly lower carbon emissions or energy consumption in the case of vehicles, due to a lower weight. Countries prone to seismic risks such as Turkey, Iran or India are also likely to adopt stricter regulations in terms of safety standards which should translate into an increased demand for high-strength low-alloy steels (HSLA).

Project Blue estimates that about 13-14% of total crude steel uses niobium and 15-16% uses vanadium, numbers which imply some upside. Given niobium’s exposure to a wider geographical market and steel types, its growth could outweigh vanadium over the coming years, although vanadium will keep dominating the Chinese market, given the large domestic production.

The intensity of vanadium and niobium use in steel is poised to increase, moderately in developed economies, but at a faster rate in developing countries, including China. Project Blue forecasts a respective CAGR of 2% and 2.5% for the vanadium and niobium consumed in steel between 2022 and 2033.

Energy transition: diverging path?

The next few years look set to offer new sources of revenue for both vanadium and niobium. This diversification could result in a diverging path between the two metals which, as discussed, have been primarily associated with the steel industry.

Decarbonisation of the electricity grid will require a storage solution for renewable energies, wind and solar, which are intermittent. Vanadium redox flow battery (VRFB) technology appears to be a solution and has already been deployed in China, at the Dalian Rongke Power plant, designed for a 100MW and 400MWh capacity. Additional smaller installations have been deployed globally. VRFBs have several advantages compared to lithium batteries in this application, including a 100% discharge, the possibility to re-use the electrolyte and its non-flammable and non-explosive nature.

However, the development of VRFB technology remains largely binary. It will depend on competing technologies, with some still under R&D, comparative economics, and politics. China’s leading position in VRFBs may continue to strengthen. Large Chinese vanadium producers, such as Pangang are already expanding vanadium electrolyte production capacity, in anticipation of rising demand. With large, untapped coalstone reserves, which also could be suitable to produce electrolytes, China could be largely self-sufficient for its feedstock. Of course, other projects exist in Australia, Europe and North America, but they are usually on a smaller scale. Project Blue estimates that VRFBs accounted for about 4% of global vanadium consumption in 2022, which is forecast to increase to 16-17% in 2033, on a base scenario which assumes that VRFBs maintain a 1% battery energy storage system (BESS) market share to 2033. Under a high case, VRFB’s market share of BESS increases over the 2020s to 2%. However, under this scenario, supply would struggle to keep pace and prices would rise steeply. With feedstock accounting for 50-60% of the VRBF’s costs, rising electrolyte prices could make the economics of the VRFB model less attractive. In a low case, competing technologies force the VRFB market share to fall back over the 2020s. 

Sources of future revenues for niobium are different. Nano-crystalline devices are a new generation of advanced niobium containing soft magnetic alloys used to control and convert electricity. Being smaller and more energy efficient than ferrite, they will benefit from the fast expansion of electric vehicles (EVs).  Another source of future revenue for niobium is the magnetic resonance imaging (MRI) market. At the heart of an MRI machine is a system of magnets. These are usually electromagnets made from strands of copper-coated niobium-titanium (NbTi) alloy. When cooled at a very low temperature, NbTi becomes a superconductor. The MRI market is forecast to grow at a high single-digit % CAGR for the rest of the decade.

The world’s largest niobium producer, Brazil’s CBMM, is expanding its niobium oxide production, to produce batteries’ anodes and cathodes. A joint development programme with Toshiba aims at producing a niobium-titanium-oxide battery anode although niobium-coated technology can also be used for cathodes. CBMM also acquired a 13% stake in Echion Technologies, a spin-off of Cambridge University (UK), for the development of advanced materials for lithium-ion batteries.

CBMM expects that 25% of its revenues will come from non-steel sales in 2030, the bulk of it being niobium metal and battery-grade oxide. Project Blue forecasts are more conservative, as the development of niobium batteries is still at an early stage, and therefore, bears more uncertainty than VRFBs. Project Blue’s base case forecasts show that by the end of the decade, oxide-based applications will account for 11-12% of the niobium market, excluding nano-crystalline which is produced using ferroniobium.