05-Dec-2011 1 Dr Neil J. Bristow Presentation at OECD Steelmaking Raw Materials Workshop Paris, France 5 th December 2011 H & W Worldwide Consulting [email protected]+61240286268 1. Brief Steel Outlook 2. Iron Ore Markets and Drivers 3. Metallurgical Coal and Coke 4. Scrap, Metallics and Direct Reduction 5. Manganese and FerroAlloys 6. Summary and Policy issues H & W Worldwide Consulting
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05-Dec-2011
1
Dr Neil J. Bristow
Presentation at OECD Steelmaking Raw Materials Workshop
• A year in two parts strong steel output/demand in H1 then weakness in H2 as economy slows
• Major dislocations to raw materials supply due to weather events in Australia and Brazil, strikes Canada
• Markets tight in early 2011, now softer, what happens if 2012 is stronger than predicted?
• Continued moves to change raw materials pricing – push to indices across iron ore and coal
• Emergence of new basins for coal and new iron ore impact more pronounced in 2012-3
H & W Worldwide Consulting
0
500
1000
1500
2000
2500
Mil
lio
n t
on
ne
s
Crude Steep production by Region
China India Asia ex China, India Europe NAFTA South America CIS Middle East
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2010 2011 2012 2013 2014
Millio
n t
on
nes
Steel and pig iron production growth
Crude Steel
Pig Iron
H & W Worldwide Consulting Source: WSA, H&W Worldwide Consulting
05-Dec-2011
3
0
200
400
600
800
1000
1200
1400
1600
1800
Mil
lio
n t
on
ne
s
Pig Iron production by Region
China India
Asia ex China, India Europe
NAFTA South America
CIS Middle East
60
62
64
66
68
70
72
74
Pe
rce
nta
ge
Global BOF Production Share
Rise of
China
Forecast
China’s growth will raise BF/BOF share by ~0.8% in 2012-3, as the majority of the global pig iron increase derives from Chinese growth in BF productivity and expansions relying mainly on imported raw materials.
H & W Worldwide Consulting Source: WSA, H&W Worldwide Consulting
Vast low cost high grade iron ore reserves
No met coal
No scrap/some merchant pig iron
Favour BF/BOF
Vast high grade iron ore reserves
Very limited met coal
No scrap/some sponge iron
Favour BF/BOF
Limited iron ore reserves
Some met coal
No scrap/minor DRI
Favour BF/BOF + EAF
Vast iron ore reserves
Extensive met coal
Scrap/some DRI
Favour BF/BOF + EAF
Low grade iron ore reserves
Large met coal reserves
No Scrap
Favour BF/BOF
SE Asia
China
Russia
India
In addition to China steel growth to 2014 will be driven by other countries, with a majority favouring the BF route relying on imported seaborne coking coal and domestic iron ore.
Brazil
H & W Worldwide Consulting
05-Dec-2011
4
Oxygen enrichment
Pulverised Coal Injection
Deadman
Recent Blast Furnace Changes:
– Reline enlargements
– Pulverised coal injection
– Oxygen enrichment of the blast
– Larger working volumes
– Low gangue feed
– Bosh / Hearth cooling
– Computer control / heat & mass
balance models
– Instrumentation advances
The BF has been the King and has seen of many challengers. It will remain the main producer of iron for
steelmaking into the future, no change in near term.
H & W Worldwide Consulting
Iron Ore 0-25%
Sinter 50-85%
Pellets 0-100%
Coke 650-290kg
Pulverised coal injection 0-220kg
Natural Gas 0-60kg
Fuel Oil 0-100kg
Lump Ore Coke
• Raw Materials costs ~60-75% of liquid steel costs
• Transportation costs ~ 6-15% of liquid steel costs
H & W Worldwide Consulting
05-Dec-2011
5
H & W Worldwide Consulting
Key roles of
coke in the BF
1. Energy
2. Source of Carbon
3. Strength
4. Permeability
Molten slag
Gas flow (coke)
Liquid flow
Sintered Ore Coke +
Carbon monoxide
+
Iron oxide
Carbon dioxide
+
Iron
Coke
+
Oxygen
Carbon
dioxide
Molten iron
Carbon
monoxide
Carbon dioxide
+
Coke
Key takeaway no
change in coke
quality
Key roles of
Ferrous materials
in the BF
1. Low RDI
2. Strength
3. Even softening
/melting
4. High reducibility
Molten slag
Gas flow (coke)
Liquid flow
Sintered Ore, lump, pellets Coke +
Fe2O3 + CO
Coke
+
Oxygen
Carbon
dioxide
Molten iron
H & W Worldwide Consulting
Carbon
monoxide
Carbon dioxide
+
Coke
Fe2O3 + C
CO2
+
Fe (l)
Key takeaway no
change in ferrous
quality
05-Dec-2011
6
Tumble /Shatter Index
Decrepitation
Reduction Degradation Index
Reducibility
Softening/melting behaviour
ferrous
burden
quality
No change in near term for ferrous burden materials as BF remains core production unit. Increased
productivity, lower fuel and slag rates remain key targets for ironmakers.
