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Future steel and coke industry trends
Dr Neil J. Bristow Chief Analyst, Carbon Steel MaterialsIntertec European Coke Conference, DüsseldorfTuesday, 11th April 2006
DisclaimerThe views expressed here contain information derived from publicly available sources that have not been independently verified. Norepresentation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation should not be relied upon as a recommendation or forecast by BHP Billiton.
Nothing in this release should be construed as either an offer to sell or a solicitation of an offer to buy or sell shares in any jurisdiction.
Presentation outline• Background - steel industry trends
• Critical issues for the global steel industry– Future structure of China’s steel industry– Consolidation– Future Blast furnace trends
• Implications for coke
• Recent studies to understand coke its reactions & performance
• Summary and Conclusions
Key theme
The world has changed
But the need for coke and hard coking coal remains
Areas where the world has changed…….• Industry structure – consolidation; the new wave
• Regional consolidation moves global
• Price volatility – industry consensus; potential to be lower
• Increased market “power” re customers (flat products)
• Current high profitability in the steel industry continues
• Raw materials – too early to be definite, but potential move to higher quality seaborne raw materials
Areas where the world has not changed
• New phase of strong demand growth - BRICS
• China driving major uplifts
• Technology trends - BF still king
• Planned new capacity SE Asia, Brazil, India etc
• Drive for higher productivity = high quality RM’s esp coke
• Environmental conditions
• Raw materials – the benefits of high quality esp coke
0
200
400
600
800
1000
1200
1920 1930 1940 1950 1960 1970 1980 1990 2000
MtThe global steel industry continues to power on
BackgroundBackground
The golden ageThe golden age1945 1945 –– 1973 6.2%pa1973 6.2%pa
Oil ShocksOil ShocksFall of Fall of
Berlin WallBerlin Wall
The efficiency The efficiency ageage
1974 1974 –– 1995 1995 0.2%pa0.2%pa
The China The China age?age?1996 + 1996 +
>4.6%pa>4.6%paThe emerging ageThe emerging agepre 1945 2.8%papre 1945 2.8%pa
Consolidation
Privatisations
New New goldengolden
age?age?
The China Effect
Source: IISI
Rebuilding of Europe
Rise of Japan
Global steel growth rates have picked up a gearBackgroundBackground
CAGR (%) Comments
1970 – 1975 1.6 First oil shock, ending of Japan steel boom
1975 – 1980 2.2 Steady global recovery from oil shock
1980 – 1985 0.1 Second oil shock, recession, reduction in steel intensity
1985 – 1990 1.4 Strong steel efficiency drive
1990 – 1995 -0.5 Fall of Berlin wall, collapse of USSR, continued steel efficiency gains
1995 – 2000 2.4 Slow CIS recovery, signs of emerging China
2000 - 2005 5.9 China takeoff, US/EU recession then recovery, emerging steel demand SE Asia
Source: IISI
China remains the main driver of this growth
0
50
100
150
200
250
300
350
400
1949
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
Crude SteelPig IronJapan CSUS CS
The largest world steel producer since 1996
First and only steel producer over 200 million tonnes per annum in 2003: ~double production in Japan
13%
23%
JapanU.S.A
1985~2000, CAGR: 7% 2000~2005, CAGR: 22%
Trend Break
Source: CISA and other industry sources
First steel producer over 300 million tonnes per annum in 2005: >3.5x production in USA 31%
BackgroundBackground
Steel 2005; 2 worlds – balanced & uncontrolled growthBackgroundBackground
Production Change 2005
-20
-10
0
10
20
30
40
50
60
70
80
EU 25 OtherEurope
N. America S. America CIS China Japan Asia Global
Mt
Crude SteelPig Iron
Source: IISI
