Vanadium: Largo Resources announces expiration of its vanadium off-take agreement

Largo Resources’ off-take agreement with Glencore International expired as of May 2020.  Largo’s relationship with Glencore helped the company move from a start-up project in Brazil to an established vanadium producer amidst a volatile period for the vanadium market. The offtake deal helped Largo to obtain debt funding for project construction, and provided the company with security during its ramp-up phase. 

Thus far, preparations for life without Glencore have seen Largo assemble a new sales team, launch two new brands (VPURE™ and VPURE+™) for its vanadium pentoxide products, and announce plans for the construction of new plants at the Maracás Menchen mine, subject to available liquidity. These include both a vanadium trioxide plant and a ferrovanadium conversion plant, with construction and commissioning of the latter expected to conclude in Q1 2021, at which point Largo anticipates introducing its own ferrovanadium product (VPURE Ferrovanadium) to the market.

Roskill View

Largo’s strategy appears to focus both on high-purity vanadium chemicals targeted at aerospace and chemical sectors, and ferrovanadium targeted at HSLA producers. Largo’s plans look set to make both markets increasingly competitive in North America. Last year, US Vanadium acquired Evraz’s Hot Springs facility in Arkansas which produces high-purity vanadium oxides and chemicals, while AMG Vanadium announced capacity expansion plans that will result in higher output of ferrovanadium.  

While Largo’s operation in Brazil remains largely unaffected by COVID-19, in South Africa, Bushveld Minerals and Glencore have started to ramp up vanadium production again, following the suspension of operations during the country’s lockdown which started in March. Roskill estimates that South Africa’s six-week lockdown will remove around 1.2kt of vanadium supply from the global market.

In China, the government is turning to heavy stimulus spending to boost infrastructure activity and the domestic economy. Roskill forecasts that China’s rebar production will be flat in 2020, in spite of COVID-19, as infrastructure spending will support steel demand. Chinese rebar consumption is up 5% year-on-year, as demand remains strong and any further increase in supply pressure will be limited as steel mills will reach full production capacity in May. China was a net importer of vanadium pentoxide during the month of March, as imports were the preferred source of feedstock for Chinese alloy producers, as pressure on margins continued. 

As the only unaffected significant non-Chinese producer in the tightening market during the COVID-19 outbreak, Largo may be well placed to benefit.

Roskill’s NEW Vanadium: Outlook to 2029, 18th Edition report will be published in June 2020 and provide 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 Ramsey Yavuz. Please get in touch below if you wish to discuss further:

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