Baosteel Group Corp. and CITIC Group teamed up with three Chinese companies to pay $1.95 billion for a 15 percent stake in the world’s biggest niobium producer as demand for the raw material grows.

Baosteel, China’s second-largest steelmaker, CITIC, Anshan Iron & Steel Group Corp., Shougang Corp. and Taiyuan Iron & Steel Group Co. agreed to buy the stake in Brazil’s Companhia Brasileira de Metalurgia e Mineracao, according to an e-mailed statement from Baosteel.

Buying the stake gives the companies a share in a company with 82 percent of the global market for niobium, according to Posco, the South Korean steelmaker that bought a stake in March. Rising prices of rare metals from niobium, which can be used to strengthen steel, and indium, used in liquid-crystal displays, to lithium, chrome and magnesium, have increased competition for supplies.

“Worldwide demand for niobium recorded an annual growth rate of some 10 percent from 2002 through 2009, buoyed by growing need for high-grade steel,” the Baosteel statement said. “Demand for niobium is projected to grow faster than the expansion in world crude steel production.”

The Brazilian producer, established in 1955, mines and produces niobium, a key material used to make steel for cars, building and oil pipelines. The deal follows the purchase of a similar-sized stake in the closely held company by a group of Japanese and South Korean companies in March.

The companies that bought that stake include Posco, South Korea’s National Pension Service , Nippon Steel Corp. (5401), JFE Holdings Inc. (5411), Sojitz Corp. (2768) and Japan Oil, Gas and Metals National Corp.

“Such investment has a very relevant strategic value for all parties,” according to the Baosteel statement. “Brazil holds the largest part of total known niobium reserves in the world, according to data from official agencies, and CBMM is thought to hold rights to the best niobium reserves in Brazil,” the statement said.

Source:bloomberg