DEVELOPMENTS IN IRONMAKING AND OPPORTUNITIES FOR POWER GENERATION

DEVELOPMENTS IN IRONMAKING AND OPPORTUNITIES FOR POWER GENERATION 1999 Gasification Technologies Conference San Francisco, California October 17-2, 1999 Geoff Wingrove Global Marketing Manager BOC Gases Don Satchell Section Director, Gases Technology BOC Gases Brian Keenan Director Power Generation & Machinery BOC Gases Clara van Aswegen Zone Marketing Manager BOC Gases

Opportunities for Power Generation Page 2 of 19 October 2, 1999

Opportunities for Power Generation Page 3 of 19 October 2, 1999 1. INTRODUCTION Current production of steel is around 76mt/y worldwide, recovering gradually from the Asian flu, should grow beyond 8mt/y within the next few years. At a price of $3/t for crude steel product, primary steel production is a $25bn/y business. Steel is still very much a strategic raw material that is fundamental to developed and developing economies and virtually every country in the world has steel production facilities in some form. Steel is also one of the most recycled commodity raw materials, with around 4% of production based, one way or another, on re-processing of scrap. Iron is basically an intermediate product that is used predominantly as feedstock for steelmaking, although to a lesser extent (65mt/y), it is also used as an industrial product in its own right, for castings etc. The ironmaking blast furnace is the dominant unit operation for iron production and has been around for centuries, and modern production facilities have evolved into highly efficient process plants through a series of incremental process improvements. However, in recent years, new ironmaking processes, many of which are based on gasification technology, have been developed to challenge the dominance of the blast furnace. All these processes depend upon the efficient production and utilization of CO/H 2 reducing gas mixtures. As part of the BOC Group strategy to explore opportunities beyond our traditional air separation markets, we have participated in a number of evaluations of new iron making technologies, often involving involve power generation as an added value product. Based on published data, the objectives of this paper are as follows: To review the status of current and new ironmaking processes, To illustrate the power generation potential from combined cycle power plants attached to these processes To illustrate the value of the offgas necessary to meet the market power costs. It must be noted that BOC does not support one steel process in preference to another and no such inference should be concluded from the data within this paper. 2. OVERVIEW OF THE IRON MAKING PROCESS Iron is made by reduction of iron oxide ores, either as hematite (Fe 2 O 3 ) or as magnetite (Fe 3 O 4 ). Carbon, CO and H 2 will all reduce these oxides to pure iron, though at different rates and under different conditions of equilibrium. There is no need to go into the details of these reactions here. For the purpose of this analysis, it is sufficient to note that all the iron oxide-hydrogen reduction reactions are endothermic and all those involving CO are endothermic except wustite reduction. Reaction rates are higher for the hydrogen reactions. Reactions rates, chemical equilibrium limitations, and heats of reaction have significant effects on the overall ironmaking process efficiency.

Opportunities for Power Generation Page 4 of 19 October 2, 1999 Broadly speaking, there are two classifications of iron making processes: Those that produce a molten (hot metal) product and those that produce a solid product. Generically, the later product type is called Direct Reduced Iron (DRI). The hot metal processes include the blast furnace,, and a suite of bath smelting processes characterized by the gasification of coal and the smelting of iron ore within a liquid slag/metal bath. A molten iron bath is in fact an ideal gasification medium, producing few oxidized or hydrocarbon species and very little soot, and from time to time there have been development projects aimed specifically at producing co-products of iron and synthesis gas. However thus far, none of these developments have come to fruition. The more usual clamor from the iron and steel community is to minimize the amount of off-gas produced, which means recovering and utilizing within the ironmaking process as much of the potential energy of the syngas as possible. The watchwords for these recovery processes are Post Combustion (burning of CO to CO 2 ) and Heat Transfer (from the combusted gases to the smelting processes). BOS gas Lump Iron Ore Fine Iron Ore Sinter or Pellet Plant Coal by-products Stoves Power Plant Coke Oven Coal Tuyeres Coke Blast Furnace 3 3 MJ/Nm3 Coal gasification in Tuyere Molten Slag Hot Metal Coal O2 Dryer Distributor Coal Injection System Figure 1: Schematic of Blast Furnace Ironmaking Process The Ironmaking Blast Furnace Basically, the blast furnace converts an oxide iron ore feed, usually predominately Fe 2 O 3, and fluxes, for example limestone, to a carbon saturated molten iron product and a molten oxide slag by the counter-current contacting of hot air blast with the iron ore, coke, and flux feeds in a shaft reactor. It was the invention of coke that really made large-scale blast furnace ironmaking viable. The coke has three primary functions in a blast furnace. First, the coke is gasified with the hot air feed in the tuyere region of the blast furnace to produce a CO rich reducing gas that converts the iron ore feed to solid elemental iron. Secondly, it provides sufficient heat to melt the iron and slag forming materials. Third, coke provides a self-supporting porous bed that facilitates [1] contact between the ascending reducing gases and the descending solids and [2] drainage of the molten iron and slag phases. If coal, rather than coke, is used as the bed medium, the coal volatile matter components rapidly plug the bed. Coke is produced from coal by high temperature (9-11 C) carbonization via indirect heating, producing gaseous fuel as a by-product. On a modern works, while the sinter, coke and blast furnaces are not

