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SCRAP SUPPLEMENTS UPDATE

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

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SCRAP SUPPLEMENTS UPDATE

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  1. OECD Steel Committee December 6th 2012 SCRAP SUPPLEMENTS UPDATE Stuart Horner Secretary General Designate

  2. 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 • Suppliers of raw materials, logistics, technology, equipment, consultancy, etc. • Consumers of ferrous metallics

  3. SCRAP SUPPLEMENTS • Merchant Pig Iron (MPI), Hot Briquetted Iron (HBI), Direct Reduced Iron (DRI) and Iron Nuggets

  4. TOTAL SCRAP SUPPLEMENTS TRADE 2011

  5. BENEFITS OF SCRAP SUPPLEMENTS • 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

  6. STATE OF THE MARKET

  7. MPI CASH COSTS

  8. HBI PRODUCTION COST

  9. SPOT IRON ORE PRICE DEVELOPMENT

  10. NATURAL GAS PRICE DEVELOPMENT

  11. GLOBAL DRI/HBI PRODUCTION

  12. DIRECT REDUCTION IN NORTH AMERICA

  13. DIRECT REDUCTION IN NORTH AMERICA

  14. SHALE GAS IN NORTH AMERICA 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

  15. DIRECT REDUCTION PROJECTS: USA/CANADA • 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

  16. CONCLUDING REMARKS • 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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