(Updated March 28, 2012)
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Niobium (Nb) is a soft, rare, transition metal used in the production of high grade steel. It is an alloying agent, which when added to another material creates a material with substantial benefits. Steel containing niobium has many attractive properties making it highly desirable for use in the automotive, gas pipeline and construction industries. Steel made with niobium is stronger, lighter in weight and corrosion resistant.
The use of niobium dates back to 1925 when it was used to replace tungsten in tool steel production. By the 1930s, niobium was being used to prevent corrosion in stainless steels. With the primary production of niobium, it became a key element in the development of modern engineering materials and its usage has steadily increased with further advances in the metallurgical field.
Niobium in the form of standard grade ferroniobium, which represents over 90% of niobium production, is a member of the group of Vanadium transition elements. It is characterized by high melting and boiling points. Despite presenting a high melting point in elemental form (2,468 8C), it has a low density in comparison to other refractory metals. Furthermore, it is corrosion resistant and exhibits superconductivity properties. Niobium chemical properties are very similar to those of Tantalum.
Niobium is found primarily in Brazil and Canada, which account for about 99% of total reported niobium production, and in Australia. The United States Geological Survey estimates world reserves at 2.7 mm MT of contained niobium.
Niobium occurs in the minerals pyrochlore and columbite, which contain niobium and tantalum in varying proportions. The mineral pyrochlore is mined primarily for its niobium content. Columbite is mined primarily for tantalum with niobium extracted as a biproduct. Roskill estimates that approximately 97% of niobium is found in the mineral pyrochlore.
Pyrochlore ores are mined using two main types of mining methods, either in isolation or as a combination:
Open-pit is the prevalent method in Brazil while underground mining is used at the Niobec mine in Canada. However, based on the results of the prefeasibility study, IAMGOLD will be proceeding with the block-caving model for future expansion.
After the ore is mined it is finely ground and beneficiated (separation process) by flotation and high-intensity magnetic separation to remove iron minerals. In Canada, nitric acid can be used to remove apatite, and in Brazil a chloride leach process is used to reduce the barium, phosphorus and sulphur content. The end result of this physical processing is a pyrochlore concentrate grading 55-60% Nb2O5. Most pyrochlore concentrates, however, are converted into a standard-grade ferroniobium for use in applications where the retained impurities can be tolerated. For applications requiring higher purity levels, further processing is required to yield purity levels of ~99% such as the levels found in niobium oxides and vacuum-grade ferroniobium.
Source: Roskill Report on The Economics of Niobium, 11th Edition ("Roskill")
Global demand for niobium has grown at a compound annual growth rate of 10% from 2000 to 2010. Growth is being driven by two key factors:
1. Robust demand for steel, particularly among the BRIC countries
Steel production grew 14% in 2010 to 1,414 million tonnes and is expected to rise a further 4% in 2011. More specifically, the automobile, construction and oil & gas sectors, which are the largest consumers of ferroniobium, tend to be highly correlated to economic growth, and as such will have the greatest impact on demand for niobium.
Strong GDP growth of the BRIC countries is fuelling higher demand for steel production. Global GDP increased by 5.1% in 2010 largely due to strong performance by the BRIC economies which grew 8.8% in 2010, particularly China which grew 10.3%. The current GDP growth outlook for 2011 and 2012 shows a similar trend with the BRIC economies growing at ~8% - China at 10% - thus propelling overall global growth of ~5%. The last decade saw the BRICs make their mark on the global economic landscape by accounting for over a third of world GDP growth and, based on purchasing power, growing from one-sixth of the world economy to almost a quarter. Goldman Sachs envisages that the BRICs, as an aggregate, will overtake the U.S. economy by 2018. By 2020, the BRICs are expected to contribute about 49.0% of global GDP growth and to account for a third of the global economy, based on purchasing power. Source: A positive global economic outlook is confirmation of strong global industrial demand, which bodes well for the steel sector. The overall global growth in steel production will continue to significantly influence demand for niobium.
