By Desmond McMahon-Exclusive to Vanadium Investing NewsWith 80 percent of the world's vanadium used in steel, steel production obviously plays a key roll in determining demand for the mineral. And while China's steel market has gotten off to a fast start in 2010, Luo Bingsheng, vice-chairman of the China Iron and Steel Association (CISA), isn't overly optimistic about China's domestic market for the remainder of this year. Bingsheng raised his concerns at the 2010 China Steel Industry Development last week with the CISA in the middle of China's annual steel price negotiations. He said increased production combined with falling exports and stiffer international competition in China's own domestic market has lead to surpluses and a slow down in steel production. In 2009, China's crude steel output grew 13.5 percent to 567.84 million tons and production levels continued to soar this year. Chinese steel mills had produced 128 million tons of crude steel by the end of February, up 25.4 percent over the same period in 2009. But Bingsheng points to forecasts that show China's overall crude steel output will only be up 16.1 percent year-on-year by the end of 2010, which is down significantly from that early pace. Bingsheng also attributes part of the slow down to the increasing prices of coal, coke, electricity, water and iron ore. He says steel prices dropped by 22 percent from last year while costs increased by 28.46 percent. With numbers like that it's not hard to see how the economy is squeezing steel maker's profit margins. But despite these warnings from the steel industry, analysts seem confident global demand for vanadium will continue to rise and that with vanadium's already tight supply picture and the growing trend towards micro-alloy steel and vanadium's performance in that area prices could climb. Analysts identified another vanadium-based product under development that could further increase demand for this rare metal. Beyond new uses for vanadium-based steel products, vanadium has interesting energy-storage properties and is being used in a new generation of batteries for electric cars and energy storage systems attached to wind or solar projects to hold power produced during peak production periods until the power grid requires the electricity.