A Chinese steel consortium has announced a $1.95bn purchase of a stake in a Brazilian miner of niobium, underscoring the country’s growing interest in Latin American resources.
The consortium, which includes Citic Group as well as steelmakers Anshan, Shougang, Baosteel, and Taiyuan Iron & Steel, will purchase a 15 per cent stake in Companhia Brasileira de Metalurgia e Mineração (CBMM), a privately owned Brazilian mining company.
The deal highlights how China’s appetite for resources has been a driver for global mergers and acquisitions, even against the backdrop of wavering commodities prices this year. China is the world’s biggest consumer and producer of steel, a key ingredient in everyday items such as cars and buildings, and Chinese demand has kept iron ore prices close to historic highs this year.
While the rare metal niobium is not that well known, it is a key alloy that makes steel harder and stronger, such as for speciality steels used in oil pipelines or long bridges.
CBMM, the Brazilian company, produces about 80 per cent of the world’s niobium supply and its biggest customers are all in Asia, according to a person close to the deal.
“The investment has an important strategic value for all parties,” said Baosteel in a statement on its website. Brazil has the world’s biggest niobium resources, and global niobium demand increased about 10 per cent per year between 2002 and 2009, the statement pointed out.
China is poorly endowed when it comes to steelmaking ingredients and Beijing recently declared that Chinese companies should step up overseas investments in iron ore, a key steelmaking ingredient, with the goal of having half of China’s iron-ore imports come from Chinese-invested mines.
The Chinese consortium’s investments comes just months after a nearly identical investment by a Japanese-Korean consortium, which paid $1.8bn for a 15 per cent stake in CBMM in March. The remaining 70 per cent of CBMM is controlled by the Moreira Salles family, which is also linked to the bank Itaú-Unibanco.
Chinese resources companies have been particularly active investors in Brazil, which is a big source of commodities for China including soybeans, oil, sugar and iron ore. Some of the largest recent deals include Sinopec’s $7.1bn investment in Repsol Brasil, Sinochem’s $3.1bn investment in an offshore Brazilian oilfield, and Beijing’s $10bn oil for loan deal in 2009.
The Chinese consortium was advised by UBS.
(c) The Financial Times - By Leslie Hook in Beijing