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Trading in commodities can be more or less risky than trading assets. We can take, as an example, gold, the safe haven par excellence,...

Trading in commodities can be more or less risky than trading assets. We can take, as an example, gold, the safe haven par excellence, where the risks are minimal and profits assured. And if there was a metal capable of making us earn more gold? That is the case of niobium.

Professional commodity traders definitely know what we are talking about, but many do not know its existence, even less its use.

Despite the mines around the world and steel plants have suffered severe loss of value last year, niobium has never ceased to attract the attention of many.

Niobium (Nb) is a shiny, ductile metal with a white luster and it is named after a Greek goddess.

It is used to produce a durable and lightweight type of metal, employed in different sectors of industrial production and vehicle construction. Niobium have unique properties including super-conductivity, corrosion resistance, very high melting temperatures, this is why it plays an essential role in the manufacture of certain types of steel and electronic capacitors.

Today it is mined in only three places in the world and its price per kg is seven times greater than the price of copper. The resources are mainly located in Brazil (93%) and Canada (7%).  Because they are hard to substitute and rare, this means that mining them under any circumstance is a profitable venture.

The Brazilian company, CIA Brasileira de Metalurgia & Mineracao, provides the 80% of the world stocks, with prices that are so difficult to determine given the lack of competition and market liquidity.

The 89% of niobium is used to produce iron, which is used in high strength low alloy steel (HSLA). HSLA steel is used in the manufacture of vehicle bodies, jet and rocket engines, ship hulls, railway tracks and oil and gas pipelines.  It is also used in large steel structures such as oil platforms.

The 11% is used in the manufacture of niobium alloys, chemicals and carbides and other metal products.

The average price of niobium last year was estimated around $ 40 per kg, when the same amount of copper pricing was around $ 5.5, despite the worldwide demand hardships still to increase.

During the month of April, a Chinese giant metal production, China Molybdenum Co., beat as many as 15 companies competing in the purchase of niobium from Brazil, paying $ 1.5 billion, 50% more than the expected price.

However, the purchase represented the market sentiment towards the niobium. There are so many companies involved and the transaction is highly competitive, leading to an offer which has gone far beyond expectations.

The reason that makes this small market so attractive is due to the fact that there are very few active mines in the world, while the importance of niobium is considered strategically important by many market participants.

Craig Burton, head of Cradle Resource Ltd., engaged in the development of a project in Tanzania, related to the extraction of niobium, commented: “The sale involved a large number of interested parties but had only one winner.” And this is how it is.

 

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