Steel makes the market

Luke Forrestal
BRW Online

Iron ore, coking coal, manganese, molybdenum - all are either main ingredients in steel making or common steel additives and all are experiencing red-hot demand, predominantly from China.

Add to that list Niobium.

Although there are less than a dozen known deposits in the world and only three substantial producers, niobium is an important additive for creating the high-strength steel commonly used in car manufacturing and also has applications in nuclear industries and electrics.

Since 2002, the size of the niobium market has been increasing at an annual rate of 20 per cent. It will surprise some to know that it is now  60,000-65,000 tonnes a year, which is in line with the size of the uranium market.

The small band of niobium producers has benefited not only from an increase in global steel consumption but also from a trend towards increasing consumption intensity: end users are tending to include more niobium per steel.

With even the dominant producer, Brazil's CBMM, struggling to keep up with demand, conditions have been ripe for new entrants. One that has seized the opportunity is Australian company Globe Uranium. On March 31, Globe unveiled a maiden 56 million tonne JORC resource for its Kanyika project in Malawi.

At current prices and grades, it says the deposit has an in-ground value of $US6 billion ($6.44 billion) While the company's name might be misleading, it is the niobium content at Kanyika that has managing director Mark Sumich excited. It accounts for two-thirds of the estimated in-ground value.

Uranium, tantalum and zircon make up the balance "The economics will be based around the niobium; the rest will be credits," Sumich says It is early days yet, but he envisages an operation at Kanyika starting in 2012 and producing about 4.5 tonnes of niobium a year, a rate that would give Globe a market share of about 5 per cent.

Even though niobium demand is growing, it is still a niche market. Sumich understands that needs to be careful in bringing supply online or risk flooding the market and destroying the fundamentals underpinning pricing.

The news on the Kanyika resource has helped the Globe share price regain some of the ground lost since April last year, when it reached a record high of $1.09. After hitting a 12-month low of 24¢ in late March, the share price has rallied back to about 50 cents.