• Market sentiment roller coaster – strong, weak and strengthening again
• China responsible for global increase – world ex China –ve growth in 2005
• Demand led by China, contribution from SE Asia: growing +ve signs US, Europe later
• Chinese production remains buoyant strong steel and stronger pig iron growth
BackgroundBackground
The China effect
-10%
-5%
0%
5%
10%
15%
20%
Dec
embe
rJa
nuar
yFe
brua
ryM
arch
Apr
ilM
ayJu
neJu
lyA
ugus
tSe
ptem
ber
Oct
ober
Nov
embe
rD
ecem
ber
Janu
ary
Febr
uary
Mar
chA
pril
May
June
July
Aug
ust
Sept
embe
rO
ctob
erN
ovem
ber
Dec
embe
rJa
nuar
yFe
brua
ryM
arch
Apr
ilM
ayJu
neJu
lyA
ugus
tSe
ptem
ber
Oct
ober
Nov
embe
rD
ecem
ber
Janu
ary
Febr
uary
Mar
chA
pril
May
June
July
Aug
ust
Sept
embe
rO
ctob
erN
ovem
ber
Dec
embe
rJa
nuar
yFe
brua
ryM
arch
Apr
ilM
ayJu
neJu
lyA
ugus
tSe
ptem
ber
Oct
ober
Nov
embe
rD
ecem
ber
Janu
ary
Febr
uary
Mar
chA
pril
May
June
July
Aug
ust
Sept
embe
rO
ctob
erN
ovem
ber
Dec
embe
rJa
nuar
yFe
brua
ry
1999 2000 2001 2002 2003 2004 2005 2006
Global YOY changeWorld YOY change ex China
Source: IISI, BHP Billiton
Monthly YOY % Change Crude Steel
-16
-8
0
8
16
24
32
40
January
Febru
aryMarc
h
April
May June
July
August
Septem
berOcto
berNov
ember
December
January
Febru
ary
Global EU(25) China Japan US
Monthly YOY % Change Pig Iron
-24
-12
0
12
24
36
48
January
Febru
aryMarc
h
April
May June
July
August
Septem
berOcto
berNov
ember
December
January
Febru
ary
Global EU(25) China Japan US
Crude Steel 12 month running totals
Pig Iron 12 month running totals
Changing trends emerged during the year
Source: IISI
700
750
800
850
900
950
1000
1050
1100
1150
1996 1997 1998 1999 2000 2001 2002 2003 2004 200555
60
65
70
75
80
85
90
95
100
12 months running total actual monthly data de-seasonalised monthly data
500
550
600
650
700
750
800
1996 1997 1998 1999 2000 2001 2002 2003 2004 200540
45
50
55
60
65
70
12 months running total actual monthly data de-seasonalised monthly data
BackgroundBackground
Annualised steel and pig iron production trendsBackgroundBackground
Annualised pig iron production
680
700
720
740
760
780
800
820
840
January
March
May July
Septem
berNove
mberJan
uaryMarc
hMay Jul
ySep
tember
November
January
(Mt)
Annualised crude steel production
950
970
990
1010
1030
1050
1070
1090
1110
1130
1150
1170
January
March
May July
Septem
berNove
mberJan
uaryMarc
hMay Jul
ySep
tember
November
January
(Mt)
Seasonal Trends
2005
Totals2004 724Mt2005 785Mt
Seasonal Trends
Seasonal Trends
Seasonal Trends
2005
Totals2004 1066Mt2005 1129Mt
Chinese Government
actions
Production cuts to lower
inventories
Production cuts to lower
inventories
Chinese Government
actions
China China reaccelerationreacceleration
China China reaccelerationreacceleration
Seasonal Trends
Seasonal Trends
Seasonal Trends
2004 2004
Source: IISI
BackgroundBackground
Massive steel de-stocking during 2005Inventories (Jan ‘99 = 100)
80
90
100
110
120
130
140
150
1999 2000 2001 2002 2003 2004 2005 2006
Inde
x
Nth America
Germany
Source: CRU
Far East
Successful price stabilisation – current prices turning upBackgroundBackground
Hot Rolled Coil Price
0
200
400
600
800
1986 1990 1994 1998 2002 2006
US$/t
EU Export
USA Domestic
Recent lows substantially higher than historical lows:
• Good demand• Consolidation (production cuts)• Raw material prices
China
Source: CRU, China – Shanghai spot
2005 price trough
BackgroundBackground
Profitability remained very strongPROFITABILITY EBITDA Margin % Pre-Tax Margin % ROIC (EBIT) %
