Japan, Korea Firms Take $1.95 Billion Rare-Metal Stake (US)

Five Japanese steelmakers, South Korea’s Posco and trading company Itochu Corp. have invested in this iron ore mine in Brazil. (Credit Photo @ AFP)

Japan and South Korea have joined forces to secure supplies of a rare metal crucial to high-grade steel production, investing $1.8bn in a Brazilian mining group that is the largest producer of niobium. Competition for niobium, which is used to increase the hardness of steel alloys, increased last year when East China Mineral Exploration and Development Bureau, a Chinese state-owned miner, struck a deal to buy a controlling stake in Globe Metals & Mining, an Australia-listed group with niobium assets in Africa. China’s booming steel industry has made it the world’s top importer of niobium, leaving Japanese and Korean steelmakers wary of supply shortages that could disrupt production of the profitable high-end products in which they increasingly specialise, such as seamless pipes used in nuclear power plants and oil rigs. The steelmakers are investing in Companhia Brasileira de Metalurgia e Mineracão, which has a mine in the south-eastern Brazilian state of Minas Gerais that is the source of an estimated 60-70 per cent of global niobium supplies. The price of niobium has nearly doubled over the past decade to about $23,000 a tonne last year – a boon for CBMM and for Unocal, the US oil group that owns a large minority stake in the group, but a problem for steelmakers. According to South Korea’s National Pension Service, one of the groups that is to invest in the company, a consortium of Japanese and South Korean steelmakers and government-affiliated bodies has agreed to acquire a 15 per cent stake.Japanese steelmakers also confirmed privately that a deal had been reached, though no formal announcement has been made.Other investors include Japan’s four largest steel companies: Nippon Steel, JFE, Kobe Steel and Sumitomo Metal; Posco, the South Korean steel group; Sojitz, a Japanese trading company that is a significant importer of rare metals and rare earths; and the Japan Oil, Gas and Metals National Corporation, a Japanese state-owned importer and developer.

Source : FT

Posted in Strategy.

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