H & W Worldwide Consulting
Diagram: Techint
Heavy melt Scrap
50 100% Shredded Scrap
0 – 50%
HBI
0 – 40% DR ore
0 – 80%
Some EAF’s have coal/oxy injection
for additional heating
EAF drivers will also remain unchanged, with adjustments to feedstocks as EAF steelmakers seek to
move up the value chain into higher quality flat products, SB’s etc - rising need for DRI, premium scrap
H & W Worldwide Consulting
05-Dec-2011
7
Melting rate Resistance to hot oxidising
gases
Carbon content
Size
DRI poor poor average excellent
HBI poor average average excellent
Heavy melting scrap
average average poor poor
Shredded scrap high
density
average/
excellent poor poor excellent
Pig Iron excellent excellent excellent excellent
Liquid Iron excellent N/A excellent liquid
Increasing EAF use is not all bad for the BF, as merchant pig iron makes an excellent part feed for modern
EAF’s as does liquid hot metal, BF linked to EAF’s in the future?
H & W Worldwide Consulting
Cost of iron ore and coking coal as percent of global HRC steel price
0%
10%
20%
30%
40%
50%
60%
70%
80%
1970 1975 1980 1985 1990 1995 2000 2005 2010
% o
f ste
el
pri
ce
Iron ore Coking coal
Major raw materials have risen very sharply in price and are now close to record % shares of the cost of steel based on HRC. This is driving steelmakers to seek to use cheaper and more difficult to use
steelmaking raw materials.
H & W Worldwide Consulting Source: Macquarie Research estimates, September 2011
05-Dec-2011
8
• Raw Materials Impurities • Increase fuel rates and lower productivity
• Can cause breakdown of coke, refractory attack
• Lead to recycling in BF and environmental problems
• Make BF slag unusable
• Freight • Increase costs and carbon footprint
• Losses and degradation during transport
• Stockpiles, dusts, environmental issues
• Supply and Quality • Increasing demand seeing moves to new materials from new locations
• Testing and evaluation of “new” raw materials
• Price of raw materials leading steelmakers to experiment with new
materials H & W Worldwide Consulting
Using carbon lean
sources
Smelting reduction
Modern blast furnace 2010
Advanced technologies
Partial reduction with
biomass or H2
Sequestration
Replace fossil carbon Improve efficiency
Development
CO
2 e
mis
sio
n p
er
ton
ne
of
ste
el 100%
80%
40%
60%
20%
0%
0 1 2 3 4 5 6 7
„Learning curve‟
1
2
4
3
Ta
rge
t
Modern blast furnace 2020
1a
5
Renewable carbon and capture
H & W Worldwide Consulting
05-Dec-2011
9
1. Brief Steel Outlook
2. Iron Ore Markets and Drivers
3. Metallurgical Coal and Coke
4. Scrap, Metallics and Direct Reduction
5. Manganese and FerroAlloys
6. Summary and Policy issues H & W Worldwide Consulting
• Natural iron ores (or direct shipping ores (DSO) or run-of-mine ores) – ores as extracted from mines and not subjected to any processes of beneficiation other than sizing. • Lump ore – ore consisting of coarse particles, typically with a minimum size
between 6 and 50mm.
• Sintering Fine ore – ore consisting entirely of small particles. Upper size limit usually between 6.3 – 10mm.
• Sized ore – ore prepared to meet specific size limits e.g. 6.3 x 30mm.
