INTERVIEW: ‘Unsustainably Low’ Vanadium Prices Will Rebound in Q2 2020, Largo Chief Says

Vanadium prices are unsustainably low and sentiment and prices should improve as evidenced by the recent ferro-vanadium price increase in Europe, Largo Resources chief executive officer Paulo Misk mentioned.

replacing Mark Smith, who had held the position since 2015. Misk has been with Largo Resources since 2014. Prior to joining the Toronto-based producer, Misk worked at Anglo American as its niobium and phosphates operational director.
“I anticipate prices increasing during the second quarter of the year,” Misk said in an interview on the sidelines of the International Ferro-alloys conference in Budapest on November 17-19. “We base that on the current fundamentals and particularly from increased demand in the Chinese vanadium market.”
“This does not mean we will see volatility in vanadium prices as seen in 2018. The price trend I anticipate for next year, and this is based on what we see in the market today, should be between approximately $7.50 and $8 per lb, which is not much different from the historical average vanadium price,” he said.
“If you look at the impact of the new rebar standards increasing demand in China and from the gradual implementation of vanadium redox batteries (VFRBs), that range should be plausible for vanadium prices,” he added.
The ferro-vanadium basis 78% V min, 1st grade, ddp Western Europe assessment was stable week on week at $23-23.80 per kg on Friday November 29, but up from $23-23.75 per kg during the conference.
Recently the assessed the vanadium pentoxide 98% V2O5 min, in-whs Rotterdam price was at $4.80-6 per lb on November 29, up from $4.80-5.75 in the previous week.
Ferro-vanadium and V2O5 prices in Europe have plummeted by more than 80% since the beginning of the year. Both prices hit all-time highs in the second half of 2018 partly because of an anticipated increase in demand from the implementation of new rebar manufacturing standards in China from November 1 last year.
The policy requires Chinese steel mills to eliminate the original 335 megapascals (MPa)-tensile strength rebar and start producing 600MPa-tensile strength rebar, which has better earthquake resistance. In doing so, the policy encourages domestic Chinese mills to utilize greater volumes of alloys to meet the revised strength requirements.
But prices began to drop sharply late last year when market participants realized enforcement of the revised rebar policy was not as stringent as had been expected and because steel mills had increased their use of ferro-niobium to reduce their consumption of more costly vanadium.

Substitution threat fading

Despite greater vanadium consumption in China over the past two years, the current price environment is largely attributable to high iron ore prices and a dramatic increase in Chinese V2O5 slag production earlier in 2019 from vanadium-titano magnetite (VTM) deposits, Misk noted.
“The increase in Chinese vanadium supply, combined with greater than anticipated niobium substitution put vanadium prices under pressure throughout 2019,” he said. “But going forward, vanadium market sentiment is expected to improve following current shutdowns from high cost stone coal producers and a decline in V2O5 slag production.”
As well, alloy substitution in rebar will go in vanadium’s favor on the back of lower vanadium prices, Misk added.
Demand for vanadium products has been weakened this year by domestic mills’ growing preference for ferro-niobium due to its relative price stability and competitiveness against vanadium products.
Ferro-niobium deals are typically agreed on a multi-year, fixed-price basis, rather than being tagged to third-party spot price assessments that fluctuate according to market fundamentals.
China’s imports of ferro-niobium soared by 86.9% year on year to 26,550 tonnes in the first half of 2019, from 14,204 tonnes in the corresponding period of 2018.
But the substitution threat has been fading with shipments slowing down and China importing around 2,550 tonnes of ferro-niobium in August, down from about 2,937 tonnes in July, marking a drop for the fourth consecutive month, according to official but unconfirmed data showed.

New sales model

Meanwhile, the offtake agreement for Glencore to market the V2O5 produced by Largo, originally signed in May 2008, will not be renewed when it expires on April 30, 2020.
Instead, Largo is developing its own internal sales and trading business, headed by Paul Vollant.
”Our goal is to minimize the volatility associated with the vanadium market through dealing directly with customers. Our proposition for doing our own sales is to have long-term relationships with our customers and to ensure that they will have access to the vanadium that they need.”
”For Largo, that partnership means if our customers prefer long term contracts, we are able to accommodate this and if they want a fixed price we can offer that as well. This is the type of relationship is something we do not see in the market today and we as Largo think we can propose a better solution,” Misk said.
Largo’s board has also approved the construction of a ferro-vanadium plant at its Maracás Menchen Mine in Brazil and anticipates it will be up and running by the beginning of 2021.
”We will then be able to offer both high purity products as well be able to convert our V2O5 to ferro-vanadium on site offering flexibility for the company,” Misk said.