December 6 th 2012 Stuart Horner Secretary General Design
SCRAP SUPPLEMENTS UPDATE
Feb 02, 2016
OECD Steel Committee. December 6 th 2012. SCRAP SUPPLEMENTS UPDATE. Stuart Horner Secretary General Designate. IIMA: 100 members in more than 35 countries. Producers of Merchant Pig Iron (MPI), Hot Briquetted Iron (HBI), Direct Reduced Iron (DRI) and Iron Nuggets Traders/Distributors - PowerPoint PPT Presentation
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December 6th 2012
Stuart HornerSecretary General Designate
This presentation is intended for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purposes of sale of any financial instrument, is not intended to provide an investment recommendation and should not be relied upon. The material is derived from published sources, together with personal research. No responsibility or liability is accepted for any such information of opinions or for any errors, omissions, misstatements, negligence or otherwise for any other communication, written or otherwise.
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– Producers of Merchant Pig Iron (MPI), Hot Briquetted Iron (HBI), Direct Reduced Iron (DRI) and Iron Nuggets
– Traders/Distributors– Suppliers of raw materials,
logistics, technology, equipment, consultancy, etc.
– Consumers of ferrous metallics
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• Merchant Pig Iron (MPI), Hot Briquetted Iron (HBI), Direct Reduced Iron (DRI) and Iron Nuggets
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Cross border MPI, 12.5
Domestic MPI, 9.0
China MPI, 55.0
Cross border DRI/HBI, 6.8
Domestic DRI/HBI, 8.0
Metallics trade: 2011 - mt Total 91.3 mt
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• Consistent quality and low residual content• Dilute impurities in scrap• Better slag foaming• Controlled C content, consistent C recovery• N2 scavenger/diluter = low N2 content in steel• Easier on hearth refractory & electrodes• High density feedstock (pig iron & HBI), less
charging time• DRI/HBI can be continuously charged to EAF
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$0
$200
$400
$600
$800
$1,000
$1,200
Jan 10 Apr 10 Jul 10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12
Scrap supplements: price development $/tonne
MPI FOB Barge NOLA [RN]HBI FOB Venezuela [Metal Expert]Iron ore CIF China 62% Fe 2% Al2O3 $/DMTNo. 1 Bushelling - Chicago [SPB]Shredded scrap - Chicago [SPB] Rebar / N.America domestic FOB US Midwest mill [SBB] HRC / N.America domestic FOB US Midwest mill [SBB]
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$25.0$14.5$35.0
$50.0
$175.0
$124.6
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500Value chain for Brazilian MPI
Logistics USA Ocean Freight Logistics to FOBOther cash costs Charcoal/coke Iron ore
$385 FOB
$424 delivered US midwest
iron ore @ $75.40/tonne + $4 per tonne logistics
1,600 kg / tonne pig iron
Charcoal @$70/m3
2.5 m3 / tonne pig iron
Not included:- shrinkage- working capital cost- depreciation/amortisation- margin
$399 CFR
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$25.0
$30.0
$22.0
$35.0
$232.0
$0
$50
$100
$150
$200
$250
$300
$350
$400
Value chain for notional HBI supply to US Midwest steel mill
Logistics USA Ocean Freight Logistics to FOBOther cash costs Natural gas Iron ore
$292 FOB
$347 delivered US midwest
iron ore pellets @ $160/tonne
1,450 kg / tonne HBI
Not included:- shrinkage- working capital cost- depreciation/amortisation- margin
$322 CFR
106 BTU @ $3.50/BTU x 106
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$0
$50
$100
$150
$200
$250
$/tonne CFR China for 62% Fe, 2% Al2O3 - TSI data
December 6th - 7th 2012 OECD Steel Committee 11
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Opportunities for steelmaking:•For EAF steelmakers, higher share of electricity from natural gas•Scope for shift in auxiliary BF fuel [typically 150-200 kg/tonne hot metal] towards natural gas•Indirect use of natural gas in the BF through use of DRI/HBI as charge material to boost productivity
• Futures contracts enable lock-in of forward gas prices - underpins viability of investment in DR capacity
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• Actual: Nucor Louisiana plant - 2.5 mtpy capacity, due to start up in mid-2013
• Projects: potential second and third modules at Nucor’s Louisiana plant
• Projects: 6-10 companies are actively considering DR plants in North America, some very seriously, with a couple of contracts possible in 6-12 months
• US Steel, Severstal and Northstar BlueScope have received press mention
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• There seems to be every prospect that the third wave of direct reduction plants in North America is upon us - the big differentiator from the past being the ability to lock in long term gas prices.
• There seems to be significant scope for rationalisation of the various projects to ensure maximum efficiency and cost effectiveness across the industry.
• This will doubtless have a significant impact on the metallics supply chain, meaning that offshore HBI and pig iron suppliers may well have to seek alternative markets for their displaced US imports.
• Nevertheless, offshore suppliers of pig iron offer the US steel and metal casting industries a useful hedge against higher gas prices.
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