• Processed ore – ore physically or chemically (rare) treated to make them more suitable for use. • Concentrates – processed ores in which the iron content has been increased,
size typically 1mm to 0.125mm
• Pellet Feeds – processed fine ores which have been ground and beneficiated, size typically <0.125mm
• Agglomerates – processed ores formed into coherent pieces which are substantially larger than the original particles, normally found as sinter or pellets
H & W Worldwide Consulting
05-Dec-2011
10
H & W Worldwide Consulting
The iron ore flow to Blast Furnace
Concentrate
Sinter plant
Pellet plant
Sinter
Pellet
Lump
BF
Fines
Pellet Feed
0 – 25%max
0 – 90%max
50 – 85%max
The iron ore flow to the DR Shaft
Concentrate
Pellet plant Pellet
Lump
DR
Pellet
Feed
~5%
~95% Grinding
Major ferrous raw materials flows are customer and region specific, increased variation is likely in the near future as new materials enter the market.
H & W Worldwide Consulting Source: CISA, China Customs, H&W Worldwide consulting
The rise of China saw seaborne iron ore grow very rapidly . Ex China seaborne iron ore has not reached pre GFC levels and is unlikely to do so in 2012-3.
Chinese iron ore imports are predominantly fines, estimated at ~90% of total figure with pellets ~5%
of the total; the majority being hematite. Magnetite is excepted to increase in the future.
China iron ore imports by source
Fines Lump Pellet Hematite Magnetite
Australia Yes predominant Yes very limited Yes majority very limited
currently will rise
Brazil Yes predominant very limited Yes Yes majority Very limited
India Yes predominant limited very limited Yes majority no
South Africa Yes predominant Yes no yes no
Ukraine Yes majority no Yes minority yes very limited
Domestic Iron Ore (62.0% Fe Equiv) Imported Iron Ore Domestic Ore Share Imported Ore Share
Source: CISA, China Customs, H&W Worldwide consulting
Million
Ton
nes
Accurate information on domestic ore is difficult to get due to under reporting, double counting but
domestic production is still rising to meet the need for iron units.
H & W Worldwide Consulting
05-Dec-2011
13
Beneficiation Balling High temperature reactions
90% passing 45µm
Magnetite - magnetic properties - in concentrate form - exothermic heating in
pelletising
Hematite - generally more costly - in concentrate form
Hematite – goethite
(Australian)
X – less desirable because
goethite lowers yield and hinders performance.
X – not ideal because
generally sold as coarse sinter fines <6mm
X – remnant goethite causes
spalling during firing & limits productivity (niche feed).
Magnetite concentrate is ideal for pelletising with excellent chemistry, high Fe, low Al and low P, requiring minimal
grinding and exothermic oxidation to hematite during firing (very limited in sintering), both of which lower energy costs.
H & W Worldwide Consulting
Local magnetite is increasingly moving to pellet production where its properties are best suited. From use in
sintering, as many new pellet plants are built in China.
Major seaborne supply basin
Major prospective supply basin
Major domestic supply basin
Mid West Lack of infrastructure, costs mid/high logistics uncertain
Pilbara
Large ore bodies, quality declining, no low-hanging fruit, costs rising
Northern Area Carajas large reserves infrastructure - increasing costs
Canada High project development and operating costs, due to arctic conditions, rail, barge and port constraints near term, new areas lack of infrastructure
Significant new supply unlikely before 2012-3, existing infrastructure close to maximum capacity
Southern Area Carajas large reserves infrastructure - increasing costs
Sweden Large magnetite reserves, high cost UG mining
Russia Large magnetite reserves, mid cost largely domestic
Ukraine Large magnetite reserves, low grade, largely domestic
China low grade, costs mid/high land rising
India Large reserves inc low grade, costs low poor infrastructure
West Africa Large reserves high
grade, costs mid?? no infrastructure
South Africa Large reserves high grade, high costs long rail haul
USA Large magnetite reserves, low grade,
Chile Large/medium reserves, mixed grade,
South Australia Lack of infrastructure, costs mid/high potential reserves
NZ Iron sands low grade, costs mid/high impurities
There are vast reserves of iron ore in the world and many major producing areas have very
significant potential for further resource development by exploration.
H & W Worldwide Consulting Source: Macquarie Research, H&W Worldwide Consulting
05-Dec-2011
14
Source: Macquarie Research, company announcements, H&W Worldwide Consulting
0
100
200
300
400
500
600
700
800
2010 2011 2012 2013 2014 2015
mtp
a
Other
Assmang
Consolidated Thompson
Mt Gibson
Atlas
CSN
Anglo American
FMG
BHP Billiton
Rio Tinto
Vale
H & W Worldwide Consulting
Seaborne market likely to see significant growth to 2015, with ~65% projected to come from the “Big 3”.
Capacity growth has been far slower than announced – typically ~50% in delays and reduced output.