2004 2005 2006E 2004 2005 2006E 2004 2005 2006EBlueScope* 18.0 18.9 11.5 14.0 17.1 8.2 24.3 34.3 14.6OneSteel†* 9.7 9.5 10.7 5.8 5.2 6.9 13.9 14.8 15.6Australasia (Mkt cap wgtd ave) 15.0 16.2 11.0 10.7 13.4 7.4 20.4 28.6 14.7JFE Holdings 17.8 23.1 23.0 7.5 10.8 16.1 12.7 24.8 25.0Nippon Steel* 13.9 18.0 19.0 2.5 10.9 13.6 8.6 17.1 21.2Sumitomo Met Ind. 15.4 21.2 23.9 3.6 13.7 18.9 6.4 13.8 23.5Tokyo Steel 13.0 34.2 30.7 8.2 31.6 26.8 18.9 136.4 100.5Japan (Mkt cap wgtd ave) 15.2 20.5 20.7 5.0 11.9 14.8 10.3 25.1 24.8Baosteel (G) 38.6 22.2 15.9 23.2 13.9 8.2 33.6 28.1 15.8Maanshan I&S 22.7 17.2 13.2 15.2 11.8 7.0 22.2 18.4 9.6Wuhan Steel 30.6 25.3 25.0 22.1 19.4 19.2 48.1 38.7 39.8China Steel 40.6 36.8 25.5 38.6 35.4 24.4 55.2 57.4 31.7POSCO 32.8 34.1 25.8 26.4 24.7 17.6 45.3 48.7 25.1Asia (Mkt cap wgtd ave) 34.4 28.9 22.7 26.7 23.0 16.5 42.3 41.5 24.7CSN* 47.0 46.5 45.7 28.6 28.9 27.3 30.0 33.3 29.2Usiminas 45.2 42.4 34.4 36.2 38.2 28.2 49.2 46.1 25.3Mechel* 24.4 19.3 20.1 42.5 14.1 14.7 52.4 28.9 25.0Severstal* 32.3 27.0 21.8 28.4 22.0 15.2 59.6 40.7 23.8Novolipetsk* 54.3 46.8 41.1 52.1 41.3 44.9 106.2 67.6 51.2Evraz* 33.6 28.4 23.6 28.1 24.6 19.9 86.4 48.4 35.0Tata Steel 25.6 35.5 35.5 23.5 34.7 32.6 25.5 48.9 42.9Emerging markets (Mkt cap wgtd ave) 37.3 35.4 30.7 32.9 29.3 25.7 54.4 47.6 33.5Arcelor* 15.2 17.3 13.3 10.5 13.3 9.9 23.3 25.1 18.8Corus 10.0 10.1 8.6 6.1 5.7 4.9 16.7 17.7 14.5SSAB 20.6 23.7 19.9 19.4 20.4 16.4 28.4 38.5 31.6ThyssenKrupp Group* 8.1 8.2 7.8 4.0 4.4 4.2 7.6 9.0 7.5Europe (Mkt cap wgtd ave) 12.6 15.8 12.1 8.3 11.8 8.6 17.4 23.1 17.2Nucor 19.5 19.7 18.7 15.9 16.7 15.9 55.1 60.8 61.1US Steel 14.1 12.8 11.4 10.5 9.4 8.1 91.6 64.9 40.6North America (Mkt cap wgtd ave) 19.3 19.5 19.1 15.4 16.0 16.0 63.0 56.6 52.3Carbon Steel Sector (Mkt cap wgtd ave) 24.7 24.8 21.5 18.2 19.0 16.5 34.2 36.7 28.1
Source: UBS *: Company report from full year
Summary – background steel industry trends• Strong steel growth phase continues led by China
• Industry highly successful, current steel prices maintained at historically high levels
• Industry profitability currently very strong
• Consolidation benefits
• Widening differentials between global and Chinese steel prices
Future critical issues for the steel industry
1. Future structure of China’s steel industry
2. Consolidation
3. Future blast furnace trends
Future structure of China’s steel industryFuture structure of China’s steel industry
Demand driven by construction, infrastructure & machinery
233Total kg/capita
2005
14Construction
16Infrastructure
19Machinery
20Automobile
16Cons. Durables
21Shipping
13Container
40Others
19Total
00~05
CAGR %
233Total kg/capita
2005
14Construction
16Infrastructure
19Machinery
20Automobile
16Cons. Durables
21Shipping
13Container
40Others
19Total
00~05
CAGR %China Steel Demand by End Use Sectors
Construction
Infrastructure
Machinery
AutomobileConsumer durables
ShipbuildingContainer Others
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2000 2001 2002 2003 2004 2005
Kt, fi
nishe
d stee
l
Source: CISA
Future structure of China’s steel industryFuture structure of China’s steel industry
China per capita steel consumption still below Asian standardsPer Capita Steel Consumption Comparision Between China's Tier I Cities in 2005 &
Global Major developed Countries
0 200 400 600 800 1000 1200
HebeiFujian
ShangdongLiaoning
GuangdongUkraine
France 1976Tianjin
JiangsuGermany
Spain 2003Zhejiang
Italy 2004CanadaBeijing
ShanghaiUSA 1973
Japan 1990Taiwan 2004
S.Korea
Kg/Capita
Source: China Metallurgical Planning and Research Institute, IISI, BHPBilliton
Future structure of China’s steel industryFuture structure of China’s steel industry
Coastal provinces are the key steel consumers in China
China's Per Capita Steel Consumption by Provinces in 2005e
212
688
268
0 100 200 300 400 500 600 700 800
TibetGansu
NingxiaInner
QinghaiXinjiangHainan
GuangxiYunnan
GuizhouJiangxiShanxi
SichuanAnhui
ShaanxiHenanHunan
JilinHeilongjiang
HubeiChongqing
HebeiFujian
