© schoconsult 1996

Iron OxidesThe Shift from a Waste-Disposal Substance

to a Highly Valuable Chemical Speciality

It96conf . Intertech Conference - Pittsburgh

some marketingreflections

© schoconsult 1996

Steel-industry plays an important role

Most purified iron oxide comes from integrated steel mills.Does the steel industry feel and act as a market maker ?

1995 2000 20050

200

400

600

800

1000

1200

1400

kt p.a.

Steel industryMining Industry

source: RTH Ruthner, 1995

© schoconsult 1996

the raw material sourcemining industry

hematitemagnetite

integrated steel millsmill scalepickle liquor

chemical stuff

mining concentrate17%

pickle liquor83% estim.1995

© schoconsult 1996

The ferrite industry depends largely on regenerated iron oxides

who is the driving force in this business ?

spray rosted

fluidized bed

1995 2000 20050

100200300400500600700

spray rostedfluidized bed

source: RTH Ruthner, 1996

© schoconsult 1996

who is the real king ?the producer of iron oxide ?

the user of iron oxide =customer =ferrite industry ?

© schoconsult 1996

Steel is the core-businessMost spray rosted iron oxides are produced as a by-productof steel strip descaling operations

> the corporate identity is "steel"> the quality of pickle liquor depends on steel

production programs> and follows their lifecycles and trends

this industry follows a production oriented philosophyand only reacts to market demands

© schoconsult 1996

Pickle liquor is (was) a waste disposal substance

the steel mills have only 3 interests

> to be freed from waste> to get back regenerated hydrochloric acid> to have some additional revenues contributed

by the ironoxides - this interest is influenced by steel prices

it seems to be of minor importance where costs arise and profits are reaped

© schoconsult 1996

Producer vs. Consumermentality & demands

> the hard & soft ferrite industry rather belongs more likely to the high tech industry than to the commodity segment

> the ferrite industry has to meet highest specificationsto be able to fullfill the technical demands of this high tech industry they are ceramists & need "chemicals' purity" + consistency

> the iron oxide producers have to come to the sameunderstanding of supplying constant quality according to market demandsthey are metallurgists and must partly adopt a chemist's attitude

© schoconsult 1996

Make your product attractive !

the ferrite industry can identify different ways how the formula could be built up

it mainly depends on the iron oxides producers whether this will bring grist to their mill

© schoconsult 1996

Quality Aspects will call forSeparate Operationswithin a steel strip processing mill

> the responsibilities to run steel strip descaling operations and to produce iron oxides are interferingand bear a heavy (QS) conflict potential

> the steel strip pickling operation always has priority

> the outcome of the spray roaster is the result ofall the efforts of making the best possible productout of this waste disposal substance

© schoconsult 1996

Polluter Pays Principle -also within an integrated steel strip processing mill ?

we expect a new structure very soon> pickle liquor has to be disposed of as waste> iron oxide producers / profit centers "buy" pickle

liquor as a raw material> and pay according to their analysis> they will also buy external stuff, e.g. selected scrap

to manage the quality demands :> investments for PPP & CPP must take place in order

to reach flexibility in production> a reasonable ROI must be obtained

© schoconsult 1996

Iron Oxides : who is who ?

0 500 1000 1500 2000 2500 3000 35000

40

80

120

160

200

240

280

320SiO2

totalppm Cl-, Mn excl.

© schoconsult 1996

Market-growth & share Portfolio

High

growthof themarket

low

high relative marketshare low

?moderate highly + or --- negativeCF CF

highly moderate pos. + or --CF CF

© schoconsult 1996

Market Portfoliosoft ferrite marketsegment

High

growthof themarket

low

high relative marketshare low

?US & European

CPP SiO2=<100 ppm

J <100 ppm PPP SiO2 100-140 ppm

PPPSiO2 150-200 ppm

othersSiO2 > 200 ppm

© schoconsult 1996

SiO2 100-150

< 100

200-250

> 250

Iron Oxides forSoft Ferrites

© schoconsult 1996

Future Requirements for Iron Oxidessource : RTH Ruthner, 1996 "Soft Magnetic Materials"

1993 1995 2000 2005 20070

200

400

600

800

1000kt p.a.

soft ferrite hard ferrite

© schoconsult 1996

what will happen, when ....

> the automotive industry prefers Si-richer steel grades ?> when individual alloy-constituents (Cr, Ni, P) have to be reduced> the soft-ferrite industry requires taylor made products with different specifications than today ?

is the European iron oxide industry able and willing to follow the market ?.

YES- some of them

© schoconsult 1996

we have to learn from other industriesthe steel industry prefers to invest when firm orders have been placed; as this did not happen in Europe, nobody invested in high purity iron oxides

we learned from the chemical & industrial mineral industry :> to believe in (y)our market analyis & strategy> to invest & offer capacities> that sales will grow with (y)our customers' prosperity

> combine metallurgical & chemical expertise

© schoconsult 19961984 1986 1994 19960

10203040506070

the slogan is Market orientationMarket orientationMarket orientationMarket orientation we learned by Japanese efforts

> their succes was initiated by the combination of the know how & background of the steel industry withthe expertise & mentality of the chemical industry

high purity iron oxide production

© schoconsult 1996

0 500 1000 1500 2000 2500 3000 35000

40

80

120

160

200

240

280

320SiO2

totalppm

new projects with the same goal ?

Cl-, Mn excl.

© schoconsult 1996

after shortage - overcapacity ?> there is a new high purity iron oxide production site

in Hungary (Europe) showing a 4-8 kt capacity> there are new operations in India and the USA with

the same targets> there are exciting plans for European steel plants to

invest in high purity oxides as well

the European market for high purity iron oxides is estimatedat 2.000 t p.a., within 2-3 years may be 6-8 kt

all the known projects in Europe sum up to 40 kt !

© schoconsult 1996

where will prices end up ?

major changes are expected in the scene> independent companies - not linked to steel plants -

will start production from selected scrap or iron ores> the advanced technology of PPP and CPP will offer

cost advantages -new engineering companies are knocking at the doors

> smaller operations will have lower overheads etc.> lower cost countries offer significant advantages, e.g. Hungary, India> they will enter the markets more aggressively

this will offer attractive prices to the soft-ferrite producers

© schoconsult 1996

Pricing expectations 1996 - 1999

1993 1995 1997 19990

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

US$/kg

Q 1Q 2Q 3

© schoconsult 1996

exp.Development of volumes by quality

1993 1995 1997 1999 2000 20020

100

200

300

400

500in %

< 100 ppm SiO2 < 150 ppm SiO2 < 200 ppm SiO2 > 200 ppm SiO2

© schoconsult 1996

Trends & Marketswe expect that

> all iron oxide can also be sold in the future but prices will be depressed> some of the established iron oxide producers will diversify to the pigment market rather than staying exclusively with the soft & hard ferrite segment - as better revenues could be generated> the iron oxide industry will change their approach to a brand producer rather than supplying a no-name oxide

> individual marketing will become more importantthan selling through the "club"

© schoconsult 1996

Specialities call for specialists> the soft-ferrite industries are expected to be served

with taylor-made high purity products in the future

! this industry will be "chemical industry" oriented andnew corporations will occupy this segment

> the hard-ferrite industries need high volumes ofa consistent iron oxide with higher impurity levels

! this is the segment where steel industry can serve bestwithout heavy investments and change of business mentality