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Fed by diverging prices for iron ore and scrap and stoked by newly cheap and plentiful natural gas across North America, a new era of steel mill inputs is upon the industry, featuring direct-reduced iron (DRI) in all of its hot, cold and briquetted manifestations.
Nucor Corp., Charlotte, N.C., is nearing completion of its new plant in St. James Parish, La. It is widely regarded as the herald of the new era, but was a lone voice until midyear. Then in rapid succession this summer Midrex Technologies Inc., Charlotte, N.C., announced two major new deals representing the next steps in the DRI renaissance: a contract with Austrias Voestalpine Group and Siemens Industry Inc. for a 2-million-tonne-per-year hot-briquetted iron (HBI) plant near Corpus Christi, Texas, and a venture with industrial gases company Praxair Inc., Danbury, Conn., to develop a DRI process using coke-oven gases that could go commercial before year-end. U.S. Steel Corp., Pittsburgh, also is known to be mulling a DRI venture with Republic Steel in Lorain, Ohio.
The top two global DRI technology licensors are Midrex, a wholly owned unit of Japans Kobe Steel Ltd., and Italys Tenova SpA, using the HYL process. Midrex claims primacy, saying that about 80 percent of the 64 million tonnes of DRI produced globally via the shaft-furnace process in 2011 used its technology, with more than 11 million tonnes of newly licensed DRI capacity to be commissioned and brought into service within the next two years.
The Voestalpine plant has already signed a regional customer, Altos Hornos de Mexico SA de CV, Mexicos largest steelmaker. The partners in the project claim it will be the largest single HBI-producing module in the world. The $726-million plant, which has direct deep-sea access to the Gulf of Mexico, is slated to be in service early in 2016, producing high-quality HBI sponge iron from ore pellets. About half of the planned output of 2 million tons per year will be supplied to mills in Linz and Donawitz, Austria, while the other half will be sold to partners interested in a long-term supply.
A few weeks before the HBI announcement, Midrex signed a strategic alliance with Praxair to develop and market a new thermal reactor system that will produce DRI using a variety of fuels using a proprietary partial-oxidation technology to convert hydrocarbon fuels into high-quality, high-temperature syngas suitable for DRI output. Under the alliance, Midrex and Praxair are conducting tests at a 1:20-scale semi-works facility at Midrexs research facilities in Charlotte.
If not for a record rainy spring on the U.S. Gulf Coast, all those announcements might have come at the same time that Nucor was cutting the ribbon on its DRI unit in St. James Parish, the first new U.S. DRI facility in many years. The first three months of this year were the wettest in the history of the state, Nucor president and chief executive officer John Ferriola said. It takes a great deal of rain to make history in coastal Louisiana, and that did not bode well for construction. We lost eight or nine weeks when we had to stop construction, and so have had to push the start for the DRI plant back to the end of the third quarter. Nucor plans to supply only its own mills once the unit is in service.
Jeremy Jones, vice president of process services at Coraopolis, Pa.-based Tenova Core, said that the two biggest drivers in the recent surge in DRI are the costs of iron ore and natural gas.
The spot price for natural gas on the New York Mercantile Exchange was around $3.35 per million BTU in early August, up more than a dollar from the record low last year but still far below the $10 to $13 range that crushed DRI economics in past years. More importantly, producers and most major consultants are forecasting gas prices in a range of $4.50 to $6.50 per million BTU for the next two to five years due to the shale gas bonanza. Since about 2000, natural gas producers have combined sophisticated three-dimensional seismic survey analysis with directional drilling, where the bore can go horizontally through thin but rich formations, and hydraulic fracturing to enhance recovery from dense rock. All of that has meant vast volumes of new production and trillions of cubic feet added to known reserves.
People are excited about the new low cost of natural gas, Jones said. That, and ore prices have stabilized, even dropped off, with slackening demand from China. At the same time, scrap prices have not dropped that much.