Ferroniobium Consumption and Steel Production, 2000-2010
Source: Roskill, World Steel Association
2. Growth in the amount of niobium being used to produce an increasingly higher grade of steel.
As the requirements by end users for higher quality steel products increase, steel mills have had to increase their usage intensity of niobium to produce steel capable of meeting higher standards and specifications. In 2000, 40 grams of ferroniobium were added per tonne to produce high-grade steel. By 2008, 63 grams per tonne were being added. Given that niobium represents a very small percentage of steel making total cost but adds significant value by improving its characteristics, notably strength, durability, weight and flexibility amongst others, it is expected that its usage intensity will continue to increase across all end-user segments.
The steady increase in demand for niobium is expected to persist in the near and longer term as the emerging markets continue to grow and applications for higher quality steels are developed. Taking into account growing steel production and increasing intensity levels, it is expected that world ferroniobium consumption will increase by ~11% from ~78,100 t in 2010 to ~86,000 t in 2011.
The largest consumers of niobium are China, North America and Europe. China is the worldís fastest-growing market for niobium, accounting for 25% of total consumption in 2010. This reflects the size of its steel industry and the rapid rate of expansion in output in recent years. China is the worldís leading stainless steel producer, with its share of world production growing from 1-2% in the 1990s to 36.7% 1 in 2010. China is also a major and fast growing producer of alloy steels, including HSLA steels.
1 International Stainless Steel Forum. Includes stainless and heat resistant steel.
The construction, automotive and oil & gas sectors are expected to continue to account for the largest percentage of niobium usage. These sectors were impacted by the 2008 financial crisis but have mostly recovered and are forecast to grow at a steady rate.
Strong demand will continue to be generated from increased infrastructure projects due to urbanization, population growth, and replacement of aging infrastructure. The requirement for larger, leaner and lighter structures will result in greater usage of higher quality steels containing niobium.In the construction segment, as infrastructure projects become more complex, niobium is playing a key role in the development of stronger and highly customizable steel that can significantly reduce total project costs.
In the automotive industry greater emphasis on improving fuel efficiency, reducing emissions and improving passenger safety, has led to a number of innovations in automobile parts requiring various grades of HSLA steels. Lighter weight steel reduces the weight of the car, which in turn lowers fuel consumption and reduces CO2 emissions. In 2005, it was estimated that an average mid-sized vehicle contained 9.3% of high-strength steel. Drucker Worldwide expects this percentage to increase to 14.0% for North American automobiles as car manufactures expand their use of advanced high-strength steels (AHSS). As auto sales have been steadily recovering since the financial crisis and as car ownership increases in emerging countries, the demand for niobium in the automotive industry is set to increase significantly.
Source: Roskill, Camet, IAMGOLD, World Steel Association, and CBMM website
Oil and Gas Industry
In the oil & gas industry, where the usage of HSLA is most prevalent, high oil prices have led to an increased focus on new shale plays and an uptick in the number of offshore drilling driving rigs. Deeper exploration in harsher conditions has contributed to more stringent steel performance requirements. Consumption of natural gas is expected to grow by 20% in OECD countries and 68% in non-OECD countries between 2007 and 2035 according to the U.S. Energy Information Administration (EIA). The increased consumption of natural gas is driving demand for HSLA steel. This is because the need to transport the gas long distances under high pressure requires steel pipes with greater toughness to prevent fractures. Given the recent events in Japan, it is conceivable that a number of countries will look to further diversify their sources of energy supply into natural gas.
Ranging from shipbuilding to aeronautics to medical applications, these industries are set to experience a significant increase in niobium consumption, the result of newer designs requiring stronger and lighter steel or specialty alloy products to meet higher quality and technological innovative standards.
Currently, the niobium industry is concentrated both in terms of mineral source and number of industry players. Virtually all global niobium supply is derived from the mineral pyrochlore with three significant producers: CBMM, Niobec (IAMGOLD), and Catal„o (Anglo American).