ShangdongLiaoning
GuangdongTianjin
JiangsuZhejiang
BeijingShanghai
Kg/Capita
Tier I
Tier II
Tier III
Source: China Metallurgical Industry Planning & Research Institute, BHPBilliton
Future structure of China’s steel industryFuture structure of China’s steel industry
China steel industry is very fragmented
Top 10 Crude Steel Production Provinces in 2005
73.9
32.8 31.8 30.6
19.316.5 15.7
12.3 11.1 10.9
21.1%
73.0%
30.5%
39.7% 48.4%
53.9%58.7%
63.2%66.7%
69.8%
0
10
20
30
40
50
60
70
80
Hebei Jiangsu Shandong Liaoning Shanghai Shanxi Hubei Henan Anhui Sichuan
MT
0%
10%
20%
30%
40%
50%
60%
70%
80%
Cumulative share of China total
Source: CISA
Future structure of China’s steel industryFuture structure of China’s steel industry
Top 10 steel mills only account for 35.4% of total in 2005
Top 18 Steel Mills With Crude Steel Production of 5+ MT in 2005
22.7
16.1
13.011.9
10.5 10.4 10.4 10.3 9.68.5
7.3 7.0 6.5 6.2 5.8 5.7 5.4 5.0
0
5
10
15
20
25
Bao
stee
l
Tang
shan
WIS
CO
Ans
han
Sha
gang
Sho
ugan
g
Jina
n
Laiw
u
Mas
teel
Val
in
Han
dan
Bao
tou
Ben
xi
Pan
zhih
ua
Any
ang
Jiuq
uan
Taiy
uan
Jian
long
MT
0%
10%
20%
30%
40%
50%
60%Cumulative share of total China
Source: CISA
Future structure of China’s steel industryFuture structure of China’s steel industry
China’s new steel policy 2005• Objective
– Competitiveness of China Iron & Steel Industry to be improved significantly– Top 10 steel mills should account for > 50% of total by 2010, and 70% by 2020
• Technology & equipment upgrade policy– Outdated processes, equipments and techniques; highly pollutant, raw material
& energy consumption and low efficiency to be phased out– Pollutant discharge and efficiency standards raised
• Foreign investment policy– In general, foreign companies are not allowed to acquire a controlling stake in
Chinese steel makers, especially medium and large ones– No greenfield project is allowed– Advanced technology with intellectual property is needed
Source: NDRC
Future structure of China’s steel industryFuture structure of China’s steel industry
Plans and Implications
• Industry structure optimization policy– Steel mills, especially big ones, are supported to grow through M&A
• Industry layout improvement policy– Steel mills encouraged to relocate or build greenfield plant in coastal or along
Yangtze River areas to take advantage of markets and overseas raw materials– Inland steel mills should cap the capacity based on the available ores in line
with the local markets and the mineral resources – Those steel mills locate in provincial capital and tourism cities are not allowed to
expand capacity of iron-making & steel-making
• Raw materials policy– International cooperation with the overseas mineral resources should be enhanced
Source: NDRC
Future structure of China’s steel industryFuture structure of China’s steel industry
Consolidation targetsThe Weight of China's Top 10 Steel Mills
47.642.3 42.2
37.1 34.7 35
50
70
01020304050607080
2000 2001 2002 2003 2004 2005 2010F 2020F
%
Source: CISA
Future structure of China’s steel industryFuture structure of China’s steel industry
Target 100Mt pig iron closed…….but will take time
Iron-Making Steel-MakingSintering
Phas
e Ou
t BF ≤ 300 M3 BOF ≤ 20 Mt
EAF ≤ 20 Mt
≤ 30 M2
Brow
nfiel
d B0F ≥ 120 Mt
EAF ≥ 70 MtBF ≥ 1000 M3≥ 180 M2
Deep
Por
t
Gree
nfiel
d
B0F ≥ 200 Mt
Crude steel
Capacity ≥ 8 Mt Mln
BF ≥ 3000 M3≥ 180 M2
Source: NDRC
Future structure of China’s steel industryFuture structure of China’s steel industry
Consolidation increased in 2005 more underway
Nanjing/Arcelortake over Tieben
Tangshan-XuanhuaChengde
Mittal 36.67% (2nd largest shareholder)Valin
Hangzhou 44.39%Ningbo Jianlong
CITIC Pacific:Xingcheng (79%)Daye (58%)Shijiazhuang (65%)
WISCOEcheng (51%)Liuzhou (51%)