Opportunities for Power Generation Page 5 of 19 October 2, 1999 close-coupled, there is significant cross usage of by-products, as shown in Figure 1. For example, coke oven gas can be used a fuel to preheat the blast furnace air feed, coke fines can used in the sinter plant, and blast furnace gas can be used as a fuel for the coke ovens. The overall fuel and energy balance, including coke and sinter making (GJ/tHotMetal) are summarized in Table 1. Table 1. Blast furnace energy balance Inputs Outputs Coal: 21.5 Power :.77.13 Steam :.12 Fuel Gas: 2.77 7.4 Net Consumption: 17.6 Energy content of Metal and Slag 7.1 Losses 7.1 If the net export gas is converted to electricity, the resulting overall surplus - after internal consumption - is about 26kWh/tHM, equating to 6MW for a 2million t/y plant. 3. DRIVERS FOR NEW IRONMAKING PROCESSES If the blast furnace is a model of industrial process efficiency, why does it need improvement? The full analysis is complex of course, but it can be distilled for our purposes into a few key points There is continuing restructuring of the industry. In 1985, less than 5% of the steel industry was in private hands. By 25, private ownership should increase to 9%, resulting in increased competitive pressures, demands for higher economic returns, and an increasingly fluid market. Share holder value and return on assets have entered the vocabulary! Capital intensity of a conventional integrated iron and steelmaking complex is very high and very large new plants are required in order to capture the economies of scale required to be economically competitive with established depreciated plants. POSCO s benchmark new works in South Korea has a ~12mt/y capacity, with investment cost of about $12bn. On the other hand, electric steelmaking Mini-mills can produce comparable quality products at competitive cost at a much smaller scale (1mt/y). Initially, the mini-mills could only produce lower grade products, such as reinforcing bar. But, subsequent technical developments in casting and rolling have enable the production of higher value flat rolled products. The higher quality products demand higher purity feedstock with minimal levels of tramp elements such as copper. The variable availability of high-grade scrap to feed the Mini-mills and the volatility of scrap price opens the door for scrap substitutes in the form of new iron processes, particularly DRI production processes.

Ore Hopper Developments in Iron Making and Opportunities for Power Generation Page 6 of 19 October 2, 1999 Even with modern technology, the environmental impact of a conventional blast furnace based ironmaking is significant and the cost of abatement measures can be enormous. As each major investment decision is made at existing works, for refurbishment of existing plant, the new process routes, with reduced environmental impact, become increasingly attractive. In particular, the new processes eliminate the need for coke. Coke production has historically been a significant source of particulate and noxious vapor emissions. The need for sintered iron ore feed is also eliminated, a process often associated with significant dioxin emissions. 4. The New Ironmaking Processes A direct consequence of this need for a low cost alternative to scrap and blast furnace iron is the suite of emerging technologies, in varying stages of realization, which have been under development since the 196s. NATURAL GAS CIRCORED To Settling Pond Iron OreVenturi 1 Cyclone CFB STAGE I Recycle Cyclone Secondary Process Gas Cyclone Process Gas Heat Exchanger Chiller Gas Scrubber Filter Process Gas Compressor Makeup To Settling Pond gas FINMET STEAM REFORMER Air Natural Gas Ore HOPPER SYSTEM RECYCLE GAS SCRUBBER REDUCING REACTORS IRON CARBIDE FINES Cyclone 2 Air Cyclone 1 Air Solids Fuel Air Lift Gas FLUID BED STAGE II Flash Heater Hot Briquetting HBI Product Fuel Bleed as Fuel Process Gas Heat Air Steam Natural Gas HEAT EXCHANGER CO2 REMOVAL Gas Natural Air Furnace Reducing Gas RECYCLE GAS COMPRESSOR BRIQUETTING MACHINE Hot Briquetted Iron MIDREX/HyL HBI IC AREX EAF BOF HBI CIRCOFER FASTMET HOT METAL LUMP & AGGLOMERATED MBF TECHNORED COREX BATH SMELT (DIOS) COAL/COKE COAL Figure 2. Ironmaking Processes 1 As illustrated in Figure 2 and Table 2, as well as the basic Hot Metal vs. Direct Reduced Iron (DRI) classification, there are other important characteristics which distinguish groups of processes: ore fines based vs. lump or pellet, coal based vs. natural gas based, air based vs. oxygen based for example. These distinctions not only significantly impact capital and operating costs, but also, together with the efficiency of energy conversion and utilization, determine the quality and composition of off-gas produced. Process selection ultimately is strongly dependent on local conditions such as availability and cost of natural gas, power and coal, as well product requirements.

