Heightened global demand for vanadium, especially from China, is prompting the global steel industry to aggressively seek out new supplies, especially in the US where this 21st century metal is becoming increasingly indispensible. Even US President Obama is championing this metal's promise for green energy applications.
Currently the US imports virtually all of its vanadium needs, which is critical for domestic production of high quality steel including specialty steels for aerospace and military applications, while it also enables the mass storage of renewable energy and powers the next-generation of lithium batteries.
That's why the investment industry is backing American Vanadium Corp. (TSX.V: AVC), which is developing a vanadium resource in mining-friendly Nevada. Named the Gibellini Project, it is on-track to become the only vanadium mine in the US and is expected to begin operating as early as the end of 2012.
Such a development will be particularly timely, according to Jon Hykawy, head of global research for the Toronto-based investment bank, Byron Capital Markets. He says that market forces are set to make vanadium one of the most important commodities of the 21st century.
"Without doubt, vanadium is growing into one of the most important metals about which no one has ever heard," he says.
"Soon, everyone is likely to become a lot more knowledgeable about vanadium, and investors can benefit by staying ahead of the curve and owning companies that can benefit from rapidly increasing vanadium demand."
Vanadium's increasing importance to industry and growing cachet among investors is largely due to the fact that it has established itself as a critical element for renewable energy storage. It's also integral to the adoption of high performance lithium vanadium batteries for the automotive and mobile power sectors.
That said, vanadium's traditional usage as a metal that strengthens and hardens alloys like steel is also fuelling a surge in demand, especially among emerging economic superpowers like China. Already, the steel industry consumes about 92% of the world's annual vanadium supply.
In fact, the world's steel industry is already currently constrained by the fact that there simply is not enough vanadium to meet existing demand. In particular, new building structures are reliant on the metal's strengthening properties to safeguard against dangers such as earthquakes.
However, the majority of world's vanadium is produced in only three countries - Russia, China and South Africa. And if a booming steel industry is increasingly forced to compete for supplies with a fast-emerging global industry for renewable green energy, especially in the US, then there will be an even greater need to bring domestic American supplies on-stream.
American Vanadium's president Bill Radvak says his company's Gibellini mine should help to remedy a growing global shortage of vanadium by providing both vanadium pentoxide for the steel industry and vanadium electrolyte for green energy applications.
"In particular, the US steel industry is increasingly interested in locking-in cost-efficient long term supplies, especially as they're showing growing concerns about security of supplies," he says.
"This is especially the case with the recent indications that China will dramatically increase their vanadium needs for steel, so much so that China may no longer be an exporter and instead may become an importer," Radvak adds. "Not only will this scenario put a major squeeze on global supplies, but it will also likely increase the price of the metal."
Radvak says the prospect of the US supply chain for vanadium being at risk has prompted the government to show a keen interest in his company's quest to become a reliable domestic producer. Especially since the Gibellini Project is also expected to have a long mine life, with a low-cost/low-risk profile.
Paramount to America's needs to lock-in future vanadium supplies in the metal's application for renewable energy. In fact, vanadium has been hailed by the Obama Administration as a game-changing future driver of next-generation mass storage batteries, which are integral to the US economy's "green revolution."
Large-scale adoption of clean, renewable energy is dependent on having grid level energy storage solutions and the US government is already funding such initiatives. In a recent speech, President Obama acknowledged vanadium flow batteries as an important part of improving energy efficiency by facilitating clean energy storage for the first time ever.
Radvak says the Gibellini mine promises to be one of the lowest cost primary vanadium operations in the world as it will use a process called heap leaching. And consequently he expects his company to have the unique ability to produce vanadium electrolyte cheaper than anywhere else in the world.
Like the steel industry, the manufacturers of vanadium redox flow batteries (VRBs) are also especially keen on the prospect of lower purchase costs from the Gibellini mine than from overseas suppliers. Vanadium currently trades at around $7.50 a pound.
"Vanadium is our largest single item cost," says Jeff Pierson, senior vice president of Prudent Energy Corp., which is an American manufacturer of VRBs.
"While Prudent is able to secure relatively low cost vanadium from a number of sources, an even lower price of vanadium would certainly have a material impact on the overall costs of our VRB energy storage systems."
Around the globe a handful of other small vanadium developers are also hard at work trying to commercialize their own discoveries. However, American Vanadium appears to be ahead of the pack and is expected to be the first to commercial its increasingly strategic domestic resources. And the company's plans to be a prolific, low cost operator should ensure a very bright future, according to Byron Capital Market's Hykawy.
William Mbaho is a reporter with www.BNWnews.ca, and is a former business reporter with which Canada's national daily newspaper, the Globe and Mail. He's also an ex-reporter for one of England's leading daily newspapers, the Independent, and has also been a business reporter for Canada's CBC Television. The principals of www.BNWnews.ca do not directly or indirectly own shares in any of the companies mentioned in this article