Even though steel plants and the mining industry is going through turbulent times – there is a metal currently performing at an opposite trend.
This mineral has very high demand and is low in supply… It’s also a necessity for society…
Can you guess what it is?
Before we do, let’s take a quick glance at the metal industry itself.
Since 2011, base metal commodities have been on a downward trajectory, mainly due to environmental pressures, a drop in confidence, and alternative material options. Many mining plants have been raising costs and making cuts to production in order to improve liquidity.
What is causing the steel crisis?
Although the commodities problem has grown over the long-term by the factors mentioned above, China flooding the world markets with very cheap steel is not helping matters, also, along with the fracking boom in the USA.
This has caused demand for the metal to nosedive, causing foreign mining companies to go out of business – meaning cuts, job losses and less money available from lower investments.
The USA is considering trade action against China unless they take effective measures to reduce the excess products entering the commodities market.
What is the metal that everyone is talking about?
Niobium; this is a metal in which supply is at risk. It is a critical mineral for infrastructure in Europe and the USA – also this resource hasn’t been produced by the West in 30 years.
Brazil is the key player for producing niobium, whilst China consumes the most in the world, mainly for strengthening architecture – it reinforces buildings for better protection against earthquakes.
Who is the largest supplier of niobium?
CBMM are the largest producers of niobium.
This mining company provides 85% of global niobium and has recently secured a $2 billion deal with China, the Koreans, and the Japanese in purchases.
Niobium has the following lucrative aspects:
- It’s considered a rare deposit, not even China can mine niobium.
- The material is a necessity for protecting lives, especially in areas prone to earthquakes and other natural disasters.
- As this resource is very restricted to markets, this means very small risk in demand and price falling.
What about the West?
To their shock, Western nations found themselves shut out from the big deal, whilst the major nations from the East seized its rewards and benefits.
What else makes niobium special?
It is used for metal alloys like stainless steel and has great importance for strengthening metals.
It is used for the following:
- Jet engines (due to a very high melting point).
- Rocket engineering.
- Beams and girders for skyscrapers and oil rigs.
- It has superconducting properties, so it’s used for MRI scanners, NMR equipment, and particle accelerators.
The performance of CBMM in the markets:
Since CBMM’s multi-billion-dollar deal with the eastern nations, niobium mining markets have soared – including an asset in Nebraska which outperformed the S&P500 (a rise of 400% since 2012).
Reports indicate the global market is to increase by an annual rate of 7%, by the year 2020.
The main players to look out for:
Global produced niobium is based from the mineral pyrochlore, and the key market players are; CBMM (Niobec, IAMGOLD) and Catalau (Anglo-American).
On the whole, this has a very positive economic outlook, especially for the steel industry – the increase in production will continue to rely on this resource for both short and long term use.
Emerging markets will always have demand for the highest quality of steel.
How did the steel crisis influence performance?
Niobium wasn’t completely risk-free, as there was less demand from lower production in steel alloys and building girders. The slumping gas and oil markets would have influenced a lower buying of gas pipes.
However, companies like China Molybdenum managed to outmaneuver 15 steel companies, through its purchasing power of niobium.
Why is this all unheard of?
The members involved in the deal would not identify themselves or disclose any information, as the matter was kept private due to the high competitiveness of the sale.
Why is niobium so unique?
It is mainly down to the very limited number of mining companies who are supplying this resource to the world economy. CBMM is the main player, whilst Niobec and Anglo only contribute a mere 9% put together.
It’s ranked as the most strategically important mineral, by Europe and USA.
Another bit of information on CBMM…
CBMM has controlled the majority of supply since the beginning of production, five decades ago. The company is owned by the Moreira Salles family, who are billionaires.
The company is owned by the Moreira Salles family, who are billionaires.
A sale of 30% stake of supply went to an Asian steelmakers firm, who held two transactions valued over $3.9 billion – this took place in 2011.
The sale in 2011 has drawn further attention from the masses, than what there was before, whilst only a small proportion have only gone for this investment opportunity.
Supply and market dominance keep demand well and truly high; you can see why this is a very lucrative investment if you can find the right share price…