JianlongTonghua (36.19%)Fushun
Arcelor-Laiwu (38.41%)
Anshan take overBenxi
Capital take overShuicheng (34.56%)
Done deal
Source: Public Media
Implications of future structure of Chinese steel industry• Consolidated more profitable industry
• Larger capacity, more efficient BF production
• Rising higher quality flat product production
Overall implications likely to see rising demand for higher quality coke made with increasing quantities of higher
quality hard coking coals
Page 30
Steel industry consolidationSteel industry consolidation
Consolidation will improve market conditions and profitability
ConsolidatedSteel
Industry
Financial Performance
Globalisation of Steel Markets
Fragmentation & Overcapacity
• Emerging regions building own capacity
• Technology diffusion• Capacity creep• Low entry/high exit
barriers• Economies of scale
• Opening of import/distribution channels• Global sourcing/rapid information flow • Global customer sourcing and specifications • Consolidated supplier and customers• Convergence of product standards• Increased JV’s
• SOx, NOx, Dioxins• CO2• Effluent discharge• Hazardous chemicals • Waste management• Poor public perception
• Ending “Social/national” business• Government support/interference• Shareholder value destruction• Inability to retain cost reductions• Inability to raise capital
Environmental Concerns
• Worldwide move to privatisation• Shareholder demand for value creation• Capital & opex constraints• Withdrawing of Bank supports• M&A/Alliances, regional consolidation
Steel industry consolidationSteel industry consolidation
The steel industry remains fragmented, despite M&A activityConsolidation:
• has increased slightly (+3 and +5 percentage points for the top 5 and 10 steel producers respectively from 2000 to 2005)
• favoured by strong cash flows and increasing desire to escape sluggish and expensive home markets (Europe, US)
• ‘hot spots’ in the US, E. Europe, CIS and China
• currently appears to be enabling improved production control - aligning demand with supply
68
47
36
33
33
28
23
21
20
19 1.4%
1.5%
1.6%
1.7%
2.1%
2.4%
2.5%
2.7%
3.5%
5.1%Mittal*
Arcelor
POSCO
Nippon
JFE
Baosteel
ThyssenKrupp
US Steel
Nucor
Corus
2005 Crude Steel Production (mt)
Market share (% global steel output)
2000 Current
Top 5 16% 19%Top 10 23% 28%
* Mittal data includes ISG (16.1mt) and Kryvorozhstal (7.7 mt)
Source: IISI, Metal Bulletin, BHP Billiton
Regional consolidation:• China, with government support but low foreign involvement (ownership limited to minority
stakes)• CIS: further consolidation, especially as focus shifts from raw material acquisitions• Smaller acquisitions between second tier producers in Europe and North America
Global / Cross-regional consolidation:• Mergers between groups (competition issues?): catalyst for rapid consolidation • Russian mills going global• Acquisitions in Latin America, Middle East, Ukraine (partly driven by captive raw materials)
Product consolidation: • Focus on flat products• Limited in long products: Ample opportunity but disincentives
Further consolidation directions:Steel industry consolidationSteel industry consolidation
Regional consolidation: CIS, China and Brazil; Europe and N. America
Steel industry consolidationSteel industry consolidation
EU, Eastern Europe
China: government supports consolidation, but not foreign
majority stakes
Regional consolidation: likely to result in more benefits than global consolidation: • Operations are strongly linked (both customer and supply side) to regional markets• Most products sourced regionally with some global support, even though ~20% of
steel production is aimed at global customersSource: Company reports and news coverage; World Steel Dynamics
US / Canada
Brazil
?