Opportunities for Power Generation Page 7 of 19 October 2, 1999 Table 2. Summary of basic characteristics of selected new processes Process Type Reductant/Fuel Ore Type Product Status Co-products Hyl III Shaft Natural gas Pellet/ lump HBI/ DRI Commercial CO2; H2O; Power Midrex Shaft Natural gas Pellet/ lump HBI/ DRI Commercial Circored Fluid bed Natural gas Fines HBI Commissioning Finmet Fluid bed Natural gas Fines HBI Commercial Iron Carbide Fluid bed Natural gas Fines Carbide fines Commercial Circofer Fluid bed Coal Fines HBI/ DRI Lab scale Romelt Bath Coal Fines / any Hot metal Pilot Steam Shaft/ Gasifier Coal Lump/ pellet Hot Metal Commercial Syngas DIOS Bath Coal Fines Hot Metal Pilot Syngas; Steam; Power Bath Coal Fines Hot Metal Pilot Syngas; Steam Cyclone Coal Fines Hot Metal Pilot Syngas; Steam Fastmet Inmetco Rotary Hearth Rotary hearth Coal plus gas Fines DRI Pilot Steam/Power Coal plus gas Fines DRI Commercial Steam/Power Some points of note regarding the table Midrex and Hyl are the only truly established gas based DRI processes. Both are pellet/lump ore based, which results in a $1plus/t operating cost disadvantage compared to fines based processes. Gas based fines processes Finmet and Circored are currently in the early stage of industrial operation. is the only commercially operating alternative to the blast furnace for hot metal production. is the only hot air based direct smelting process, enabling recycle of a significant proportion of off-gas as fuel for air preheating. Circofer is the only process designed specifically to produce DRI using syngas from a coal gasifier. This process is still in the early stages of development. The rotary hearth processes, while requiring a relatively small amount of fuel gas, are predominantly coal based, with reducing gas generated within pellets made from a mixture of fine ore and coal. These processes represent an alternative to Circofer and other potential coal gasifier based processes.

Opportunities for Power Generation Page 8 of 19 October 2, 1999 5. OFF-GAS UTILISATION : MAKING A VIRTUE OUT OF NECESSITY ASU Fuel: NG Syngas Coal Conditioning CO2 removal Sulfur removal Scrubbing Metallurgical Process Co-Products Power Steam CO2 H2O Process Chemical Metallurgical Product Hot Metal DRI/HBI Figure 3. Offgas utilization Optimizing the utilization of energy in the off-gas really is fundamental to the success of these processes, particularly for the hot metal producers where raw energy cost is typically 3~4% of variable operating cost. The higher the fuel requirement, the more critical it becomes to recover the energy in the offgas. Moreover, the capital cost associated with these energy recovery systems significantly impacts overall project finances. As shown in Figure 3, generally there are a number of different uses for the off-gases, including: Fuel for power generation Fuel for the process Feedstock for other metallurgical or chemical processes, CO2 for methanol for example The potential energy recovery opportunity for the processes described earlier is shown in Tables 3 2 and 4 2, which present the overall specific energy balances per metric ton of iron product. This basis gives a clear indication of the scale of energy recovery plants, which, depending on the process, could up to 2MW as electrical power for a nominal 1 million metric ton per year plant.

Opportunities for Power Generation Page 9 of 19 October 2, 1999 Table 3. Energy data for the Smelting Reduction Processes ( per tone hot metal) Inputs: DIOS Romelt Coal kg 946.8 711.2 62. 623 63.7 (*) Fuel MJ - 5.5 1 47 57.5 Electricity kwh 75 74 7 6 233 HP Steam kg - - - 394 - LP Steam kg - 8 - - - Oxygen Nm3 526 49 6-799 Total MJ 3251 25778 22779 25865 25176 Outputs: Romelt Export Gas MJ 134 771 4 4 - Electricity kwh - 32 - - 3 HP Steam kg - - - 394 - LP Steam kg - 722 1387 742 - Total MJ 134 1243 83 76 276 Net MJ 1911 15535 14479 18265 22416 (*): Coal consumption for Romelt: 12 15 kg/thm Table 4. Summary Energy data for DRI Processes ( per metric ton DRI) Inputs: Midrex Hyl III C red C fer IC Inmetco Finmet Fastmet Coal kg - - - 323.2-445.2-42 Fuel MJ 19 19 116-14 23 126 3258 Electricity kwh 15 1 1 9 23 9 15 6 HP Steam kg - - - - - - - LP Steam kg - - - - - - - Oxygen Nm3 - - - 18 - - - - Total MJ 11856 11819 12519 11692 16116 16929 1398 16832 Outputs: Midrex Hyl III C red C fer IC Inmetco Finmet Fastmet Export Gas MJ - - - - - - - - Electricity kwh - 1 - - - 29-1 HP Steam Kg - - - - - - - - LP Steam kg - - - - - - - - Total MJ - 92 - - - 2668-92 Net MJ 11856 1899 12519 11692 16116 14261 1398 15912

