DRI explored – how is DRI being utilised globally?

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©2013 Metal Bulletin Research www.metalbulletinresearch.com 1 1

AMM DRI & Mini-mills Conference

DRI explored – how is DRI being utilised globally?

10-11 September 2013, New Orleans, LA

Atilla Widnell Senior Metals Analyst


©2013 Metal Bulletin Research www.metalbulletinresearch.com 2

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Introduction

Latest Developments

Forecasts

Conclusions



• Introduction

• Latest Developments:

• What are the developments in DRI/HBI production and trade in the rest of the world?

• Forecasts:

• Where are the key growth areas/regions for future production?

• How will growth of DRI/HBI production effect scrap demand in key regions?

• What consequence will this have on scrap & metallics trade as a result?

• What will be the impact on international DRI/HBI and metallics prices?

• Conclusions

• New MBR products:

• MBR Steel Scrap & Metallics Forecaster

• Strategic Outlook to the Global Ferrous Scrap Industry out to 2021



Introduction

Latest Developments

Forecasts

Conclusions



Source: Midrex, MBR.

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

0

5

10

15

20

25

30

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Indian DRI/HBI output (M tonnes) vs. y/y change (%)

• Limited raw material availability has impacted DRI/HBI

output at Indian sponge iron units through 2011 and

2012...

•...resulting in higher consumption of ferrous scrap in

EAF production, to replace these lost iron units over this

period.

• In fact, Indian DRI/HBI production declined 6% and

9% in 2011 and 2012 respectively...

•...owing largely to the aforementioned limited supply of

raw materials, given:

• iron ore mining bans;

• coal scandals and;

• natural gas availability issues



Source: ISSB, GTIS, MBR.

• As a result, Indian ferrous scrap imports climbed to

5.9M and 7.6M tonnes in 2011 and 2012 respectively.

• The largest supplies of scrap originated from:

• UK

• USA

• UAE

• More recently, however, we anticipate that scrap

consumption rates in Indian EAFs have declined in

2013...

• ...given declining scrap imports and improved

domestic supplies of iron ore feedstock.

0

1

2

3

4

5

6

7

8

9

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8 Indian monthly vs. annual scrap imports

(M tonnes) Rest of World

UAE

USA

UK

Annual



Source: Bloomberg.

Rs40

Rs45

Rs50

Rs55

Rs60

Rs65

Rs70

Rs75

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13

Indian Rupee vs. US Dollar

23%

• In fact, falling ferrous scrap imports from the UK, USA

and UAE have been exacerbated by a new import duty

and a rapid depreciation of the INR.

• Anecdotal evidence from our sister publication, Steel

First, suggests that scrap exports from the UK almost

came to a standstill in August...

• ...given that the sharp depreciation of the currency

makes it uncompetitive to import some steel raw

materials in USD and sell finished products in INR.

• MBR believe this will prompt domestic DRI/HBI

facilities to increase output from current low levels...

•...to meet the requirements for iron units displaced by

lower and less cost competitive scrap imports.



Source: MBR, GTIS, ISSB.

• At the same time, Indian steel producers have

imported cost competitive DRI/HBI largely from these

locations in 2013 so far:

• UAE

• Russia

• Saudi Arabia

• Malaysia

• Oman

• MBR’s sister publication, Steel First, has heard of

good quality material imported at $300/tonne CFR from

the UAE.

• That said, Steel First reported that there were rumours

some of the material from the UAE had been

repackaged from its true point of origin.

• But where is some of this material “apparently”

originating from???

17%

10%

3%

21%

49%

Total Indian DRI/HBI imports year-to-date breakdown by origin (%)

UAE Russia Saudi Arabia Malaysia Oman





Source: ISSB, MBR.

• Indeed, Iran has significantly increased DRI/HBI

output through the first seven months of 2013.

• This has largely been a result of the commissioning of

the following DRI/HBI modules:

• IGISCO – Ardakan (0.8M tpy)

• Khorasan Steel II – Khorasan (0.8M tpy)

• South Kaveh Steel – Kish (1.86M tpy)

• It is, therefore, with little surprise that material could

have been exported to nearby countries.

• Looking further forward, more DRI/HBI modules are

scheduled to be brought online in 2013:

• Arfa Steel – Ardakan (0.8M tpy)

• Saba – Bandar Abbas (1.5M tpy)

0.50

0.75

1.00

1.25

1.50 Iranian monthly DRI/HBI production

(M tonnes)



Source: ISSB, MBR (deduced).

0.00

0.05

0.10

0.15

0.20

0.25

0.30 Venezuelan monthly DRI/HBI exports

(M tonnes)

• In Venezuela, DRI/HBI exports came to a standstill

between May and July, and most probably August.

• No approval of export permits since the government

announced creation of a central price fixing committee.