CIS: Regional consolidation
between CIS countries
Japan: consolidate to two companies
Strong Regional Consolidation
Second Tier Firm Consolidation
Steel industry consolidationSteel industry consolidation
Fragmented industry now consolidating – regional impact
12.513.1 13.3
14.715.5
1717.4 17.7
17.1 16.9
10
12
14
16
18
20
% s
hare
of t
otal
pro
duct
ion
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Total Crude Steel Production750Mt 799Mt 777Mt 788Mt 847Mt 850Mt 902Mt 934Mt 1069Mt
1129Mt
Share of top 5 producers
Note growth in Chinese steel has countered global consolidation impacts – although regional consolidation has occurred
Source: IISI, Metal Bulletin, BHPBilliton
Steel industry consolidationSteel industry consolidation
Even after recent mergers, industry concentration is low
0%10%20%30%40%50%60%70%80%
Steel
Chemicals
Copper
Paper Oil
Autos
Iron O
reGlobal market share of top 3 producers, 2005e
Source: CRU Analysis, Deutsche Bank
Steel industry consolidationSteel industry consolidation
Flat products is relatively consolidated, unlike long products
20%
40%
60%
80%
West Europe North America Japan China
Plate Hot rolled Cold rolled Galvanised
Flat Products• High regional consolidation in W. Europe, USA,
Japan• Scope for consolidation in:
– China: flat product consolidation has fallen– North America (limited scope)– Western European plate capacity
20%
40%
60%
80%
West Europe North America Japan China
Rebar Wire rod Merchant bar Beams• Significant consolidation is unlikely: the rationale
is less compelling: – local markets, – low barriers to entry – low economies of scale
• Consolidation isolated: – Beams and structural products– Gerdau, CELSA, Nucor and Mittal
Regio
nal M
arke
t Sha
re of
Top
3 Pr
oduc
ers:
Long Products
70%
70%
Source: CRU
Arcelor & Mittal Steel Plant LocationsArcelor PlantsMittal Steel Plants
• Major player in Western Europe, South America• Minor operations in North America, Eastern Europe, Asia• Arcelor has decided to turn their external growth efforts to
countries such as Brazil, Russia, India, China, Eastern Europe and Turkey.
• Production of 47 Mtpa of steel in 2005
Global share 10-11%
• Major player in NAFTA market, Eastern Europe, Africa and Kazakhstan
• Limited in Western Europe in production and distribution, no presence in South America
• Annual production capacity of Steel of 70 Mtpa
Atlantic share ~20%
Steel industry consolidationSteel industry consolidation
Source: Public sources, BHP Billiton
Steel industry consolidationSteel industry consolidation
Mittal is vertically integrated using high levels of domestic coal
MITTAL ARCELOR MITTAL ARCELOR
Brazil (Fines) 20% 54%Brazil (Pellets) 10%Australia 6% 10% 49%CIS 9% 13%Canadian 13% 12%Mauritania 11%Sweden 5%
Own/ Dom Mines / Strategic LT Contr 54% 3% 76%USA 24%South Africa 6%Poland 5%Others 4% 10% 1% 4%
IRON ORE COKING COAL
About 50% of iron ore and 70% of coking coal consumed by Mittal are supplied by own resources or sources outside the “seaborne” markets generally lower quality than seaborne supplied materials
Source: Mittal, Public sources, BHP Billiton
Steel industry consolidationSteel industry consolidation
Mittal Mining Operations:
USAProd.: 8.2 Mt
Contr.: 13.0 MtRes.: 500 Mt
MexicoProd.: 2.3 MtExpan.:3.5 Mt Res.: 250 Mt
LiberiaUnder Develop.