Opportunities for Power Generation Page 1 of 19 October 2, 1999 6. Power Generation Using Process Off Gas As with conventional blast furnace ironmaking, the new ironmaking processes, especially those making hot metal, are significant consumers of electricity so using the process off-gas for power generation can be an attractive proposition. Using the above data and the gas analyses in Table 5, we have carried out a screening study on a number of the new hot metal processes to illustrate the potential for combined cycle power generation in particular. Table 5 presents typical off-gas compositions for iron making processes which we have used in this study. It shows that a number of the gases have very low lower heating values (LHV). Historically these would have to be spiked with natural gas or similar calorific value fuel to raise the calorific value. Table 5 : Comparison Gas Analyses Midrex HYL DIOS HISMELT Hydrogen mol % 3 28.7 57 16.7 19.5 15 4.8 Methane mol %.9 4.4 1.5 Carbon Monoxide mol % 21 5.2 22 44.4 23.5 3 14.8 Water mol % 5.5 1.6 1.5 19.5 2 5.7 Carbon Dioxide mol % 23 56.6 15 24.1 44 2 22.6 Nitrogen mol % 53 2.8 11.8 9.1 15 52.1 LHV BTU/SCF 73.23 1.3 258.6 195.6 82.6 133 58.7 The analysis uses the export gas available from a 1 million metric ton per year hot metal production facility. Conventional wet scrubbing is assumed to remove particulate matter from the process offgas that would be harmful to the gas turbines. Fuel gas compression is required. The gas turbines were selected from the current experienced models which have operated on blast furnace gas without a pilot flame. These turbines are the GE 9 series and the Kawasaki ABB 11-N-2. The GE machine has a can annular combustor design and the Kawasaki machine has a silo design. Tables 6 and 7 show the amount of natural gas required to raise the heating value of the gases to 13 Btu/scf, which is around the lower limit for can annular combustor machines. This value also represents one between the GE 9EC s operating at ILVA which uses Coke Oven Gas to raise the calorific value to above this level and the Kawasaki ABB 11 N 2 gas turbine at Bao Shan, which operates at a lower value.

Opportunities for Power Generation Page 11 of 19 October 2, 1999 Table 6. 6 Hz Applications 13 BTU/SCF Process Offgas pressure Export Gas LHV Natural Gas LHV mixed gas Gas Turbine Export Power Notes Barg Flow Nm3/Hr BTU/Scf Nm3/hr BTU/Scf Kw Blast Furnace 2 13 73.23 1198 132.6 6FA 79757 No excess gas 3.7 27 195.6 195.6 11N2 26862 Excess gas used in HRSG 3 145 82.6 994 136.7 6FA 97414 No excess gas DIOS 2 25 133 133.1 11N2 163476 No excess gas 1 176 58.7 16821 132.1 6FA 16151 Excess gas used in HRSG Table 7. 5 Hz Applications 13 BTU/SCF Process Offgas pressure Export Gas LHV Natural Gas LHV mixed gas Gas Turbine Export Power Notes Barg Flow Nm3/Hr BTU/Scf Nm3/hr BTU/Scf Kw Blast Furnace 2 13 73.23 1198 132.6 6FA 79757 No excess gas 3.7 27 195.6 195.6 9E 199187 Excess gas used in HRSG 3 145 82.6 994 136.7 6FA 97414 No excess gas DIOS 2 25 133 133.1 9E 16461 No excess gas 1 176 58.7 16821 132.1 6FA 16151 Excess gas used in HRSG Tables 8 and 9 show the amount of gas required to raise the heating value to 2 BTU/SCF, selected to enable the analysis to include the next larger frame size of gas turbine. As can be seen from the Tables 6, 7, 8 and 9, in some of the cases there is excess off-gas and this is used in the HRSGs. Table 8: 6 Hz Applications. Fuel 2 BTU/SCF Process Offgas pressure Export Gas LHV Natural Gas LHV mixed gas Gas Turbine Export Power Notes Barg Flow Nm3/h BTU/Scf Nm3/h BTU/Scf kw Blast Furnace 2 13 73.23 2426 23 11N2 164888 No excess gas Midrex.6 - - - - - HYL 4 - - - - - 3.7 27 195.6 195.6 11N2 213866 Excess gas used in HRSG 3 145 82.6 2463 21.2 11N2 175834 Excess gas used in HRSG DIOS 2 25 133 2456 21.7 7FA 28941 Excess gas used in HRSG 1 176 58.7 3551 199.9 7FA 226424 No excess gas Romelt 19

