Amid the disastrous commodity downturn there is one mining product that is still thriving.
Niobium, a metal mainly mined in Brazil, is a soft, grey, ductile transition element used in the aviation and industrial pipe industries on account of its ability to produce light, yet strong, steel.
A bidding war was recently fought for ownership of a major producer of the metal and China Molybdenum Co. were the eventual winners, purchasing the niobium and phosphate facility previously owned by Anglo American Plc. The price was $1.6 billion, a staggering 60 percent over the expert consensus valuation.
Considering many metal purchasing experts have never even heard of Niobium, which is named after the Greek goddess of mourning, the market is enjoying a meteoric rise and may be worth up to four billion dollars annually.
“I must confess I had been ignorant of the element even though I’ve been trading metals for over 30 years,” said Derrick Noble, Vice President of Corporate trading at Fidea Group. “We could describe Niobium as a particularly niche metal. It was like going back to school for me as I definitely had to do some serious research to get up to speed.”
The lack of liquidity in the Niobium market means that companies can’t even report a solid price for the metal in open trade.
That doesn’t deter buyers, however, with the metal averaging approximately $45 per kg in 2015 as opposed to copper which fetches less than $6 for the same weight. This price was low compared to the previous year though as decreased demand for pipelines in the hard hit oil and gas sector affected steel production. This led Anglo American to eventually sell up and pay off its debt.
A dominant player still in the game is Cia. Brasileira de Metalurgia & Mineracao (CBMM) in Brazil, undoubtedly the biggest producer of Niobium. Their size allows them to have a major influence on supply and prices, giving them a distinct advantage in the market.
The absence of competitors to CBMM, resulting in only three major mines producing the metal, means that the business has been attracting more and more interested parties.
Derrick Noble added, “This metal has some alluring market properties being mined by so few companies. Even then we are really only talking about the Moreira Salles family who own CBMM. We are seeing a buyer frenzy at the moment, a race to snap up the smaller producers of Niobium. Look for more takeover bids very soon.”
