As several possible producers assess their proposed investments in direct-reduced iron (DRI), steelmakers are carefully recalculating all of the variables in their recipes and in their economic models for inputs.
Analysts have forecast annual demand of anywhere from 8 million to 12 million tonnes in the United States--and, indeed, about that much has been planned. But beyond the startup of Charlotte, N.C.-based Nucor Corp.s DRI facility in St. James Parish, La., late last year, no greenfield capacity will be built for more than a year, so steelmakers will have time to refine their calculations.
Today we have roughly 12 million (tonnes) proposed or planned, but I think 10 million (tonnes) per year actual demand might be a bit on the high side, said Ralph Smailer, director and owner of Pittsburgh-based Metserv Metallurgical Consulting. If all the proposed production were built, that would translate to an 80-percent operating rate--a fair number. The actual demand for DRI has just as much to do with the level of scrap exports and quality grades as it does with the pure price of scrap or DRI itself. There has been a huge increase in export demand for scrap from the United States, he said.
Smailer said that transportation is a huge component of the delivered price of DRI at the steel mill, suggesting a three-way calculation: for any given DRI project, does it make more sense to bring the ore to the gas, the gas to the ore, or the DRI to the mill? Among the new DRI plants in service and planned, there are examples of each possible combination.
The demand is for low-residual inputs, Smailer said. Im a metallurgist, and I have to say, from the technical side, the renaissance of DRI has been fun to see. He noted, for example, that pig iron is not free from impurities, especially phosphorous, which reduces ductility. It is easy to remove phosphorous in the electric-arc furnace (EF) at cool temperatures for a basic slag, then increase to finish. But that adds extra time, maybe 20 minutes, to a short cycle.
So for the EF operator, the calculation is not just the price of pig iron, scrap or DRI, but cycle time, product mix, energy costs and quality control. There are similar options for blast-furnace operators, Smailer said. Some operators typically run 40 percent ore-based metallics for flat-rolled steel. Another area for DRI is steel for long products. That would require a lower percentage of DRI, but long manufacture could benefit from a sweetened charge.
While Smailer smiled at the current enthusiasm for DRI, he noted that this is not his first rodeo. In the mid-1980s everyone was studying it. It always came down to transport costs. Now, he said, smaller EF operators are studying the idea of a multi-mill consortium for captive DRI production. Both Charlotte-based Midrex Technologies Inc. and Coraopolis, Pa.-based Tenova Core Inc. have small modular units, he said, so several EFs could club together on a big joint DRI plant, but there also are viable options for smaller, exclusive production. The recent announcements have all been large, but the plants dont necessarily have to be. For the big units, water transport is huge, Smailer said.
With marine transport a key factor in the DRI supply chain and increasing production in several regions, not just North America, the stage is being set for a growing global commercial market. Indeed, the World Steel Association began tracking DRI production data in March 2013, and none too soon, according to Bekir Baris Ciftci, manager of steel business analysis in WorldSteels economics group.
In a global sense, the second half of 2013 was very significant, he said. We saw rapid capacity development around the world, but importantly it was not evenly distributed. Major DRI capacity additions are restricted to certain areas where raw materials and production costs give an advantage. The growth is local or regional, and is only global in the aggregate.
All around the world we see new capacity, Ciftci said. In the Middle East and North Africa, where scrap is insufficient but there is abundant gas, there is a great deal of growth. We see new capacity in Iran and Egypt. The (United Arab) Emirates have two new modules expanding. That region has been a net importer so regional production is a logical route to increase steel production, and at less capital investment than a blast furnace complex.