Opportunities for Power Generation Page 12 of 19 October 2, 1999 Table 9: 5 Hz Applications.Fuel 2 BTU/SCF Process Offgas pressure Export Gas LHV Natural Gas LHV mixed gas Gas Turbine Export Power Notes Barg Flow Nm3/h BTU/Scf Nm3/h BTU/Scf kw Blast Furnace 2 13 73.23 2426 23 11N2 164888 No excess gas Midrex.6 - - - - - HYL 4 - - - - - 3.7 27 195.6 195.6 9E 2546 Excess gas used in HRSG 3 145 82.6 2463 21.2 9E 18514 No excess gas DIOS 2 25 133 2456 21.7 9EC 27425 Excess gas used in HRSG 1 176 58.7 3551 199.9 9E 18957 Excess gas used in HRSG Romelt 19 Natural gas Mw = 16.46 It should also be noted that, unlike the IGCC processes, the gas flow rates from the ironmaking processes can be highly variable, rather than constant. As a result, the optimum gas turbine operating conditions can not be necessarily be guaranteed. Additionally, because of the differences in design of gas turbines for 5 Hz and 6 Hz applications, excess gas has been absorbed in the HRSGs in a number of the 6Hz cases. In determining the overall project viability, the balance has to be drawn between the value of the off-gas that would be required to make the ironmaking process economically viable and the value of the gas that allows the power generating company to make its required project returns. The graphs below illustrates the value of the gas at various locations to permit a 12% RIRR (Real Internal Rate of Return). The assumptions we have made in generating this data is as follows: 1) Capital costs were split 6% equipment, 36% engineering, 4% spares. 2) For US / Canada we assumed all equipment / services would be sourced 'in country'. For the rest of world we assumed 5% imported equipment / services. 3) Construction period = 24 months 4) Operation = 15 years 5) Site labour = 15 people 6) Uptime = 97% 7) Auxiliary high calorific value fuel for spiking is priced at 2.5 $/MMBtu for the USA and Canada, 3.6 $/MMBTU for Holland and 6$/MMBTU for China. 8) Local country taxes are included in the analysis Additionally, we carried out a sensitivity analysis to determine the effect of a 1% increase in power output from the same fuel gas amounts, coupled with a 2% decrease in capital. The results of the base case and the sensitivity analysis are given in the following graphs.

Opportunities for Power Generation Page 13 of 19 October 2, 1999 Fuel gas price $/MMBTU USA - Fuel Gas 13 BTU/SCF. Auxiliary fuel at $2.5/MMBTU 8 6 4 2 2 4 6 8-2 -4-6 Power Price c/kwhr Fuel gas price $/MMBTU 1 8 6 4 2-4 -6 USA. Fuel Gas 13 BTU/SCF. Auxiliary fuel $2.5/MMBTU. Power +1%. Capex -2%. -2 2 4 6 8 Power price c/kwhr Canada -Fuel gas 13 BTU/SCF. Auxiliary fuel at $USA 2.5/MMBTU Canada - Fuel Gas 13 BTU/SCF. Auxiliary fuel at $US 2.5 / MMBTU. Power +1%. Capex -2%. Fuel gas price $USA / MMBTU 8 6 4 2 2 4 6 8-2 -4-6 Power cost c/kwhr Fuel gas price $USA/MMBTU 1 8 6 4 2-2 2 4 6 8-4 -6 Power price c/kwhr China - Fuel Gas 13 BTU/SCF. Auxiliary fuel at $6/MMBTU. China - Fuel Gas 13 BTU/SCF. Auxilairy Fuel $6/MMBTU. Power +1%, Capex -2%. 8 8 Fuel Gas Cost $/MMBTU 6 4 2-2 2 4 6 8-4 -6-8 -1-12 Power cost c/kwhr Fuel Gas price $/MMBTU 6 4 2-2 2 4 6 8-4 -6-8 -1 Power Cost c/kwhr Holland - Fuel Gas 13 BTU/SCF with Auxiliary fuel at $ 3.6 / MMBTU Holland - Fuel Gas 13 BTU/SCF +1% Power, -2% Capex Auxiliary Fuel at $3.6 / MMBTU 8 Off Gas price $/MMBTU 6 4 2-2 2 4 6 8-4 -6-8 Power Price c/kwhr Off Gas Price $/MMBTU 8 6 4 2-2 2 4 6 8-4 -6 Power Price C/KwHr

