While being optimistic, Project Blue exercises caution in terms of any expectation of a sharp increase in market growth.

Scandium’s critical material label comes mainly from supply risk concerns.  Most of the world’s scandium comes from the by-product waste streams of metals like cobalt, nickel, uranium, and especially titanium.  China dominates feedstock production and is also the world’s leading producer of refined scandium oxides and metal, based both on domestically produced feedstocks and materials imported from abroad.  While scandium production in the ROW is dwarfed by China, a number of proposed mine and refinery projects are hoping to diversify the global production landscape.  Last year, Rio Tinto started production in Canada, in a move which has the potential to reshape the market. 

The scandium market is small compared to most commodities – totalling less than 40t in 2022.  However, global consumption has increased considerably over the last ten years driven by its use in solid oxide fuel cells (SOFCs) and aluminium alloys.  The outlook is also very positive.  Project Blue expects the scandium market to grow at a CAGR of 6.4% over the period to 2027 and notes that longer-term, there may be even more upside if scandium finds application in the electric vehicle and/or hydrogen economies.

However, while being very optimistic about scandium’s prospects, Project Blue exercises caution in terms of any expectation of a sharp increase in market growth.  The prospect of a “scandium boom” being “just around the corner” is not new – and people have been talking up its growth potential for many years.  Whether “supply creates demand” or “demand creates supply” remains a contested issue in mainstream economics.  The debate works well when applied to the scandium market.  Some believe that additional (and lower cost) supply of scandium is required to create demand, whereas others contend that more demand for scandium is required to incentivise supply.

The by-product nature of scandium must be factored in here.  It is demand for titanium, REEs, nickel and other metals which generates a supply of scandium feedstock in the first place.  Refined processing capacity to recover scandium is a secondary step.   As noted above, it is China that dominates refined capacity but new projects (like Rio’s) have the potential to diversify supply away from China to some extent.  This could have the combined effect of lowering prices and reducing the risk for consumers of using a metal dominated by Chinese and Russian production.  

Over the short-to-medium term, it will be important to monitor the impact of new production from Rio Tinto on the market.  How will new supply from a Western, blue chip miner impact market dynamics, prices, and consumer appetite for scandium?  Depending on the answers to this question, over the longer term there may be considerable upside potential for scandium compared to our base case.