Japan, Korea Group to Get 15% Share in CBMM

Nippon Steel, JFE Steel, Sojitz Corporation and Japan Oil, Gas and Metals National Corporation (JOGMEC) announced on Friday they, POSCO and National Pension Service (NPS) of South Korea will purchase total 15% share in Companhia Brasileira de Metalurgia e Minera??o (CBMM) of Brazil, which is world largest niobium producer. Nippon Steel, JFE Steel, Sojitz and POSCO signed long term purchase contract with CBMM. The group of Japan and South Korean companies tries to establish stable procurement system for niobium, which is indispensable for high grade steel production, through the 160 billion yen of strategic investment in CBMM with overwhelming competitiveness in volume, cost and quality.

Japanese group with 4 companies and South Korean group with 2 companies establish special purpose company each to purchase CBMM share 10% for Japanese group and 5% for South Korean group from CBMM’s owner family. Japanese group pay US$ 1.3 billion and South Korean group pay US$ 650 million for the transactions. The all 6 companies have each 2.5% share in CBMM indirectly.

They reached the agreement after CBMM offered the investment as strategic partner based on the relationship with 40 years niobium trading and joint development of niobium applications. CBMM apparently tries to secure stable customers and to improve the technology level through the partnership with Japanese major steel makers, which has led niobium usage in steel industry.

Nippon Steel and JFE Steel can secure 100% requirement of niobium through the long term contract while they didn’t disclose the detail. The long term contracts including deals for Sojitz and JOGMEC will cover around 8,000 tonnes per year of Japanese ferroniobium consumption. Sojitz, which has been CBMM’s agent since 1974, tries to secure the alloy stably to supply other customers than Nippon Steel, JFE Steel and POSCO.

JOGMEC decided the investment as important part of the national security of the mineral resource for Japan. The investment is the first case for JOGMEC to invest in operating mine after the revision of the related law in 2010 while JOGMEC can invest only in exploration projects to support private companies’ mineral resource investment.

Niobium is one of rare metals and used as small amount additive to improve steel strength, toughness and heat resistance. The metal is indispensable to make high grade steel products including automotive flat steel, material for line pipe and special steel. World niobium demand increased by annualized 10% in 2002-2009 due to strong demand in China and India. Chinese import doubled in past 4 years. The demand is expected to increase more than growth rate for total steel production.

CBMM established in 1955 produced 72,000 tonnes of ferroniobium in 2010 at the site with mine and refining plant and in Araxa of Minas Gerais, Brazil. The volume represents large portion of estimated near 100,000 tonnes of world demand in ferroniobium with around 65% Nb. CBMM can keep the operation for more than 400 years based on the rich resource when the firm has almost all mining right for Brazilian niobium deposit while Brazil has largest part of known world niobium resource.