Opportunities for Power Generation Page 14 of 19 October 2, 1999 25 USA - Fuel Gas 2 BTU/SCF. Auxiliary fuel at $2.5/MMBTU 25 USA. Fuel Gas 2 BTU/SCF. Auxiliary fuel $2.5/MMBTU. Power +1%. Capex -2%. Fuel gas price $/MMBTU 2 15 1 5 2 4 6 8-5 Fuel gas price $/MMBTU 2 15 1 5 2 4 6 8-5 -1-1 Power Price c/kwhr Power price c/kwhr Fuel gas price $USA / MMBTU 25 2 15 1 5-1 Canada -Fuel gas 2 BTU/SCF. Auxiliary fuel at $USA 2.5/MMBTU 2 4 6 8-5 Power cost c/kwhr Fuel gas price $USA/MMBTU 25 2 15 1 5-1 Canada - Fuel Gas 2 BTU/SCF. Auxiliary fuel at $US 2.5 / MMBTU. Power +1%. Capex -2%. -5 2 4 6 8 Power price c/kwhr 1 China - Fuel Gas 2 BTU/SCF. Auxiliary fuel at $6/MMBTU. 15 China - Fuel Gas 2 BTU/SCF. Auxiliary Fuel $6/MMBTU. Power +1%, Capex -2%. Fuel Gas Cost $/MMBTU 5 2 4 6 8-5 -1-15 -2 Power cost c/kwhr Fuel Gas price $/MMBTU 1 5 2 4 6 8-5 -1-15 -2 Power Cost c/kwhr Holland - Fuel Gas 2 BTU/SCF with Auxiliary fuel at $ 3.6 / MMBTU Holland - Fuel Gas 2 BTU/SCF +1% Power, -2% Capex Auxiliary Fuel at $3.6 / MMBTU 15 Off Gas price $/MMBTU 1 5 2 4 6 8-5 -1 Off Gas Price $/MMBTU 15 1 5 2 4 6 8-5 -1-15 -15 Power Price c/kwhr Power Price C/KwHr

Opportunities for Power Generation Page 15 of 19 October 2, 1999 These graphs illustrate that in low cost power areas, e.g. parts of the USA and Australia with an average price of 2.5 USA c/kwh, the power project requirements are only likely to be met if the off gas is given a zero or negative value. By contrast, without a significant off-gas value, the new ironmaking processes struggle to be economically viable, which explains, at least to some extent, why so many proposed projects do not progress beyond the feasibility study stage. The graphs also show that projects become increasingly attractive as the CCGT unit becomes larger, which would require either an increase in off-gas volume (i.e. iron plant larger than 1mt/y), or an increase in higher calorific fuel enrichment. In other locations, e.g. China, India or Japan with average power prices of 6.5 USA c/kwh or more, the off-gas can be credited with a positive value and projects in these locations are more likely to proceed. One way to further enhance the economics of the power projects would be to eliminate the need for higher calorific fuel spiking by operating the ironmaking processes less efficiently, using more coal to produce a higher CV off-gas. is, in effect, an example of this, generating off-gas with an LHV of around 195Btu/scf without spiking. But even in this case, the value of the off-gas for a viable power plant project in the US is well below the $1.5/GJ or so that would be needed to make the ironmaking project look attractive in geographies with low power prices. This approach also is at odds with the goals of the ironmaking process developers, who generally regard minimization of energy consumption as a critical objective. Table 1: Electricity generation using steel plant offgas 1987-2 Location Country Steel Making Gas Turbine Number of Trains Electricity GT ST Steam FG Compressor S/U Year Process MW ( Net ) MW MW t/h KW ( Approx ) Kawasaki Japan Blast Furnace Kawasaki 11 N 2 1 153 144 6.5 51.5 2 Hoogovens Holland Blast Furnace Mitsubishi 71 1 145 124.4 57.6 37 1999 Bao Shan China Blast Furnace Kawasaki 11 N 2 1 153 144 6.5 51.5 1999 Ilva Italy Blast Furnace GE MS 91E 3 54 127 68 15 27 1998 Confidential Japan Blast Furnace Mitsubishi 51 1 13 86.25 58.75 42 1994 Funamachi Japan Blast Furnace Mitsubishi 1 28.6 15 22 8.4 1992 Nakayama Japan Blast Furnace Mitsubishi 151 1 28.6 15 22 8.4 1991 Nisshin Japan Blast Furnace Mitsubishi 251 1 27.3 32 18 22.7 1989 Chiba Japan Blast Furnace Mitsubishi 71D 1 145 124.4 57.6 37 1987 As shown in Table 1, since 1987 over 1 Gigawatt of combined cycle power generation capacity has been installed in blast furnace iron production facilities, and in addition, there has been progress towards producing electric power from the off-gas of the newer technologies. At Jindal Iron and Steel in India the off-gas is being used to produce electric power by co-firing in a coal fired boiler. At Hanbo Steel in Korea, construction had commenced on a 2 MW power station using off-gas, city gas, and fuel oil. Unfortunately the project was terminated when Hanbo Steel experienced financial difficulties associated with the overall problems in Asia.

