Integrated production chain from chromite to stainless steel Mauri Kauppi VP – Sales & Marketing Outokumpu Chrome Oy 1 July 2016
Integrated production chain
from chromite to stainless steel Mauri Kauppi VP – Sales & Marketing Outokumpu Chrome Oy 1 July 2016
7/1/2016 2
Contents
1. Outokumpu Ferrochrome
2. Business fundaments FeCr
3. How to tackle the Asian challenge?
4. Making most of integrated production chain from chromite to stainless steel
5. Conclusions
7/1/2016 3
Outokumpu Ferrochrome Integrated operating model
Mine
Works
Sales
2,7 Mt ore
850 kt FinCon
400 kt Lumpy ore
530kt FeCr
370MNm3 CO-gas
625kt slag product
~430kt internal
~100kt external
7/1/2016 4
Contents
1. Outokumpu Ferrochrome
2. Business fundaments FeCr
3. How to tackle the Asian challenge?
4. Making most of integrated production chain from chromite to stainless steel
5. Conclusions
7/1/2016 5
Predictable
• Currency changes in the near term, interrelated dependencies; oil, gold,..
• Approach of summer season
• Supply/demand - capacity / utilisation
• World economy in the near to medium term
• Ni ore export ban from Indonesia
• Import duties against Chinese and Taiwanese stainless steel are temporary
• Asian tiger (China) is not resting; introduction of Ni pig iron, building FeCr capacity, Tsingshan model
• Speculation that leads to either destocking or restocking, thus increasing cyclicality
Business fundaments FeCr
(commercial commodity)
Ferrochrome production by country1 1994-2014 [Ktonnes2]
• China became the largest producing country in 2012, with the help of chromite imports from South Africa.
• However, South Africa should be in the position to reassume its dominance, IF it can ensure reliable &
inexpensive supply of electricity.
0
1,000
2,000
3,000
4,000
5,000
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
[Ktonnes] South Africa
China
Others
China & South Africa as the major producers Will China maintain its leading position?
China vs. South Africa
China South Africa
Reserves Very limited,
practically
imports all
~74% of
world total
Industry &
capacity
Fragmented,
high-cost, but
new capacity
being added
Consolidated,
mostly low-
cost
Electricity
costs
High &
increasing, but
differ by region
Increasing,
shortages &
cuts expected
Currency Appreciated Depreciated
Investment
climate
Good, but credit
outlook
uncertain
Poor
1 CRU Market Outlook (May 2015)
2 Gross weight, high-carbon ferrochrome 11 June 2015 6
Japan ferrochrome industry collapse Similarly China has invested in self-sufficiency but will it be sustainable?
Ferrochrome and stainless steel output in Japan & China [Mtonnes, Ktonnes]
Source: Heinz Pariser 11 June 2015 7
7/1/2016 8
Melting Capacities in China MILL 2009 2010 2011 2012 2013 2014 2015 2016
TISCO 3.000 3.000 3.000 3.000 3.300 4.000 4.000 4.000
Baosteel/Desheng 1.600 1.850 2.300 2.500 2.700 2.700 2.700 2.700
Posco 800 800 1.000 1.000 1.000 1.000 1.000 1.000
Ansteel/Lisco 800 1.200 1.600 1.600 1.600 1.600 1.600 1.600
Jisco 600 800 1.000 1.200 1.200 1.200 1.200 1.200
Established major mills 6.800 7.650 8.900 9.300 9.800 10.500 10.500 10.500
Tsingshan Group 200 200 200 1.100 3.250 4.500 6.000 6.000
Taishan Steel 400 600 600 600 600 1.000 1.000 1.000
Sichuan Jinguang 600 600 600 850 1.000 1.400 1.400 1.400
Fujian Wuhang 400 600 800 800 800 800 800 800
Jinhui/Shengyanbg 20 180 600 600 800 800 1.400 1.400
Jinxin Li 300 300 300 300 300 300 300 300
Eastern 100 400 500 500 500 500 500
Chengde Beihai 600 1.200 1.200 1.600 1.600 3.400
Formosa Plastics 360 720 720 1.440
Jinhai 500 1.000 1.000 1.000
Huale 600 800 800 800
Sinosteel 200 500
Delong 300 1.000
Shangtai 1.000
New major private mills 1.920 2.580 4.100 5.950 9.910 13.420 16.020 20.540
Total 8.720 10.230 13.000 15.250 19.710 23.920 26.520 31.040
7/1/2016 9
Unpredictable
• Brexit
• Over night changes in export /import duties esp. in China
