ENERGIRON DR TECHNOLOGY AND NATURAL GAS: THE NORTH AMERICA PERSPECTIVE

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1 2ND WORLD DRI AND PELLET CONGRESS ABU DHABI (UAE) APRIL 2014 ENERGIRON DR TECHNOLOGY AND NATURAL GAS: THE NORTH AMERICA PERSPECTIVE ANGELO MANENTI VP NORTH AMERICAN BUSINESS DEVELOPMENT TENOVA HYL ENERGIRON ALLIANCE

2 COMPETITIVE DRI PRODUCTION IN NORTH AMERICA

3 WHY TO PRODUCE DRI IN US THE NATURAL GAS BOOM > Thanks to the exploration and the extraction of the shale gas, US has become the largest Natural gas producer in the world Natural gas production by source (trillion cubic feet) > This means long term availability and price stability for natural gas > The rapid increase in natural gas supply managed to lower its price. For 2013 Henry Hub spot prices averaged $3.73/MMBtu for Projected Henry Hub natural gas prices average $3.89/MMBtu in 2014

4 WHY TO PRODUCE DRI IN US THE NATURAL GAS BOOM The US gas price advantage is even more evident if we compare the US price situation with the rest of the world: > only few years ago, in 2008, natural gas prices were in line with European and Japanese prices at around 13$/Mbtu > Currently prices of natural gas in US are about 1/3 of the European price and 1/5 of the Japanese s price! This makes processes that produce metallics utilizing natural gas as primary energy source, such as DRI extremely attractive in US

5 WHY TO USE DRI IN US - RAW MATERIALS MARKET & EAF Scrap in US is the metallic of choice but: Metallic Charge > During high demand very difficult to find > The good stuff is expensive > High grade steel products require iron sources (metallics) low in or free of tramp elements DRI/HBI Scrap Therefore: Producing on site metallics in the form of DRI can solve or minimize the effect of fluctuating market scrap price and reducing the overall metallic charge cost EAF

6 IMPACT OF DRI USE ON STEEL PRODUCTION > Dilute residuals > Consistent chemistry > Consistent C content > Carbon already present with the metallic in charge > Better slag foaming > No energy penalty for high carbon DRI when charged Hot to EAF More consistent and predictable Meltshop operations

7 DRI VS. SCRAP ECONOMICS IN USA & NORTH AMERICA

8 SCRAP VS. DRI: ECONOMICS > With current iron ore and gas/utilities prices, DRI can be produced in US with ENERGIRON technology from 250 to 300$/t (depending on raw material prices) with a metallization of 95%, carbon around 4% and no residual elements > For the same level of low inclusion an equivalent scrap mix will cost today around $380/t and Pig iron costs more than $400/t > Consequently using DRI instead of prime scrap and Pig Iron today will generate a saving of a at least $100/t > This means that a 2.5 Million ton/y DRI production unit in US (such as NUCOR) could potential generate $250,000,000/year in raw material savings! > The payback on the investment is relatively fast and ROI is high

9 US DRI PROJECTS : ONLY TWO PROJECTS.SO FAR 2,500,000 t/y - NUCOR St. James Parish, Louisiana (ENERGIRON) > The only US plant in operation > Started up end of Dec 2013 > Reached 95% metallization and 4% carbon in the first 24 hours of operation > Investment cost: $750 Million 2,000,000 t/y VAI Corpus Christi TX (Midrex) > Still in the engineering phase, not yet permitted > Not operating until 2016 > Investment cost: $750 Million

10 DRI PRODUCTION IN NORTH AMERICA.THE FUTURE > We can estimate that by the end of the current decade, the production of DRI in US could reach 10 Million t/y from the present 2.5 Million t/y > A large portion of this amount will be produce and consumed internally by NUCOR > The majority of the foreseen U.S. production will be controlled directly from steel mills and not by commercial operators > Consequently only a very limited amount of US produced DRI will be available to the market for purchase

11 ENERGIRON ZR AND US MARKET TRENDS

12 US DRI MARKET TRENDS Beside the large module plants already producing in US such as 2,5 million t/y NUCOR (Energiron) and the one announced, such as the 2 million t/y VAI TX (Midrex), the new market trends in US for DRI production are: > High Carbon DRI (C>4%) - HCI > Micro module units ( ,000 t/y DRI plant)

13 HIGH CARBIDE IRON DRI (HCI) > Because in US, DRI is mainly used in conjunction with scrap to dilute residuals and substitute pig iron the normal percentage in use is about 30% to 40% of the total charge > ENERGIRON can produce High Carbide Iron DRI (HCI) with carbon content around 4% that allow easy storage and transportation due to less reactivity with air and it is more efficient source of Carbon to the EAF > Consequently HCI DRI it is the preferred type of DRI by US steel makers > NUCOR plants using HCI DRI (C >4%) form ENERGIRON Louisiana plant, experience a dramatically increase in production and reduction of operating cost at the EAF due to the extra energy given to the bath from the High Carbon pellets, better foamy slag operation and dramatic reduction of injected Carbon