Opportunities for Power Generation Page 16 of 19 October 2, 1999 This experience would tend to support the conclusions from our financial model : Power projects are tending to occur in areas where power prices are high thus allowing a high value to be attributed to the off-gas. These have been in Asia and China. The exceptions are Ilva in Italy, where high government subsidies were required, and at Hoogovens - now Corus - where an environmental requirement had to be met. Consequently, for new iron making projects to be viable in lower electrical power cost regions, there needs to be a more creative approach to off gas utilization and process integration, some ideas for which are outlined below. 6.1 Power Plant and ASU Integration In oxygen based direct smelting processes such as the, the cost of oxygen may be as much as 15% of the variable operating costs, with power requirement for the Air Separation Unit a key component. Integration of the ASU with the power plant and with the process provides the opportunity for optimizing energy recovery, but at the same time introduces additional operational complexity. Previously the industry has tended to steer clear of complex, close-coupled processes, but if the new processes are to be cost competitive it may be that a bolder approach to process integration is needed. Figure 6 shows the potential for integration of process gas, steam, air/oxygen/nitrogen within the process incorporating CCGT and oxygen plants Figure 6. Cyclone converter furnace & air separation process integration Gas Cooler / Boiler Venturi Scrubber, Bag Filter, or Electrostatic Precipitator HRSG Coal O2 Compressor ASU GT Extraction Air ST ST Condenser N2

Opportunities for Power Generation Page 17 of 19 October 2, 1999 In this scheme process steam is used for driving the compressor for the air separation plant and air is extracted from the CCGT compressor to supplement the ASU air machine. This type of close-coupled arrangement raises issues and challenges in terms of plant reliability and uptime, and more conventional energy recovery schemes are of course an option, but the final solution depends on a detailed cost/benefit/risk analysis. Table 11 outlines some of the options and gives an indication of the increase in recovered power as the complexity and capital investment is increased. Table 11. Cyclone converter furnace process integration with an air separation unit Power Production for 1. Million thm/a Plant Revenue @2.5 and 7.5 c/kwh Chemical Energy Available (MWth) 132 Thermal Energy Available (MWth) 142 Particulate Removal, Flare Stack and BP Steam Turbine 15 (MWe) $3m-$9m Fired Boiler and Condensing Steam Turbine 93 (MWe) $24m-$71m Fired Boiler, Condensing Steam Turbine and Gas Expander TA - 88 (MWe) Exp - 12 (MWe) $25m-$75m CCGT with Process Gas GT - 57 (MWe) TA - 54 (MWe) 111MWe total $28m-$85 CCGT With Gas Spiking 181 MWe total $38m-$114m 7. GAS RECYCLING AND INTEGRATION As shown in Figure 3, the off-gas generated by these metallurgical processes, as well as providing an opportunity for power generation, also may have value as a process fuel, as a syngas, or for further processing to other products. In some DRI/HBI processes, the recycling of the gas is an integral part of the existing process, resulting in minimal export energy. However, in bath smelting, other than in HIsmelt where the off-gas is used as a fuel for air pre-heating, there has been little attempt to re-use the off-gas within the process, despite the incentive of reducing the requirement for virgin fuel.