Prod.: 15 Mt by 2010Res.: 1Bt
S AfricaProd.: 10.2 Mt
AlgeriaProd.: 2.0 MtRes: 100 Mt
BosniaProd.: 1.5 Mt
Expan.: 1,0 MtRes: 100 Mt
UkraineProd.: 9.4 Mt
Expan.: 6.0 MtRes: 1Bt
KazakhstanProd.: 6.0 Mt
Expan.: 2.5 MtRes: 2.3Bt
KazakhstanCoking CoalProd.: 5.5 Mt
Res: 1.5Bt
USA: captive supply contractS Africa: cost plus contract
Prod: ProductionContr.: Contract
Expan.: ExpansionRes.: Resources
Iron Ore: 50 Mtpa of Curr. Prod. / Add. 28 Mtpa by 2010 / Res.of 5Bt Coking Coal Curr. Prod. of 5.5 Mtpa / Res. of 1.5 BtSource: Mittal
Summary steel consolidation - implications• Steel industry will continue to consolidate
• Moving from regional to global industry players
• Flat product will continue to lead consolidation
Overall implications likely to see more profitable steel industry operating more efficiently requiring high quality
coke likely to be made with increasing quantities of higher quality hard coking coals
Future BF trendsFuture BF trends
Blast furnace – trends in operating philosophy/practice
European Survey 2003 Blast Furnace Productivity
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57
Blast Furnace
Prod
uctiv
ity (t
/m3
24h
- WV
basi
s) Design = 2.5
Most modern EU-15 Blast Furnaces operate at less than design productivity of 2.5 t/d/m3, further improvements will be made
Source: European BF committee, Hatch
Future BF trendsFuture BF trends
BF technology changes will be delayed to well after 2013.Pe
rcen
t Bla
st F
urna
ce R
elin
e / N
ew 1009080706050403020100
2005 2010 2015 2020 2025
Mid-life BF ~2005
Need Reline
New BFs
+20 year life
+20 year life
BFs NeedReline
This group offers opportunity for new technology implementation
+20 year life
Blast Furnace will remain the mainstay of steelmaking processes
Future BF trendsFuture BF trends
The BF’s domination of virgin iron unit production will remainBlast Furnace Hot Metal as a Source of Virgin Iron
Trend to 2025
82%
84%
86%
88%
90%
92%
2000 2005 2015 2020 2025Glo
bal B
last
Fur
nace
Hot
Met
al
Prod
uctio
n (%
)
1807050Other (MT)Blast Furnace (Mt)Virgin Iron Units (Mt)
11208004001300870450
Yr 2025Yr 2015Yr 2000
Source: Hatch
Future BF trendsFuture BF trends
ULCOS (Ultra Low CO2 Steelmaking) program likely impact after 2025 • Step 1 (2005–10) exploring wide
range of steelmaking concepts
• Including future BF concepts– O2 blast– Biomass/plastics injection– Top gas recycling with CO2 removal– CO2 sequestration
Future BF trendsFuture BF trends
Blast Furnace - future evolution
Pre-Heated Burden
Fine IOMid-Furnace
Injection (Oxy)
Plastics
Top Gas Recycling
Scrap/Metallic DRI
New hearth for high liquids drainage
• Outlook for the BF– Decline in no = higher
productivity– Expanded campaign life >20
years– Shorter down periods– Higher PCI, O2, lower fuel rates– More stable operations– Enhanced computer models
and control, value-in-use– Enlargement during relines– New hearth designs
Summary future BF trends and implications• BF will remain the main source of iron for steelmaking
• Longer lived, high productivity & efficiency future for the BF
• Size will increase as MBF’s move to larger >3000m3
Overall implications likely to see more productive, efficient BF operations requiring high quality coke likely to be made with increasing quantities of higher quality
hard coking coals
What happens if you use poor quality…………
Blast Furnaces must be looked after!
Overall implications for coke in the new world• Current trends:-
– China’s future, growth and structure– Industry consolidation– Future BF trends
• All lead to the conclusion that– Coke will remain vitally important to steelmaking– Coke quality trends are likely to be for higher quality– Coke ovens are a valuable asset– Implications are for continue requirements for HQHCC
Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performance
Understanding coke reactions and performance• Are traditional methods for assessing coke still relevant
• BF operations have changed and will continue
• Coke characterisation tests developed 20 years ago!!– Cold strength probably OK
– Hot strength(CSR) generally useful
• New techniques/evaluations for the new world????
• Role of coking coals in making coke
Simulating coke conditions in the blast furnaceRecent studies of coke its reactions & performanceRecent studies of coke its reactions & performance
Does CSR adequately account for high temperature coke properties?
CSR/CRI
European BFAustralia BF conditions
CSR represents one reaction, under one set of conditions
Conditions vary through (gas, temp) but are also different in various parts of a blast furnace.
