Vanadium: Largo Resources 2020 guidance remains unchanged

Largo Resources announced production of 2,562t of V2O5 for Q2 2020 with a V2O5 recovery rate of 80.8%. In Q4 2020, Largo expects to perform planned upgrades and improvements to the kiln and the cooler, which are expected to increase the nameplate capacity from 1.0kt to 1.1kt of V2O5 per month. The total capex for this project is approximately US$1.3M and Largo Resources does not expect this work to impact production in Q4 2020.

The company continues to maintain its 2020 guidance on a ‘business as usual’ basis and has not experienced any significant impacts to operations or to the shipment of material as a result of the global COVID-19 pandemic. Largo completed its first independent vanadium shipment on 14 May.

Roskill View

Largo Resources’ unchanged 2020 production guidance ranges 11,750-12,250t V2O5, in line with Roskill’s forecasts. In 2021, Roskill forecast an increase in production of V2O5, although the increase could be delayed as the kiln improvement has been pushed back to Q4 2020, rather than the original H1 plan.

Globally, incremental V2O5 supply will be very limited in 2020, with Chinese slag producers running close to capacity. In 2021, some new capacity will come from Bushveld Minerals and, as mentioned above, from Largo’s kiln improvement. On the demand side, the de-synchronisation between China and the rest of the world in terms of impacts on economic activity during the COVID-19 pandemic has caused steel production to diverge. Roskill expects that China’s steel production will be flat YoY with a potential upside, supported by domestic stimuli and infrastructure spending. In the rest of the world, steel production is forecast to fall sharply.

Vanadium is used mostly in rebar steels, with China accounting for over half of global vanadium consumption. Unsurprisingly, the V2O5 price is showing a wider than usual gap between China and Europe. Roskill expects that Chinese prices will remain steady with strong demand, while some price recovery should take place in Europe later this year and narrow the gap, assuming a rebound in steel production.

Roskill’s NEW Vanadium: Outlook to 2029, 18th Edition report was published in June 2020 and provides detailed analysis on supply, demand, trade, prices, cost curves and forecasts. The report discusses key aspects impacting the industry, including substitution risk from niobium in rebar and the outlook potential of vanadium redox batteries. For more information or to subscribe, click here.

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This article was written by Erik Sardain. Please get in touch below if you wish to discuss further:

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