Opportunities for Power Generation Page 18 of 19 October 2, 1999 To illustrate this concept, BOC developed a process model for the process. In one what-if scenario as shown in Figure 7, CO from the off-gas Figure 7. PROCESS WITH CO RECYCLE -USING A CO was recycled back into the bath to replace the 2 SCRUBBER To Combustion Turbine N nitrogen usually used as stirring gas. The estimated 2,CO, H 2O, CO 2,H 2 or vent conditioning (Optional) 15*C coal requirement for this reduction process decreased Stm gen./ Expansion CO2 CO2, Sulphur (for Turbine Scrubbing CO2 recovery by 15%, productivity increased by 18%, whilst the O2 from ASU or venting) 27*C Coal N off-gas volume decreased by 25%. 2,CO, H 2O, H 2 Particle Separator Blower The boldest attempt at process integration along these Ore Lime 3-4 Bar Dryer lines so far has been the coupling of a hot Moisture 18*C metal production plant with a Midrex DRI plant at Combustion Zone Nitrogen Excess N2 Rejection Unit Saldanha Steel in South Africa, which, in effect, results in a doubling of the amount of steel that can be Foamy Slag Zone Compressor 16*C Slag Reduction Zone made per metric ton of coal compared to a stand Hot 154*C CO Lance (Option 2) Metal CO Recycle (Option 1) alone plant, albeit with significantly less power 8 bar Nitrogen for Stirring generation potential. Elsewhere, CO 2 and water have been recovered as a valuable by-products from the Hyl process. Ever more ambitious opportunities for complex integration are now being considered for green field Power Power 14 MW Fumes to Fuel Gas/Vent 2, tpa Scrap Fuel: NG Coal (With Alt. Fuel) 13, MW 14 MW 111 tpd 915 tpd w/alt. Fuel 3 MW Gasifier/ Reformer Unit 177 tpd 11.6 MW 61,3 Nm 3 / h Syngas DR Unit 93, tpa 88% Yield 75 MW EAF Unit 1.16 tph 92% Yield 1. mm tpa Steel Product Steel N2 18 tpd O 2 Plant 97 w/alt. fuel Ar Ore 1.24 mmtpa Fine Ore Fuel Pellet Unit Figure 8. DRI-EAF-NH 3 production integration projects linking syngas production, utilities, ironmaking and steelmaking, all directed at enhancing overall project economics. Moreover, from a utilities and co-product point of view, there may be synergies to explore between adjacent works in some of the major industrial complexes. For instance, within the chemical industry, there are processes which may be able to utilize the waste streams from the ironmaking process e.g. CO 2, and may have H 2 or CO available to supply additional reducing gas to the DRI. In Figure 8, a

Opportunities for Power Generation Page 19 of 19 October 2, 1999 reformer/gasifier is used in conjunction with additional equipment and molecular sieve gas separation to provide a typical syngas for a DRI process. The gasification requires large amounts of oxygen and therefore an Air Separation Unit, and as a byproduct, the ASU produces large amounts of nitrogen, which in the right locations, can be used in the production of ammonia/urea. While few, if any, schemes of this complexity have been implemented, it seems that a more open minded approach to integration across process industries will be increasingly necessary to enhance overall project viability. 8. CONCLUSIONS It must be noted that these conclusions apply only to 1million metric ton/annum steel plants with combined cycle power plants. Larger steel facilities or boiler / steam turbine plants are likely to result in different conclusions. (a) The majority of current steel plant combined cycle power generation projects are in geographies with high power prices such as China, Japan and Italy. (b) The more efficient the steel process the lower the calorific value of the off gas. Current experience is at about 13 BTU/SCF which means that some of the Off Gases have to be spiked with a higher calorific value fuel. (c) A number of the processes require additional fuel to be added to match the combustors of the available gas turbines and to fully load the gas turbines. Depending on the country and the cost of this additional higher calorific value fuel, this can have a high impact on the cost of power. (d) If the fuel gas is assigned the same value in $/MMBTU as the coal used in the steel plant then it would appear that all the future processes are commercially viable at power prices in excess of 4 c/kwhr with a 12% RIRR. However this power price can rise as high as 7 c/kwhr depending on the gas turbine selected and the amount of high calorific value fuel which has to be added. (e) Reduction in capex by 2% reduces the cost of power by between.5 c/kwhr and 1 c/kwhr depending on the process and the country. (f) To approach power prices of 2. to 2.5 c/kwhr, zero or negative value has to attributed to the Off Gas. This suggests that in geographies with low power prices, further integration of the steam cycle is required to increase the output power of the CCGT to generate a revenue from the Off Gas stream. (g) The new steel making processes are essentially coal gasification based processes and as such offer the potential for polygeneration products such as power, steam, syngas, hydrogen, and carbon monoxide, with industrial gas co-products such as Oxygen, Nitrogen and Argon in addition to their core metal products. This potential for polygeneration will help in the commercialization of these processes.

Opportunities for Power Generation Page 2 of 19 October 2, 1999 9. CONCLUDING REMARKS Demand for iron units from New Ironmaking processes is expected to grow from 35mt/y in 98 to 1mt/y by 21, with demand fulfilled by a combination of the processes introduced above. New capacity will generally be linked to new Mini-mills or to existing works and integration with the total works flowsheet will be an important facet in realization of these projects. The success of projects based on the new technologies depends as much upon the efficient utilization of energy as on the fundamentals of the processes themselves, since energy is such a significant cost component. Optimization of the flowsheet requires an open-minded approach to the specifics of the process, the local conditions and the commercial footing of the project, requiring a co-ordinated approach from iron and steelmakers, utility operators and technology providers, each sharing risk and reward. References 1. Courtesy of MW Saab of CVRD 2. Energy Use in the Steel Industry : International Iron and Steel Institute, Brussels