Vanadium Market Update: VRFB Strengthening Assets

Capital 10X highlights vanadium often, we think this a very undervalued commodity tying into the theme of the energy transition. In January, we’ve seen a continued increase in vanadium prices globally. Vanadium prices increased by approximately 6%, and 29% since September last year.

The rise in vanadium prices came on strong news from the vanadium energy storage industry, with a spotlight on China. Several battery and electrolyte projects greater than 100MWh were announced over the past few months; the commissioning of Dalian-based 100MW / 400MWh vanadium redox flow battery (VRFB) system was the major highlight. This is the largest project and the world, and reveals China’s keen interest in the roll out of VRFB technology.

Each 200MWh of battery capacity is approximately 2,000 mt of V2O5 equivalent or 1% of production. 2023 estimates are as high as 2 GWh of total new VRFB projects, representing approximately 10% of global vanadium production and more than double the total installed capacity since the 1980s. These projections have the potential to transform the vanadium industry.

We’ve made a report about the increasing market potential for vanadium and VRFBs see our video summary:

Read the full report here

Demand from other vanadium markets (e.g., aerospace, steel and chemical) have been stronger than expected, buoyed by China reopening in the aftermath of COVID-19 lockdowns and a returning construction industry. Producers like Largo Inc. and Bushveld Minerals Ltd. Announced lower than 2022 guidance production, while large producers in China are reducing output in the early months of the year.

Let’s take a look at the only ETF-structured asset for vanadium, Largo Physical Vanadium Corp (LPV) (TSX: VAND), for an idea of the leverage investors can receive from dipping the toe in the industry.

LPV net assets are over 90% held in physical vanadium product and near-term delivery commitments. LPV launched in September 2022, which was a bright point for the company – coinciding with a period of lower vanadium prices, which enabled LPV to purchase vanadium units at favorable market conditions. Their NAV is at C$2.47/share, or 24% above their public transaction price of C$2.00/share, and 40% above the closing share price of C$1.76 per share on January 31st.

So, the NAV to share price discount offers investors a solid investment case. If LPV focuses on closing this disconnect, this would prove to be a boon to the share price, as they are highly leveraged to vanadium spot price.