Vanadium’s price is up 960% in two years, should I invest?

I recently read about vanadium, a metal that has apparently risen in price more than any others in recent years.

I’ve seen a few investment tips regarding it, but what is it, how are people investing, and how risky is doing so?

The graph shows the increase in the price per kilogram of vanadium over the past two years

They can also be charged and discharged simultaneously making it highly suitable for large-scale storage from renewable sources, such as solar and wind, when connected to an electricity grid. 

The main downside is low energy density which means comparatively large installations are needed. This can be costly.

Simon Moores, of consultancy Benchmark Mineral Intelligence, said: ‘If a vanadium battery producer steps forward with bold plans to produce vanadium flow at mass scale, giving the industry its Elon Musk or lithium ion moment, the potential for the technology to be the second most deployed ESS battery in the world is there.’   

But the supply of the metal has not kept up with demand. There was a 9,309 ton vanadium supply deficit in 2017 and this is expected to widen in the future with an expected uptick in demand for steel and battery manufacturers.

This is good news from an investor’s point of view as economics 101 teaches us that prices go up when demand exceeds supply to create a new equilibrium – and of course as prices go up, so does investors’ potential returns. 

How to invest in vanadium

As mentioned before, the most common way to invest in the vanadium is by holding shares in a publicly listed company that is involved in the production and distribution of the metal

Moore favours Advanced Metallurgical Group, commonly referred to as AGM, which is the only provider of vanadium recycling in North America.

He said: ‘It has announced plans to expand its facility in Cambridge, Ohio by the end of next year, which will see its spent catalyst recycling capacity increase by about 30 per cent.

‘The group has also entered exclusive negotiations with Criterion Catalyst and Technologies, a subsidiary of oil major Shell, for a joint venture to expand their operations, which would offer further upside to forecasts once confirmed.’ 

He added: ‘Every $1 move in the price adds approximately $1.5million to AMG’s operating profits.’  

The risks of investing in vanadium

Supporters assert that the price of the metal is preparing to go on something on a run. Vanadium is not a one trick pony. Its performance does not hinge solely on the demand for steel or the uptake of grid storage. 

What’s behind the name?

Vanadium was named after the Norse goddess of beauty and fertility Vanadís (Freyja).

This is attributed to the wide range of colors found in the mineral vanadinite, which is an important source of the metal.

The demand for the metal outstrips supply at present without factoring its application in new and expanding markets such as nanotechnology and even electric vehicles. 

However, the main risk to be aware of is vanadium, like any metal, is a commodity so its price can spike and retrace at a drop of a hat.

Commodity prices are typically driven by both demand and sentiment and the latter can change rapidly.

And if commodity prices are volatile, the share price of firms linked to them can swing about even more wildly.

Betting big on small mining companies has also dented many a portfolio in the past 

‘Investing in small mining companies which heavily rely on the fortunes of a small number of mines or obscure commodities are not for the faint hearted, as the share price can fluctuate considerably on a day-to-day basis,’ said Danny Cox of DIY investment platform Hargreaves Lansdown.

He added: ‘This is often the speculators hunting ground, where they look to make quick profits and move on, as stocks are priced based on the optimism for future production and sentiment can turn quickly in either direction. 

‘As such these are high risk and not for the average portfolio.’