Fri, Mar 04, 2011 - Page 10 News List

Japan, S Korea in US$1.95bn Brazil rare earths deal

MONOPOLY MONEY:China is believed to be building strategic reserves of rare earth metals, while US analysts have called for efforts to secure supplies


A consortium of Japanese and South Korean companies plans to take a US$1.95 billion stake in a Brazilian rare earth mining firm, officials said yesterday, as both sides look for ways to reduce their dependence on China.

Japanese companies including Nippon Steel, JFE Steel, and trading house Sojitz as well as Japan Oil, Gas and Metals National Corp are negotiating with Brazilian company Companhia Brasileira de Metalurgia e Mineracao (CBMM), a Tokyo official said.

The South Korean entities are Posco and the National Pension Service (NPS).

defensive alliance

CBMM produces niobium, a rare metal that is crucial to the production of high-grade steel for automobiles and many other products.

The deal comes as Japan looks to diversify and thereby secure the supply of rare earths for its high-tech industries — ranging from computer components to hybrid cars — as China, which controls more than 90 percent of global supply, tightens export quotas.

The Japanese companies will take a combined 10 percent stake and the remaining five percent worth US$650 million will be taken up by Posco and the NPS, Posco said in a statement.

A contract is scheduled to be signed in Japan tomorrow, it said, adding that CBMM controls 82 percent of the world’s niobium market.

stable supply

The deal “will help Posco secure a stable supply of rare mineral resources” used to produce high-quality steel products, it said.

Japanese public broadcaster NHK separately said the Japanese team had clinched a basic agreement with CBMM to obtain the 10 percent stake for US$1.3 billion.

An official at Japan’s Agency for Natural Resources and Energy noted more than 90 percent of niobium is mined and produced in Brazil.

“Demand for niobium is expected to grow as China, India and other emerging companies become more [technologically] powerful and produce more high-grade steel,” said the official, who declined to be named owing to the sensitive nature of the deal.

strategic reserves

“Japan imports 90 percent of its niobium needs from Brazil, but it is procured through markets ... Japan needs to secure stable supply,” he said.

Japanese industry sources said China temporarily cut off exports last year during a territorial row between the two countries.

China is building strategic reserves of rare earth metals, while the Japanese and South Korean governments say they have amassed some reserves and US analysts have called for a similar effort.

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