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Niobium demand to pick up in Q3 2009

http://www.commodityonline.com/news/Niobium-demand-to-pick-up-in-Q3-2009-16206-3-1.html

LONDON: Demand for niobium has seen enormous growth in recent years. At about 58,000t contained Nb, processors' shipments in 2007, reported by the TIC, were double those in 2003. That continued into early 2008, with H1 shipments up 18% on H1 2007 and 12% on H2 2007 (although primary production was down by 13%).

The niobium market is not, however, immune to global economic turndown and with consumers both reducing purchases and running down inventories, total shipments for 2008 were probably little higher than in 2007. Demand in H1 2009 will very likely be flat at best.

Global GDP and industrial production are expected to enter a recovery phase in 2010. Metal markets will tend to begin re-stocking before that and Roskill predicts that demand for niobium will pick up as early as Q3 2009 and quickly return to a growth trend. Niobium producers are well-placed to supply the world's ferro-niobium needs for the foreseeable future. Several new tantalum-niobium projects are also expected to become operational over the next year or two.

Niobium demand to continue growing over the long term

The recent large increases in niobium consumption have not come as a result of new applications. The principal markets - HSLA steels, stainless steels and superalloys - are essentially the same as they have been for years. Growth has come not only from the overall rise in global production of these materials, but also from the greater penetration of niobium in markets where it is already well-established and often irreplaceable.

HSLA steels, by far the largest application for niobium, are widely used in automobiles, construction and natural gas linepipe, all market segments that will return to long-term growth in a year or so. With the ongoing drive to achieve weight reduction in both the automobile and construction sectors, HSLA steels are likely to win further market share from mild steels.

The world's appetite for energy will see demand for gas linepipe remain healthy for many years to come. With the supply disruptions that have been seen in Europe recently, it is not beyond the realms of possibility that whole new transmission networks could be built. Demand for linepipe could prove to be higher than previously forecasted. The HSLA steel grades required for high-pressure linepipe cannot be made without niobium.

In the stainless steel industry, niobium is consumed mainly in ferritic stainless and most notably that used for automobile exhausts. 2009 will not be a good year in this market; vehicle production forecasts are grim and Roskill expects total stainless steel demand to be nearly 20% down from its 2007 peak. Strong recovery will begin in 2010. In the longer term, this could be a significant growth market for niobium, particularly if continuing volatility in nickel prices leads to a large-scale and permanent switch from the use of nickel-bearing austenitic stainless to nickel-free ferritic steels.

There is good scope for niobium consumption to grow considerably in some parts of the world. In 2008 the overall unit consumption of niobium in steel was around 55-60g/t of steel produced. In the most highly developed countries the figure was 100g/t or more, whereas in China only around 40g/t were consumed. There would appear, therefore, to be significant potential for the increased use of niobium. While, in 2008, about 10% of the steel produced globally contained niobium, that share could rise to as much as 20% in future.

Niobium prices to remain at current levels

Key characteristics of the niobium market are the important role played by long-term contracts, which now cover about 95% of total sales, and highly stable prices. From the early 1990s to the mid-2000s, the average export price for Brazilian ferro-niobium remained within the range of US$12,500-13,500/t contained Nb.

That changed in 2007, when prices for ferro-niobium and other niobium products began to climb sharply. Average import prices for ferro-niobium reported by major importing countries in 2008 were more than double those seen in 2006. In the case of Japan, the average price rose from about US$9,000/t (gross weight) to over US$22,000/t.

Roskill's view is that the increase in price is not temporary. In real terms, niobium prices had been falling for years at the same time as demand was increasing and producers were expanding capacity, probably at considerable expense. An adjustment to the benchmark price at some point was inevitable. Niobium prices, particularly ferro-niobium prices, are likely to remain at about the level seen in late 2008 and early 2009 and will display little volatility in the coming years.

Even at the higher price, niobium inputs constitute a very small part of total production costs in the main end-use markets, and the opportunities to substitute for niobium in most applications are very limited.(Courtesy: PRNewswire)