• Oil price movements, important for FeCr; each 10 USD/barrel up means higher FeCr
consumption
Business fundaments FeCr
(commercial commodity)
7/1/2016 10
Destined to happen but when
• Hard landing in China, debt ratio >240% GDP
• Chinese companies producing Ferroalloys and stainless steel must make profit, hard
to compete with “state capitalism”
• Consolidation in China
• Pollution issues in China become important
• Grexit
Business fundaments FeCr
(commercial commodity)
Charge/HC FeCr Producer Ranking 2014 (Partially estimated, Preliminary Data)
11
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Charge HG HC LG HC© Heinz H. Pariser
35%
23%
>200 kt
8%
>100 kt
6%
<100 kt
Total Selected
Market Share: 72%Excluding China Domestic of 4.1 Mill t:
Top3 Market Share ~ 55%
7/1/2016 12
Contents
1. Outokumpu Ferrochrome
2. Business fundaments FeCr
3. How to tackle the Asian challenge?
4. Making most of integrated production chain from chromite to stainless steel
5. Conclusions
7/1/2016 13
• Forecasting tools are important for commodity business like FeCr, seeing the turning
points on time means right decisions; advantage being part of a global stainless steel
company
• Despite heavy overcapacity the market is not always in balance
• Sales strategy; important to keep long term focus, diversification by market segments
and geography. Sometimes selling solutions
• As FeCr is a commercial commodity, it is essential to maximize output to minimize unit
costs. This leads us to be an active seller as well as an active buyer on the market
How to tackle the Asian challenge?
7/1/2016 14
Contents
1. Outokumpu Ferrochrome
2. Business fundaments FeCr
3. How to tackle the Asian challenge?
4. Making most of integrated production chain from chromite to stainless steel
5. Conclusions
7/1/2016 15
Mining operations are fine tuned for internal consumption, only
• The ore body is poor but large, enough for 100 years.
• Just on time production, low inventories, only homogenization stocks at the
concentration plant
• Environmentally friendly; no stocks in open air
• Minimizing capex
• Mine product optimization;
Making most of integrated production chain
from chromite to stainless steel
7/1/2016 17
FeCr smelter consists of 3 furnaces; 40, 75 and 135 MVA, principally the same technology for all furnaces
• Capacity 530000 mts/a, the new furnace biggest in the world with capacity 270000 mts/a
• Totally closed furnaces, pelletized feed, hot charging
• CO gas utilized by 95% efficiency, at FeCr plant but also at steel mill, lime plant and power station
• Lowest carbon footprint among stainless steel mills
• All FeCr slags are commercialized with CE marking
• Unique technical solutions give annual availability > 99% for SAFs over 4 years maintenance cycles
Making most of integrated production chain
from chromite to stainless steel
7/1/2016 19
Stainless steel meltshop; examples
• Cr converter utilizes liquid FeCr to boost capacity as well as it saves electric energy. It is the most ideal line to produce ferritic grades. Annually up to 140000 mts liquid FeCr is used
• Low FeCr inventories needed thanks to the vicinity of the FeCr plant as well as the predictability of FeCr production
• Meltshop is capable of using FeCr Fines as well as recovery products from FeCr slag recovery plant
• Ability to charge hot slabs to hot rolling plant; in case it is not possible right away, hot keeping pits are an option
• Efficient water cooling of coil cuts 2 days from the cooling time thus shortening the lead time correspondingly
Making most of integrated production chain
from chromite to stainless steel
7/1/2016 20
Contents
1. Outokumpu Ferrochrome
2. Business fundaments FeCr
3. How to tackle the Asian challenge?
4. Making most of integrated production chain from chromite to stainless steel
5. Conclusions