0
200
400
600
800
1000
1200
1400
1600
0 100 200 300 400 500
Time (min)
Tem
pera
ture
(C)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Temperature CO CO2 H2 H2O N2
0
200
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800
1000
1200
1400
1600
0 100 200 300 400 500
Time (min)
Tem
pera
ture
(C)
0
0.1
0.2
0.3
0.4
0.5
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0.7
0.8
Temperature CO CO2 H2 H2O N2
0
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1200
0 50 100 150 200 250Time (Minutes)
Tem
pera
ture
(C)
0
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120
Gas
Con
tent
(%)
Temperature%CO2
0
200
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600
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1200
1400
0 50 100 150 200 250Time (min)
Tem
pera
ture
(C)
0%
10%
20%
30%
40%
50%
Gas
Mix
ture
(%)
TempCOCO2H2H2O
High temperature coke reaction furnace (HTCRF)Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performance
Figure 2. High Temperature Coke Reaction Furnace (HTCRF)
Heating Elements
99.8% aluminaworktube
Control TC
1. Up to 200g coke
2. 1600°C Sample temperatures
3. N2, CO2, CO, H2 controlled atmospheres
4. Programmable gas-temperature regimes
More realistic BF Conditions vs CSR and CRI
Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performance
72.0073.0074.0075.0076.0077.0078.0079.0080.0081.00
0.9 1.1 1.3 1.5 1.7Coal Rank
+10m
m W
all p
rofil
e
01020304050607080
CSR
Val
ue
BF Wall
CSR
0.02.04.06.08.0
10.012.014.016.0
0.9 1.1 1.3 1.5 1.7Coal Rank
Wal
l Pro
file
Wt.
Loss
0
10
20
30
40
50
CR
I Val
ue
BF Wall
CRI MV/LV Blends
MV/LV Blends
Key Findings1. CRI/CSR indices similar, but there is less differentiation between cokes under the
blast furnace profile. CSR and CRI overestimate the differences in cokes
2. Strength indices show different behaviour between CSR and BF profile. The drop at high rank is likely due to thermal damage (as shown in nitrogen data)
3. High rank coals increase fines when 100% of battery feed, but do not appear generate increased fines when present in blends.
Source: BHP Billiton
Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performance
Different parts of the blast furnace
0.0
5.0
10.0
15.0
20.0
25.0
30.0
0.9 1.15 1.4 1.65Coal Rank
% P
assi
ng -2
mm
aft
er 6
00re
vs
BF Wall
BF Centre
Nitrogen76.0
78.0
80.0
82.0
84.0
86.0
88.0
0.9 1.1 1.3 1.5 1.7Coal Rank
+10m
m c
entr
e pr
ofile
01020304050607080
CSR
Val
ue
BF Centre
CSR
Key Findings1. Coke behaviour depends on where you are in the BF.
2. At the centre, thermal effects predominate.
3. At the walls (and most likely the mid radial locations, chemical attack via CO2 becomes much more significant).
4. Similar, non-additive behaviour MV/LV blend.
Source: BHP Billiton
New methods for looking at coke structureX-ray computer tomography (CT) is a non-destructive imaging technique that has been applied extensively in medical and engineering fields to visualise internal features of humans and objects
X-ray micro-tomography (XRMT) is based on the same essential principles of X-ray absorption as standard X-ray CT but differs in sample transport and in size of the X-ray source
Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performance
Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performanceX-Ray Micro Tomography (XRMT)-
Effect of gasification on coke structure
Coke microstructures showed significant difference between the effects of
• CSR conditions &• a typical BF gas-temperature profile
• CSR reaction penetrated deep into the coke lump for all cokes studied
• BF profile resulted in reaction confined to lump surface.
Use High Temperature Coke Reaction (HTCR) furnace & XRMT to study the change in coke microstructure through the BF.
Coke made from higher rank coals showed a more limited change in coke microstructure.
Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performance
US LV v Aust LV Coals – Effect on coke strength
50
55
60
65
70
75
80
85
CSR ASTM Stab ASTM Hard M40
(%)
25% USLV 25% Aust LV
Source: BHP Billiton
Measurement of oven wall pressure (OWP)Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performance
• Moveable wall pilot coke ovens provide a direct measurement of OWP
– Research Coke Oven at Newcastle completed over 750 experiments since 1994
Standard ConditionsMoistureBulk density
GrindHeating
5%825kgm-3 (db) box
charge85% minus 3.35mm
Simulation of Australian slot ovens
Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performance
Oven wall pressure studies
0
2
4
6
8
0 5 10 15 20Elapsed Time / hours
Ove
n W
all P
ress
ure
/ kPa
Base containing 25% US low vol
Aus LV replacing US low vol
Source: BHP Billiton
Oven wall failure
And the end of the road
Summary• The global steel industry remains firmly in the “new world” led
by China
• Future trends in China, industry consolidation and changing BF practices all suggest the need for higher coke quality
• Traditional techniques to characterise coke lack the precision to provide superior BF performance
• OWP remains an important parameter esp. with aging ovens
• High quality Australian hard coking coals esp. low vols will remain a core part of current and future coke blends