• Venezuelan industry minister stated the committee will

“fix the prices in a sovereign manner”.

• At the same time, there has been a significant

shortage of domestic iron ore pellets.

• Comsigua currently Venezuela’s sole producer of

DRI/HBI.

• Briqven, Venprecar, Ferrominero Orinoco and SIDOR

plants are currently idled due to lack of feedstock and

maintenance programmes.



Source: World Steel Association, MBR.

• DRI/HBI output in Trinidad & Tobago is 10% lower

year-to-date.

• However, DRI/HBI modules in T&T have been steadily

ramping up production since the low in Sep’12.

• Suppliers in Russia and T&T may be able to replace

some of the shortfall left by Venezuela producers.

0.00

0.05

0.10

0.15

0.20

0.25 Trinidad & Tobago monthly DRI/HBI production (M tonnes)



Introduction

Latest Developments

Forecasts

Conclusions




• MBR expects India to import less scrap in 2013, given:

• improving availability of domestic iron ore;

• imposition of scrap import duties, and;

• a sharp depreciation of the INR

• which has made it less cost competitive to import

some raw materials.

• As a result, MBR forecasts that India will import about

6 million tonnes of scrap this year, a fall of 18% y/y...

• ...as this feedstock for electric arc furnaces (EAFs) is

displaced by improving supplies of DRI/HBI.

• Therefore, Indian EAF scrap consumption rates are

expected to decline in tandem.

Steel First Outlook: Indian scrap imports to fall 18% in

2013 0

1

2

3

4

5

6

7

8 Indian annual scrap imports (M tonnes)

http://www.steelfirst.com/Article/3207995/Search-Results/STEEL-FIRST-OUTLOOK-Indian-scrap-imports-to-fall-18-in.html?PageID=201885&Keywords=india+scrap+outlook&OrderType=1

http://www.steelfirst.com/Article/3207995/Search-Results/STEEL-FIRST-OUTLOOK-Indian-scrap-imports-to-fall-18-in.html?PageID=201885&Keywords=india+scrap+outlook&OrderType=1



Source: Midrex, MBR.

• DRI/HBI plants in Trinidad & Tobago have spare

capacity, as...

• ...total operational capacity in Trinidad & Tobago is

circa 3.8M tpy...

• ...and are able to produce and export more material to

mills in the USA to make up for the shortfall of “lower”

Venezuelan output and exports.

40%

55%

70%

85%

100%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0 Trinidad & Tobago DRI/HBI production (M tonnes) vs. capacity utilisation (%)




• MBR expect EAF-based steelmaking to face a positive

outlook in the coming years...

• ...as production will be driven by significant volumes of

new DRI/HBI capacity...

• ...particularly in the Middle East and North African

region, and...

• ...given these expected capacity additions, we

anticipate DRI/HBI output to reach c.40M tpy in the next

5 years.

0

5

10

15

20

25

30

35

40

45

2012 2017

MENA DRI/HBI production growth (M tonnes)



Source: MBR.

• MBR expect improved finished steel demand in 2014

to drive underlying scrap and metallics consumption.

• As a result, we expect international scrap, merchant

pig and HBI prices to improve in 2014.

• Looking further forward, we anticipate that falling costs

of hot metal production will remove support from global

scrap and metallics prices.

$200

$250

$300

$350

$400

$450

$500

$550 US Busheling vs. Venezuelan HBI FOB ($/tonne)



Introduction

Latest Developments

Forecasts

Conclusions



• Conclusions:

• Where are the key growth areas/regions for future production?

• Middle East North Africa (Egypt, Iran, Qatar & Saudi Arabia) and India

• How will growth of DRI/HBI production effect scrap demand in key regions?

• Lower scrap consumption rates in EAF steelmaking

• What consequence will this have on scrap & metallics trade as a result?

• Lower scrap and metallics imports in some regions

• What will be the impact on international DRI/HBI and metallics prices?

• DRI/HBI and merchant pig iron prices will continue to track scrap prices





• Metal Bulletin Research (MBR) has published a

timely study, A Strategic Outlook to the Global

Ferrous Scrap Industry out to 2021, providing

valuable global information, expert analysis and

forecasting for this important industry.

• The study provides unparalleled industry knowledge

from a team of experts who have a high level of

experience in economics and metallurgy.

• PLUS a dynamic scrap supply/demand model

enabling you to run your own scenarios by country.



Thank you for your attention

Questions & Answers



Contact details for further information:

Metal Bulletin Research

Nestor House, Playhouse Yard, London EC4V 5EX

+44 (0)20 7779 7999

Atilla Widnell

Senior Metals Analyst

+44 (0)20 7827 6480

[email protected]

mailto:[email protected]

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DRI explored – how is DRI being utilised globally?