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Niobium Project in Brazil

Fulfilling Our Mission : Ensuring a Stable supply of the Rare Metal Niobium

February 2012

*Affiliations and titles are current as of the time of the posting of this article.

Rare metals (= minor metals), which have attracted considerable attention in recent years, are one of Sojitz’s strengths. Sojitz boasts the highest domestic market share of Niobium, the rare metal discussed in this story in terms of trading volume. We trace the development of Sojitz’s niobium project and Sojitz’s ability to lead the market through foresight amidst global competition for resources.

 

Niobium, a Rare Metal

Niobium Crystals

Niobium is a type of metal known as a rare metal. It is produced by the action of magma in the earth, and most niobium production is in Brazil and Canada. Brazil’s Araxá Mine has by far the highest reserves and production volume.

Niobium is important because when added to steel, it greatly increases the strength and durability. There are other materials with similar properties such as molybdenum and vanadium. Niobium, however, has unique properties, and as a result, there is practically no substitute.

Today, most niobium is used as a secondary material in high-grade steels, and recently demand for such steels has been skyrocketing in emerging market countries such as China and India. Niobium is used in automotive steel plates, pipelines, jet turbine engines, and many other applications, and as a result, it is a crucial material for Japanese steel makers to maintain competitiveness in global markets.

In addition to steel, niobium is used in a wide range of other applications such as high refraction lenses and the coils used in MRI diagnostic equipment.

The properties of a material can be completely different depending on the amount of other materials that are added and the process in which they are added. It is for this reason that rare metals are sometimes referred as the “vitamins of industry.”

Sojitz focused on these properties of niobium at an early stage and expanded sales routes while actively developing applications in conjunction with economic growth.

In recent year, demand for niobium has been growing rapidly, but the growth has been particularly prominent in China. Japanese steel makers are at the vanguard of development of high-performance materials. If automobiles can be made lighter without any loss of safety through the use of high-strength steel plates, they can achieve superiority in terms of fuel efficiency. It is no exaggeration that rare metals play a crucial role in this development, and niobium holds the potential for higher demand even among rare materials by targeting general steel products because of its diverse properties.

Sojitz has a long-standing and deep relationship with niobium

Sojitz’s handling of niobium goes all the way back to 1969 (at that time, Nissho Iwai).

There are few companies in the world that can stably produce and supply niobium. Among them, Brazil’s Companhia Brasileira de Metalurgia e Mineracao (CBMM) is the world’s leading producer of niobium. At that time, CBMM wished to do business with Japanese steel makers, which were growing at a rapid pace, and trading was commenced with Sojitz acting as a broker. At this point, niobium’s properties and future potential were still largely unknown.

Sojitz’s foresight served it well. Not only did it serve as a broker for manufacturers, it also invited researchers to the company for advice and actively supported R&D and application development. This was the time that the foundations of Sojitz’s reputation for having strengths in rare metals were formed.

In 1974, Sojitz concluded an exclusive agency agreement for Japan with CBMM. Sojitz later acquired exclusive sales rights for 11 additional countries in the Asia-Pacific region in 1999 and has conducted active marketing including the provision of technical support to direct users. Sojitz, which has an outstanding network, became a key partner to CBMM, and a strong relationship of trust was established between the two companies.

Increases in steel production in China, India, South Korea, and other countries gradually expanded to high-grade steels, and demand for niobium grew every year. As a result, Japanese steel makers became concerned that they would not be able to maintain stable supplies of niobium as in the past.

Japan-Korea Niobium Alliance

In 2010, Sojitz received an inquiry from CBMM concerning capital participation. CBMM proposed that Sojitz to acquire 15% of its shares for a total cost in excess of 150 billion yen. In light of the rising demand for high-grade steel in developing countries such as China and India and the resulting competition for resources, Sojitz wanted to acquire a 15% stake and establish stable supplies. What CBMM wanted from the Japanese side was the formation of a consortium by Sojitz and the Japanese steel makers that had done business with for many years and capital participation in CBMM as a strategic partner. The Japanese steel makers agreed to cooperate, since maintaining stable supplies of niobium was an important issue for them. Next were South Korean steel makers. Cooperation between Japan and South Korea would provide the benefit of economies of scale, making it possible to seize the initiative.

The project received a boost when the Japan Oil, Gas and Metals National Corporation (JOGMEC) became able to invest in CBMM following an amendment of the law. Japanese national policy recognized the importance of procuring rare metals, and this project was the first application.

IIn this way, the joint investment from Japan and South Korea in CBMM was fulfilled.

Sojitz’s relationship with CBMM goes back more than 40 years. At different times, Sojitz has been required to exhibit marketing capabilities, development capabilities, and sales capabilities. Sojitz believes that by participating in this joint investment project, the cooperative relationship between Sojitz and CBMM as strategic partners will be strengthened. Sojitz will continue to serve as a trading company by striving to provide stable supplies of rare metals such as niobium as an industry leader.

Participating in This Project form a Corporate Perspective

Takuya Johke, Section 2, Legal Dept.
Toshihiko Matsuoka, Manager, Enerty and Metal Section, Risk Management Dept. 2
Akira Mitsuda, Resource Financing, Structured Finance Dept.

We have consulted with the Business Division concerning this project from the year2010. When we started the consultations, the investment amount was considerable, and we expected that there would be many difficult hurdles to overcome. However, because the objective of the project was to establish leadership and stable niobium procurement, we were eager to participate. Sojitz, acting as a partner to Nippon Steel, JFE, and POSCO, was given the role of coordinating the various interests of the parties because of the 40-year relationship of trust between CBMM and Sojitz’s Ferroalloys Dept. We traveled to Brazil and sat at the negotiating table with the Business Division. After the agreement was signed, we are following up to make sure that the project is proceeding as planned from the various perspectives.

As we moved towards finalization of the agreement, the number of parties involved in the project steadily increased. It was necessary for us to play our role reliably without losing speed, and we are satisfied with the result of having implemented an outstanding project for our partners and enhancing Sojitz’s position by securing a rare metal. We learned from the Business Division about the importance of maintaining a steadfast attitude of not losing business opportunities. Going forward, we hope to use the experience we gained from this project and create synergy effects through Sojitz’s network as a general trading company.

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