The global niobium industry has witnessed substantial alterations to its corporate landscape over the past few years, Roskill explains. As recently as 2011, the Brazilian niobium and ferroniobium giant CBMM (pictured) was wholly owned by the Salles family, with Anglo American providing the balance of the country’s ferroniobium output. The only other significant ferroniobium producer, Canada’s Niobec, was in the hands of the Toronto-listed miner IAMGOLD.
Things now look very different Roskill states. During 2011, CBMM sold 30% of itself for $3.9 billion to two consortia of Asian investors, one Japanese/Korean, the other Chinese. Both groups include steelmakers (i.e. CBMM’s own clients). In 2015, IAMGOLD sold Niobec to the Toronto-based private-equity firm Magris Resources, which is backed to a large extent by investors in Singapore and Hong Kong. That deal was worth $0.5 billion. This was followed by the conclusion in 2016, of China Molybdenum’s (CMOC) acquisition of Anglo American’s Brazilian niobium and phosphate businesses for a total of $1.7 billion, an earnings multiple that surprised most in the industry. With this, CMOC gained the Catalão operation, the second-largest producer of ferroniobium in the world.
These changes have been set against the backdrop of a relatively stable niobium market. Since 2011, ferroniobium supply has remained with the narrow range of 53-54,000 t/y Nb, with the exception of 2013. Brazil and Canada continue to dominate mine and ferroniobium supply with the rest of the world accounting for only 2% of ferroniobium production.
For a metal that many people have never even heard of, upwards of $5 billion of investment in less than five years is pretty impressive. Equally remarkable is that, from a standing start, Asian investors have gained control of, Roskill estimates, at least a third of global ferroniobium production capacity.
So why are people still investing very large sums of money in the industry, when growth prospects for steel are not spectacular and even the current ferroniobium production capacity is far bigger than demand and will remain so?
The reasons why the three ferroniobium producers divested are fairly clear. CBMM certainly didn’t need the money; it wanted to lock-in some of its largest customers. IAMGOLD had acquired Niobec as part of a purchase of another gold miner and did not see it as a core business. It definitely needed the money to plug a gaping gold-related hole in its balance sheet. Anglo American simply wanted to get rid of non-core businesses, not to mention a large pile of debt.
Why other companies would have wanted to invest in this industry is somewhat less obvious. Demand for ferroniobium surged during the 2000s, more than doubling during the first half of the decade and continuing to grow until the global financial crisis kicked in. There are two main reasons for the growth. One is that consumers gained better understanding of the benefits of using ferroniobium in steel. The addition of niobium at the rate of fractions of a per cent by weight, and at a cost of only a few dollars per tonne of steel, greatly increases the strength of steel. This is of benefit in structural applications, where large structures can be built using less steel, and in automotive applications, where benefits come from weight savings and thus increases in fuel efficiencies.
The other driver was the explosive growth in global steel production, particularly in China. Related to this and applying mainly to CMOC, is the desire on the part of China to gain greater influence over its raw material supply chains (and CMOC is part-controlled by the Chinese government).
The global financial crisis caused a huge fall in demand for steel and for ferroniobium but it recovered quickly and in recent years has remained within a fairly narrow range close to the peak level of the late 2000s. The outlook for global steel production now seems starkly different to what it was just a few years ago, especially in China. Overall growth in steel production is not going to be the main future driver of demand for ferroniobium, Roskill contends.
Although the ferroniobium market is already comfortably met by existing (huge) surplus production capacity, and will remain so, new producers are trying to enter the market. There are several projects in the pipeline and at least two of them are at, or near, the financing stage. They would not be large in tonnage terms by CBMM standards but is there even a place for them? It all boils down to the market’s desire for diversity of supply of what is, essentially, a commodity product and made using similar and well-understood processes by existing producers; processes that would also be used by any new producer. For any project these days, securing offtake agreements is key to securing project finance, particularly debt finance (which makes getting equity finance rather easier, too).
On the non-steel supply side, in 2008, Peruvian tin miner Minsur purchased Mineração Taboca and its Pitinga tin mine from Paranapanema for $0.47 billion. Taboca’s main product is a FeNb-Ta alloy (40% Nb, 7% Ta min), which is exported mostly to processors in China, USA, Estonia and Germany. In 2011, US-based Molycorp acquired the Sillamäe plant in Estonia, which produces a variety of niobium and tantalum products. Following Molycorp’s exit from Chapter 11 bankruptcy in August 2016 under the name Neo Performance Materials, Molycorp Silmet was renamed NPM Silmet. Also in 2011, Uralkali gained the loparite mining operation at Lovozero and the niobium and tantalum oxide producer, Solikamsk (SMW), incorporating them into the same corporate group.
Consumption of niobium in non-steel market segments, such as high performance alloys, remains concentrated in the USA, Western Europe and Japan. These are used in aerospace and land-based power generation. These markets show trends that generally mirror overall economic trends very closely and future growth in demand for niobium will reflect that of the global economy. Consumption of niobium in non-steel applications in 2016 is estimated to have amounted to roughly one-tenth of total consumption.
The niobium industry in its current form is really only a few decades old. It has seen big changes over the last decade or so and there may well be more to come.
Roskill has released its new niobium market report with forecasts out to 2026. Niobium: Global Industry, Markets & Outlook to 2026, 13th Edition is now available from Roskill Information Services.