Blast furnace technology appears poised for a dusting-off of sorts as costs for scrap used by electric-arc furnace (EF) steelmakers skyrocket, but whether that will cast a cloud over the EF dust sector remains to be seen.
EF steelmakers have been on a steady growth curve for much of the past 50 years. First, they tackled reinforcing bar and other long products like beams and structurals. In the past 20 years, they've invaded the sheet steel business and now account for about 60 percent of overall U.S. steelmaking capacity.
Riding on their coattails have been EF dust processors and other companies that specialize in providing outsourced services. Growth in processing EF dust hinges on the EF-based segment of the steel industry. Integrated steel mills use blast furnace iron and relatively little ferrous scrap with much of the waste products of their output normally held in the slag.
But Nucor Corp., the largest EF-based steelmaker in the United States, has laid plans to build a 3-million-ton-per-year blast furnace and produce iron for its own melt shops, with a proposed Louisiana site potentially being the first integrated steelmaking complex to be constructed in the United States since 1969.
To some that move might suggest if not the end, at least a flattening of the growth curve for EF steel mills and a return to the basic oxygen process. Not necessarily the case, according to two industry analysts.
The fundamentals are still in place to support expansion of EF mills that make long products like rebar, said Peter F. Marcus, managing partner of World Steel Dynamics Inc. (WSD), Englewood Cliffs, N.J.
There is a big difference between scrap-using mini-mills that use obsolete grades of ferrous scrap, like No. 1 heavy melting steel and shredded scrap, and the mini sheet mills that rely on industrial grades like No. 1 busheling and No. 1 bundles, Marcus pointed out.
Prices paid for No. 1 busheling averaged $883.33 a long ton in mid-July, according to AMM's composite price data, while shredded averaged $594 a ton and No. 1 heavy melt $523.33. By comparison, hot metal costs at an integrated steel mill can range from $600 to as high as $700 per net ton, one mill source said, depending on how much purchased metallurgical coke is used in the blast furnace to produce iron vs. the coke from the integrated steel mill's own coke ovens.
For scrap-consuming mini-mills that depend on obsolete grades, the raw material supply is huge and is traded substantially on a global basis. The "spread" between scrap and long products, like rebar, is what determines profitability, Marcus said. Higher scrap prices, which usually occur when there is a strong steel market, draw out more scrap, and the EF steelmakers making long products come out ahead. The mini-mills making sheet products that use more industrial steel scrap face a tougher challenge their scrap supply is limited and they have to battle integrated steelmakers for the material.
Against that backdrop, Marcus said "it might be argued, theoretically, that there will be a rising proportion of integrated expansions. However, if you look to Russia, EF expansions are huge, even though the cost of the final product is high, because the demand outlook (for construction) and the price of long products is so lofty."
Those expecting a full-scale return to the blast furnace-basic oxygen furnace (BOF) route have to realize that, outside of China, few steelmakers favor that technology. It takes an incredibly long time to build such facilities and, once built, can require a lengthy start-up time. Consequently, "the strategy-du-jour is to build electric furnace-based mills to make commodity long products, build the plant fast and cheap, and capture a sizable margin due to the high spread," Marcus said.
In the United States, the mini sheet mills of the future might have to forge a link to a pig iron or scrap substitute supply—à la Nucor's potential Louisiana plant (pig iron production) and Trinidad and Tobago facility (direct-reduced iron).
"I don't think mini sheet mills will be losing market share," Marcus said. "Their plants cost less, make an increasingly outstanding product and start up much faster from planning to good-quality shipments."
Michelle Applebaum, managing director of Michelle Applebaum Research Inc., Chicago, said the technology of the EF vs. the blast furnace makes each right for their particular steel products. "There is a difference in the technologies that goes beyond the randomness," she said.
"The idea that we would go one way or the other is very akin to saying we would never build another blast furnace in this country.
"The economics here have shifted in favor of the blast furnace, so it makes sense to do that (right now)," Applebaum added.
So while EF expansions might see a slight cooling in the U.S., they're still hot on the burner globally, which should bode well for the EF dust recycling industry.