AMM Steel Scrap Conference: DRI panel DRI & Opportunities Ahead

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1 AMM Steel Scrap Conference: DRI panel DRI & Opportunities Ahead Robert Bellisle October 31 st,

2 Steel production metallic source Metallic Source Scrap Iron Ore New Obsolete Reduction Process BF/RH Home Prompt DRI HBI Pig Iron Iron Nuggets 2

3 BF/CO dominates steel landscape Iron production (tons million) as of December 2012 Pig iron / Blast Furnace Direct Reduced Iron (DRI) European Union Eastern Europe North America South America Asia Oceania Worldwide 70% of steel is made via BF/BOF with 25% scrap as feed material Remaining 30% is made via EAF s with almost exclusively with scrap due to its low price but it limits the range of products manufactured DRI on the other hand can be made at competitive price and is higher quality as a scrap alternative Source: Deloitte 2013, Remaking the steel industry, Lower cost natural gas and its impact 3

4 DRI Production ( mt) 841 Canada 3,067 11,582 Iran Egypt 5,530 Mexico 3,250 mt Trinidad & Tobago 4,977 Saudi Arabia India 19, Peru Venezuela 4,594 South Africa 1,567 1,606 Argentina Total : 55,357 mt Top 6 producers Source: AM marketing 4

5 Changing landscape of steel, natural gas a game changer US$/mmbtu Natural Gas prices Import price in China is ranges from $12-15/mmbtu Japan LNG German Border UK NBP spot US Henry Hub (trillian cubic feet as of April 2011) 5, Others US$/mt US$/mt HBI prices No 1 bundles For IOP $20/ton premium for conversion to 68% Fe content IOP 62% Fe CFR China (Righ hand axis) 3,031 Proven natural gas reserves (incremental) USA Technically recoverable shale gas resouces VenezuelaAlgeria Australia Impacts of natural gas: 1, China Norway India Reduction in energy costs, a 30% reduction expected Increase in production and use of DRI vs. scrap Fall in the price of scrap due to reduced demand due to Increase in supply of DRI Increase in supply of obsolete scrap by 2020 Fall in the price of iron ore due to Increased global supply and Increased supply of DRI and scrap Source: Deloitte 2013, Remaking the steel industry, Lower cost natural gas and its impact, European Commission Quarterly report on European gas markets, Iron age, Platts Canada LibyaNetherlands 5

6 Volatile gas prices eliminated the domestic DRI industry in the early 2000 DRI plants time line Nucor Louisiana plant: 2.5 million tons to start mid 2013 Potential second and third modules DRI expected to contribute 10 million tons replacing mainly BF/CO Voest-Alpine Sthal to build 2 million tons HBI plant 6-10 companies considering building DRI plants 2013 Nucor LA start up Georgetown steel closed AIR dismantled Tuscaloosa steel dismantled AIR start up Tuscaloosa steel start up 6

7 Advantages of DRI in EAF steel making Predictable chemistry Less back charging Low tramps Low Nitrogen Good Carbon & foamy slag Blending for flexibility Low capital & operating cost Noiseless continuous steelmaking 7

8 DRI impact on levels of residuals found in the scrap supply chain No. 1 Bundles Residuals (Cu+ Ni + Cr+ Mo + Sn)% Bushlings Cut Structurals Turnings # 1 HMS RR Rails Plate & Structural Typical steelmaking requirements are: Tinplate/EQ sheet- 0.1 DD/DQ sheet 0.12 CQ sheet 0.22 SBQ Shredded # 2 HMS # 2 Bundles HYL DRI/HBI Source: The increasing role of direct reduced iron in global steel making by F Grobler and RCA Minnitt, Journal of the South African Institute of Mining and Metallurgy, March/April

9 DRI (B) Value in use (VIU) in EAF steel making DRI(B) as a low residual metallic with consistent chemistry is an excellent virgin iron unit for the EAFs producing higher end steel grades. It helps the steelmaker to exploit charge mix economics through the TCO route: to substitute Pig Iron and/or Busheling, enable higher use of obsolete scrap through dilution of residuals and even densification of scrap charge. VIU benefit of DRI(B) varies with the quality based on metallization, C, S, P and Gangue content. It also depends on the melt shop equipments, control on metallurgical practices and personnel skill + experience. Higher carbon in DRI(B): enables higher O2 usage aiding foamy slag practice, increasing the efficiency of FeO recovery and the CO gas evolution in the bath helps in the floatation of inclusions and lowering dissolved gases like N2 (FeO + Fe3C 4 Fe + CO); extra C is a source of chemical energy saving power consumption. DRI (B) is ideally fed directly in to the bath through the EAF roof to rein in the full benefit, improving the productivity of a melt shop. The continuous charging system can be installed as shown in the next slide a recent installation at ArcelorMittal Canada. 9

10 ArcelorMittal Canada, CCW site with the DRI direct feed and continuous charging system 10

11 Components impacting the variable cost of DRI Yield Process Control Iron Ore Natural Gas Price Reducibility Price Consumption Market Transportation Ore Quality, Size, Binder Market Transportation Process Control Productivity Electricity Consumption Price Consumption Price 11

12 US steel producer s cost advantage will be further extended due to low cost DRI Hot-rolled sheet cash costs $/t Labor Energy Raw Material e e e e 2013e 2013e 2013e China Integrated US Integrated US Minimill Source: J.P Morgan research; 85% utilization assumed China Integrated US Integrated US Minimill US Minimill with DRI US steel mills benefit from a raw material advantage over most foreign mills Iron ore sold at discounted world prices from Cliffs Natural Resources and captive iron ore mines Metallurgical coal sold at annual contracts below global seaborne prices Healthy supply of domestic scrap With a combination of DRI, domestic iron pellets and shale gas EAF will be able to produce the lowest cost steel in the world Assuming a 45% DRI feed per charge a mini mill could produce HRC at approximately $425/ton vs US integrated at $488/ton and Chinese integrated at $610/ton 12

13 Disadvantages of DRI Lower yield Energy intensive (Gangue) Increased slag handling Higher refectory cost Critical process balance Fire Hazards (Pyrophoric) Delicate storage, handling & transport Increased baghouse dust & fines DRI Chute Blockage 13

14 Being ahead of the competition curve, load stations an alternative to Greenfield DRI projects Modify the furnace roof cover to center precisely the DRI drop in the center of the delta. New baghouse with collectors to each DRI transfer points. New foundation and steel structure to support silos and conveyors. New additional storage area in the existing building A. New nitrogen supply to silos. New dry fire sprinkler system. New meltshop melting model program with DRI. Engineering and management in a fast track mode. 14

15 Thank you 15