This has led to multiple points of savings along the supply chain, and increasing interest by electric-arc furnace (EF) and blast furnace operators to move into higher-quality markets make the case for DRI from downstream operations just as compelling as for upstream.
We have seen some consolidation among the EF operators, Jones said. These larger mini-mill groups are now looking for better reliability, flexibility and quality. The new focus on DRI is a natural progression. In recent years we saw several mini-mill companies buying scrap operators to gain control of that input stream. DRI is the next step.
Jones said that DRI isnt a substitute for scrap in the EF, but rather an enhancement. Using DRI creates opportunities for the furnace operator. By combining DRI with low-quality scrap, the operator can realize a large discount on inputs and still achieve the same melt chemistry.
That said, he acknowledged that the new options also put a lot more variables in the supply chain. The International Iron Metallics Association is doing a lot of work on value and use models that will help the industry understand these materials and make best use of them.
DRI is a fairly well-proven technology worldwide, said Thomas A. Danjczek, president of the Steel Manufacturers Association. Everyone wants to gain efficiency, but that is just one part of the equation. Electrical energy is about two-thirds of the melt, but the other third is chemical energy, so the charge is very important.
There are five main factors in the DRI decision for an EF operator: the overall availability of scrap; the availability of scrap with low residuals; the all-in costs of DRI vs. scrap at charge; the consequential costs of power and fuel; and the required quality and characteristics of the steel and finished products. Any melter prefers to use scrap, not any alternative. ... DRI is a substitute that allows for the use of lower-quality scrap, Danjczek said. DRI is not going to be a home run for anyone. (But) it can be cheaper to build an EF with a DRI unit of some kind than to build a new blast furnace.
Which is not to say that DRI doesnt have benefits for blast furnaces. Absolutely we consider DRI to be an opportunity for us and for the industry, said Steve Baisdan, vice president of strategy for Cliffs Natural Resources Inc., Cleveland, which supplies blast furnace pellets in North America.
Cliffs, which has had some experience providing ore specifically for DRI, is poised to modify as much as half of the 5 million tons per year produced at its Northshore Mine on Minnesotas Mesabi Range to DRI-grade ore, said Bill Hart, the companys chief strategy and marketing officer. Most ore is typically 60- to 65-percent iron and 4- to 5-percent silica. Our DRI pellet from Northshore is 68-percent iron and less than 2.5-percent silica and alumina. It would take about a year from the time we got the go-ahead from the board.
All of the existing DRI processes can use any grade of ore, but high gangue in is high gangue out, he added.
Ralph Smailer, director and owner of Pittsburgh-based Metserv Consulting and an old hand in DRI going back to 1967, agreed. He noted that the old divisions between producers of long products and flat-rolled steel are diminishing and that both EF and blast-furnace mills have operational and metallurgical reasons for including DRI in their supply chains and melt chemistry.
Smailer is optimistic about the new generation of processes being licensed. However, looking back, most of the current technologies have not quite lived up to expectations.
DRI isnt quite the mix-and-melt ingredient that it seems to be, he added. If you are going to go for DRI or HBI, then you really have to go all the way and modify the furnace for optimal energy and materials use.
In many cases, DRI cant be added to a blast furnace because of its physical strength, Henry Gains, vice president of marketing at Midrex, said. That is what led to HBI.
The next step is the thermal reactor system process being developed with Praxair, Gains said. The focus on coke oven gas as a reductant not only provides a high fuel-value gas, but reduces the amount of coke required to metalize the ore. For every 10 percent that the burden is metalized, you increase productivity by 8 percent and realize a fuel saving of 7 percent.
Overall, Gains sees the spectrum of fuels broadening to provide both EF and blast furnace operators with more options and greater efficiency. Even the charge itself in effect becomes a fuel when its retained heat is added to the equation. Hot discharge led to HBI and hot DRI in the 1980s and 90s, he said. Now the next big thing is new fuels and a series of options to transfer DRI to the furnace.