NEW YORK Nucor Corp.s ramp-up of its direct-reduced iron (DRI) facility in St. James Parish, La., has gone well operationally, but start-up costs of $20.7 million in the first quarter were higher than anticipated, company executives said.
"From an equipment perspective, from an operational perspective, the start-up was great," chairman, president and chief executive officer John J. Ferriola said during an April 24 conference call.
Nucor is working to reduce yield loss at the facility, and start-up costs are expected to fall to between $10 million and $15 million in the second quarter, chief financial officer James D. Frias said.
To help the process, the company is installing a briquetter in Louisiana that will be operational in the next two to three weeks, Ferriola said.
Meanwhile, the facility reached quality and output targets shortly after start-up, with achieved metallization rates of 96 percent and carbon levels exceeding 4 percent, he added.
The Charlotte, N.C.-based steelmaker is planning a three-week outage at the facility in June to make some adjustments to the furnace and the conveyor system, but these costs will be minor, Ferriola said.
The facility is still expected to produce 500,000 tons of DRI in the period, exceeding first-quarter output of 455,000 tons, with the companys steel mills already consuming the material.
"Our mills are receiving it and theyre consuming it at a high rate of about 30 to 40 percent of the total charge," Ferriola said, adding that the company has pushed the rate to more than 50 percent on an experimental basis.
"At the end of the day, if obsolete scrap drops to a very low level we can put more obsolete scrap into our furnace and achieve the same iron unit quality by putting more DRI into the furnace," he said in response to an analysts question regarding how the DRI facility aids Nucor in its raw material strategy.
In terms of the competitiveness of DRI in the current raw material price environment, Ferriola said Nucor does not anticipate current low prices for iron ore and coking coal to continue.
"These are unusually low numbers, and frankly its a result of demand for steel slowing down and the slowdown in China. Thats going to change," he said.
Despite recently suspending its drilling program with Encana Oil & Gas (USA) Inc., a subsidiary of Canadas Encana Corp. (amm.com, Dec. 17), Nucor is confident of the Louisiana facilitys energy supply this year, Ferriola said.
Natural gas supply from the joint venture was slightly less than 100,000 British thermal units (mmBtu) per day in the first quarter, and the DRI plant consumes between 75,000 and 80,000 mmBtu per day, Ferriola added.