RE:The big price gap between Euro and Chinese VFirst, thanks to kha, island, clipper ( and various others) for their attention and contribution to the V matter, Largo in particular.
This whole V China vs Europe pricing is indeed quite puzzling. I think we all, by now, know that the supply and demand equation is swaying on more demand –for- the same supply. It also appears that V supply is fought between two main providers China and Glencore. It also feels like one is going into the other’s turf and NOT vice versa ( ie., China into G’s).
Why would Glencore not want to fend off China’s entrenchment into the European market?? I surmise that such is a reasonable expectation … whether they, in fact, can is another question…. Regardless, would lower Glencore-induced pricing not assist in such a wanted outcome?... In maintaining a Glencore V supply dominance – at least in – Europe?
Now, for how long can you keep prices low in a demand climate that’s ever increasing? In an offtake market that is basically limited to constancy relative to the increasing demand? Well such will depend, at least in part, on the stockpile at hand, increases in offtake supply and perhaps Glencore’s own production push. Glencore can continue to stab their feet (profit cannibalize) to maintain a competitive stance / fending stance – BUT – for how long must they do this for and for how long can they do this? Are they serving the same client base or has their take on the European V-pie decreased of recent? Is it fear of the future take or a new reality setting in?
If Glencore loses on the ‘market grab’ then they will also lose the potential additional V need for the future uses (I will call it new-infrastructure steel and … perhaps the battery realm?)… Will Glencore want Largo’s near-term extra 25% production? Why not – IMO, the extra production is a direct reflection of the demand consequence… the demand reality. Is the increased Largo production ONLY Largo’s ? I don’t have a clue – but- for now highly likely…. Is that bad for Largo ? no, not at all and I would even stretch to say that Largo will ask for a bigger cut in this ‘over-and-above’ surplus production… As a minimum, it will be a L-G win-win.
The problem is that Glencore cannot continue to stump the prices to keep and perhaps increase their current stablished base… How will Glencore supply this existing or increased client base once the Largo contract comes to an end, next year? Glencore better be nice to Largo starting now so next year looks rosier for them…no? To that end, if Glencore still wants to be a front runner in the V space, they will obviously need to negotiate in a ‘different’ more Largo-considerate fashion going forward… Will Largo want to put all their V eggs in the Glencore basket? Likely not …why would they! Unless there is something that escapes us all and that makes incredible sense, beyond our understanding, for Largo.
If not all, Glencore may keep a good chunk of the V in a new Largo-favorable negotiated arrangement. The rest, likely much more that 50% (just a crazy guess) , would be Largo’s to keep and get full value for -as well as - any additional production that Largo may further enable.
Perhaps the ideal scenario, to keep things simple, is to fully rid of any Glencore link completely – BUT – such may not be ideal either. Lest not forget Glencore’s tentacles are deep-rooted and ‘that’ counts in a merciless private, behind closed doors V trading agora.
I suspect that the best of both worlds may be to have a hybrid off-take approach ; in other words a % offtake with Glencore and with the rest Largo would be able to have other offtakes and do their own direct selling – assuming that – they have the capability to do so.
For the record I too have bought of late for both fundamental and tech analysis reasons (@ 1.7). This company (Largo) has so much to gain going forward regardless of the current competitive dynamics – which are – giving us all an absurdly twisted view of the real supply-demand perspective of V… I am mentioning this because I believe in their path even more so now than I did when I bought into Largo at a higher SP. Remember – Largo’s fundamentals have only improved and so has their vantage point and the clock is ticking towards near term contractual liberation.
All Largo has to do is keep on increasing capacity and thoroughly assess their core-adjacent competencies to truly and realistically ensure that they can make the most out of what is now a severely constrained contractual arrangement…
Anyway – my 1 cent on the matter… GL 2Longs