The non-pyrochlore producers are spread across multiple geographies and are typically fairly small in size and their operations are fairly rudimentary and sporadic. The production of niobium from non-pyrochlore sources is mostly obtained as a by-product of tantalum operations.
1 Niobec mineral reserves have been estimated as at December 31, 2011 using the block caving scenario from the pre-feasibility study using $45 per kg of niobium and include dilution material.
Source: Company Management
Source: Company Management
A number of other niobium deposits have been discovered around the world; however, these projects are in early stage, have lower grades, and are mostly owned by junior mining companies with limited financial capacity.
In the early 2000s, niobium prices remained relatively flat in the US$12.00 to US$13.50/kg range Given the robust economic growth in emerging markets, particularly in the BRIC economies, and increased usage intensity of niobium in the steel making process, niobium prices rapidly increased to US$32.63 / kg in 2007 and have since remained in excess of US$30.00 / kg.
Given the absence of an actively traded market and lack of price disclosure for competitive reasons, few research analysts make predictions about future niobium prices and those who make such predictions behave rather conservatively. Despite these factors, niobium is expected to perform well in the near term with prices remaining in excess of US$30/kg. So far this year CBMM niobium export prices have increased by ~22% to US$39.38 in January and February compared to the 2010 average of US$32.28. Niobec expects rising prices over the next three to four years based on customer interactions and future needs.
In recent years, niobium prices have been much more stable than other substitutes. In 2008, as the financial crisis was unfolding CBMM delayed its announced capacity expansion and cut down production to adjust to lower customer demand levels. As a result, niobium prices remained relatively flat through the crisis while other substitutes experienced significant price collapse. From a customer perspective, the steady price of niobium is a desirable feature as it allows them to better forecast and appropriately budget cost. Furthermore, end users have stressed the importance of sourcing niobium from multiple suppliers to minimize supply chain disruptions and avoid over-reliance on one producer.
The key substitute for niobium is ferrovanadium, which has largely recovered from the collapse experienced during the financial crisis. However, ferrovanadiumís comparatively higher price and significantly higher volatility have promoted substitution to ferroniobium which has a more predictable price pattern.
Given the high value added from using niobium in the steel making process (i.e. additional strength, durability, anti-corrosion, heat resistance, reduced weight) and the relatively small share of total costs, customers display fairly inelastic demand.
As an example, it is estimated that niobium accounts for <0.1% of content in structural steel and <0.5% of total steel costs. Furthermore, niobium is an additive to high-value alloys that are used in highly technical applications (i.e. jet engine components, medical equipment, heavy engineering) where adherence to specifications and superior performance is a necessity. As a result, the usage intensity of niobium in steel production has risen to 63 g/t in 2008 from 40 g/t in 2000. This trend is expected to continue into the future as additional benefits of niobium as a steel additive continue to be developed.
CBMM Sale of Minority Stake
CBMM announced that it had entered into an agreement to sell a 15% stake in CBMM for US$1.95B to a Japanese and Korean steel consortium (the "Consortium"). The Consortium is composed of i) four Japanese companies: JFE Steel Corporation ("JFE"), Nippon Steel Corporation ("NSC"), Sojitz Corporation ("Sojitz"), and Japan Oil, Gas and Metals National Corporation ("JOGMEC"); and, ii) two Korean companies: POSCO, and National Pension Service ("NPS"). Each of the six members of the Consortium indirectly own a 2.5% stake in CBMM for a combined total of 15%.
In addition to the equity investment, JFE, NSC, POSCO and Sojitz strategically secured a long-term niobium supply agreement with CBMM at undisclosed terms thus effectively removing a substantial amount of future niobium production from the global markets. The Consortium cited the following as the key rationale for its investment:
CBMM announced the sale of another 15% stake for US$1.98B to a Chinese consortium comprising of China's CITIC Bank and a group of steelmakers - Baosteel Group Corp., Shougang Corp., Anshon Iron & Steel Group Corp. and Taiyuan Iron & Steel Group Co.