A red hot steel beam is shaped by machine as it moves along a rolling conveyor inside the ArcelorMittal HighVeld Steel & Vanadium Corp. plant in eMalahleni, South Africa. (Photographer: Waldo Swiegers/Bloomberg)

How Strong Steel Might Kill Off the Next Big Battery Metal Story

(Bloomberg) -- Vanadium’s astonishing rally is threatening its chances of being the next big battery metal.

Prices have surged more than 800 percent in about two years, driven by Chinese demand for stronger steel. There’s also been speculation that vanadium will become a key metal for the battery industry. But with prices now at extreme levels, it could be too expensive, according to Evraz Plc, a Russian steelmaker and one of the top producers of vanadium.

How Strong Steel Might Kill Off the Next Big Battery Metal Story

Steelmaking accounts for almost all demand for vanadium, an obscure silvery-grey metal thought to have been used in steel as far back as the Middle Ages. China, which makes half the world’s steel, is set to implement new rules next month requiring steel used in construction to be stronger. And that means using more vanadium.

That could be a big blow to the nascent vanadium battery industry. There’s been anticipation that vanadium flow batteries -- the size of shipping containers -- could be used to store power and help smooth out peaks and troughs in electricity supply. But that’s unfeasible with prices this high, according to Evraz, the Russian steelmaker that’s the biggest producer of vanadium outside of China.

“Vandadium batteries do have benefits, but for market purposes the current price is too high,” said Alexander Erenburg, head of vanadium at Evraz, which counts billionaire Roman Abramovich as its largest shareholder. “I don’t believe they will take off.”

Too Expensive

Ferrovanadium, the standard traded product, needs to be priced at about $30 a kilogram for usage in flow batteries to make sense, Erenburg said. The current price is about $115.

The rally could still have further to go.

“How far it can go, I don’t want to speculate about that,” Erenburg said. “Potentially it can go higher. The ceiling is not there.”

©2018 Bloomberg L.P.