DRI, alternatives may alter course of scrap markets

Oct 31, 2012 | 07:00 PM | Bill Beck

Tags  direct reduced iron, DRI, Nucor Corp., Steel Dynamics Inc., Daniel R. DiMicco, Mesabi Nugget, Mesabi Iron Range, Peter Kakela Craig Pagel

Scrap substitutes have long played a role in North America’s electric-arc furnace mini-mill segment, but for years most scrap substitutes were processed offshore and shipped to the United States. In recent years, pig iron from Brazil and Russia, along with direct-reduced iron (DRI) from the Caribbean, have been the major scrap substitutes consumed by U.S. mini-mills.

Offshoring the sourcing of scrap substitutes was necessary because DRI processing typically requires using natural gas as a fuel, and until the very recent past firing DRI furnaces with natural gas was too costly in the United States. And primarily for environmental reasons, processing pig iron in the United States has long been prohibited.

But freight rates for bulk cargo shipments of such products as pig iron or DRI can make the cost of landing in the United States uncompetitive with prime grades of scrap, especially since many of the cargoes have to be unloaded at the port of New Orleans and transloaded into barges for delivery to steel mills along the Mississippi River and other inland waterways.

But with the discovery of seemingly near-unlimited supplies of shale gas in the United States in recent years, the paradigm for processing DRI has shifted dramatically. Natural gas has dropped to $2 to $3 per million British thermal unit in the United States from a high of $14 in the early years of the 21st Century. Processing commodities such as DRI in the United States has suddenly become competitive as a scrap substitute, and some major players in the metals recycling industry are moving to take advantage of that price competitiveness.....





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