Cheap gas to increase US direct reduced iron self sufficiency

Tue Jan 29, 2013 10:09am EST

Related Topics

* Nucor, Severstal, Voestalpine investing in DRI plants
    * Third wave of US investment in DRI more likely to succeed
    * Venezuela has production issues, Russia boosts output

    By Silvia Antonioli
    MIAMI, Jan 29 (Reuters) - The availability of cheap shale
gas will help the U.S. to increase its self-sufficiency for
direct reduced iron, a main steel ingredient, and will likely
curb imports of Brazilian pig iron, the president of the iron
metallics industry body said on Tuesday.
    Cheap energy prices in the United States are pushing steel
mills to invest in direct reduction plants, which convert
natural gas and iron ore pellets into high quality direct
reduced iron (DRI), a feed used alongside steel scrap to produce
various steel products in electric arc furnaces.
    U.S. steelmakers such as Nucor and Severstal North
America and also foreign producers such as Austria's
Voestalpine for example, are investing in construction
of direct reduction iron making facilities in North America.
 
    "There is definitely a trend in the US, there is more
interest in building captive direct reduction plants," Alberto
Hassan, the president of the International Iron Metallics
Association (IIMA) said in an interview on the sidelines of a
CRU Metallics meeting. 
    The metallics complex includes steel raw materials such as
steel scrap, pig iron, DRI and its processed form, hot
briquetted iron (HBI), which can in some cases substitute each
other in steelmaking. 
    "If these new plants materialize there will be a
rearrangement of the metallics industry. There might be less
demand especially for the Brazilian pig iron," Hassan added.    
    The U.S. is currently a large importer of Brazilian pig iron
and Venezuelan HBI, but if the country completes construction of
its own direct reduction plants it might start importing less
HBI and pig iron and more iron ore pellets to process it
domestically. 
    Twice before, in the 1970s and in the early 2000s, low gas
prices have triggered a similar trend in the U.S., but this was
then reversed fairly quickly when the energy prices increased
again. This time however, things might be different, according
to Hassan.
    "This time it seems that the companies have been able to
lock in future gas prices, for example Nucor has locked in a 20
year contract. So at least it guarantees some stability."
    Nucor is building a $750 million direct reduction facility
in St. James Parish, Louisiana, expected to produce two and a
half million tonnes of direct reduced iron a year.
 
  
    VENEZUELAN ISSUES
    Venezuela, which thanks to its ample availability of natural
gas and iron is on paper an ideal producer of both DRI and HBI,
has seen its production volumes shrink in the last few years
three years or so.
    The industry has been largely nationalized in 2009.
    The country has an HBI capacity of 7 million tonnes a year
but in 2012 it produced only about 2 million tonnes.
    This was mainly due to the lack of investment, which has
caused domestic plants to shut downs in recent years, and lack
of iron ore pellet, market players said.
    The country is expected to produce once again about 2
million tonnes of HBI in 2013.
    This compares with peak production of around 5 million
tonnes in the early 2000s, Hassan said.
    Partially making up for the Venezuelan contraction is a
production expansion in Russia, where Metalloinvest is ramping
up capacity at its Lebedinsky facility, Hassan said.
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