14 HCI DRI TO EAF: BENEFITS > Carbon in the DRI is pure; no presence of ashes, sulfur, volatile matter, etc. > Carbon in the DRI minimizes/eliminates the use of external carbon injection to EAF > Carbon is fed without any gas carrier > Carbon in DRI has higher yield than injected carbon. > It is easy to match Oxygen injection with the Carbon input (from DRI) and this is controlled according to the DRI feeding rate > high CO generation, easily create and maintain foamy slag throughout the melting process

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16 STABILITY OF HIGH CARBON DRI > The High-C DRI from ENERGIRON ZR scheme, exhibits a significantly lower reactivity than the standard DRI > The onset temperature for the High Carbon DRI is higher (>206 C) than for standard DRI (140 C) > The tendency to re-oxidize is lower for the High Carbon DRI (ODR ~ negligible) than that for a Standard DRI (ODR~ 200 liters/ton/day)

17 MICROMODULE: ,000 METRIC T/Y DRI PLANT The tendency in the DRI industry has been in recent years for plants to grow in capacity to take advantage of economies of scale (NUCOR is an example). For the small to medium size steel mill or foundry, this is of little consequence since they cannot justify the investment for such a large DRI facility. That s why TENOVA HYL developed and started up in Abu Dhabi the Micromodule concept, a high efficiency, low investment cost DR module for producing up to 250,000 metric tons per year of high quality, high carbon DRI. The Micromodule allows for targeted on site production of High Carbon DRI that can easily substitute pig iron and high quality, high price scrap in the metallic charge at a substantial savings. The Micromodule is based on the fully developed and many years successfully proven Energiron ZR Technology.

18 MICRO MODULE: GULF SPONGE IRON, ABU DHABI First Micromodule > 200,000 metric t/y > ZR plant for high carbon DRI > Started up 2010

19 MICRO MODULE: GULF SPONGE IRON, ABU DHABI

20 MICROMODULE: COMPETITIVE ADVANTAGES > Small footprint that can easily fit in existing Meltshop > Low Capital Cost (lower financial commitment) > Onsite DRI production and substituting high price low residual scrap and pig iron, reducing steel production cost. > DRI improves liquid steel quality, enabling to meet any finished product specification and possibly enter new market grades

21 NUCOR PROJECT LOUISIANA USA

22 NUCOR > With a production capacity of approximately 27 million tons, Nucor is the largest producer of steel in the United States > Nucor pioneered in USA steel production with electric arc furnaces and mini-mills > Because of its need of virgin iron ore for its flat products plant Nucor bought American Iron Reduction plant and shipped it to Trinidad (2007) > NUCOR selected ENERGIRON technology for its only USA (and brand new) DRI plant ( )

23 NUCOR LOUISIANA - KEY FIGURES > Located in St. James Parish, Louisiana (USA) by the Mississippi river > Plant designed for 2.5 million tonnes of DRI, producing currently at above 96% Metallization and 4.2% Carbon Content > Iron ore pellets are received via ocean going vessel in a port on the Mississippi River > DRI is shipped to various Nucor plants via river barge

24 NUCOR DRI PLANT - MISSISSIPPI PORT FACILITY First vessel of samarco iron ore delivery

25 NUCOR - THE LARGEST DRI PLANT IN THE WORLD

26 NUCOR - PROJECT MILESTONES > February 2011 Authorization to Proceed > August 2011 Start Soil Stabilization > September 2011 Start Piling > March 2012 Start Steel Erection > October 2012 Set Reactor > October 2013 Mechanical Completion > November 2013 Start Hot Commissioning > December 2013 Successful start up

27 NUCOR DRI PLANT CORE AREA

28 NUCOR DRI PLANT REACTOR AND GAS HEATER Reactor tower: 110 mt Reactor diameter: 6.5 mt

29 NUCOR DRI PLANT CONTROL ROOM

30 NUCOR CEO, JOHN FERRIOLA INTERVIEW ON CNBC John Ferriola - Chairman and CEO of Nucor, interviewed for CNBC by Jim Cramer on march 10,2014

31 NUCOR CEO, JOHN FERRIOLA INTERVIEW ON CNBC

32 NUCOR STEEL LOUISIANA > World s highest capacity single DRI module 2.5 million tpy capacity Energiron ZR 96-97% metallization 4 % carbon > Started up Dec. 24, 2013

33 THANK YOU Angelo A. Manenti Vice President North America Business Development +1(412) ext. 2265