Seoul: Nippon Steel Corp, JFE , Posco and others will buy a 15% stake in a Brazilian rare metal miner for around $1.8 billion, South Korea’s National Pension Service (NPS) said on Thursday.
The deal adds to a growing cross-border tie-ups by Japan and South Korea to secure natural resources to power their manufacturing-based economies.
The Brazilian company is Companhia Brasileira de Metalurgia e Mineracao (CBMM), which mines and processes niobium, a rare metal used to produce high-grade steel used in autos, aerospace and pipeline to make steel products lighter and stronger.
Brazil is the world’s No. 1 Niobium producer. The Brazilian mining industry association (IBRAM) data said Brazil produced 80,000 tonnes out of world production of 83,000 tonnes produced globally in 2010 and the ratio has been similar in the last decade.
China vs Japan, Korea
“Behind the move is a growing demand for niobium in China, and its aggressive move to secure supplies from abroad because its domestic output is very limited,” said Kaz Machida, president of KAY International, a rare metal consultant.
“Japanese steelmakers, worried of China’s aggressive moves, moved quickly in a tie-up with Korean firms,” he said.
China’s domestic niobium production is limited, although demand is expected to soar in the future. In contrast, China has rich rare earth supplies, producing 97% of the minerals.
An NPS spokesman said Japanese investors including Nippon Steel, JFE Holdings and trading firm Sojitz Corp will buy a 10% stake in CBMM.
South Korea’s Posco and National Pension Service will jointly buy 5% of the unlisted company, investing around 350 billion won ($312 million) each, the NPS spokesman said.
“Resources assets tend to generate higher returns and the joint investment with industry specialists such as steelmakers will generate more synergies,” the spokesman said.
The deal values the unlisted CBMM at around $12 billion.
Another Japanese-Korean consortium is bidding to develop the world’s largest untapped coking coal deposit in Mongolia, while Japanese trading firm Itochu Corp and six Asian steelmakers paid about $3 billion for a 40 percent stake in Brazilian iron ore miner Namisa in 2008.