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Direct Reduced Iron and Iron ore

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See also.....
bulletCIP presentation by BHP Iron Ore to CIP.
bulletA 13 page report on Direct Reduced Iron prepared by ACTED.

UPDATE INFORMATION

To December 2000, world steel production was a record 843 million tonnes (up 7 per cent on previous year). China produced 126mtpa, Japan 106 mpta and the USA 101mtpa. About 40 per cent of steel is from scrap. US prices for scrap are $20 per tonne lower than in Asia. EAFs anticipated to produce 45 per cent of world steel production by 2010. Scrap sells in a range of about $US80 per tonne to $US140/t. It in 2000 now trading at the lower end. A new DRI plant would have to produce in the range of $US80 to $US90 a tonne for viability.

Hismelt (April 2002)

Rio Tinto Ltd has confirmed the construction of a $400 million commercial scale HIsmelt plant in Kwinana south of Perth, after securing federal government assistance of A$125million ($50 million plus a further $75 million contingent on the steel mill), WA government $30 million in land and port facilities and Japan's Mitsubishi Corp as a joint venture partner.

Mitsubishi would take a 10 per cent stake in the project, joining Rio Tinto (60 per cent), US steelmaker Nucor Corp (25 per cent) and Chinese steelmaker Shougang Corporation (five per cent).

The project will produce around 800,000 tonnes of high quality pig iron a year using lower grade and lower value iron ore (typically 25 per cent less), such as the high phosphorous ores found in the Pilbara region of WA. It would promote a cleaner steel industry not requiring coke ovens and sinter plants and producing less greenhouse gas per tonne of metal.

It followed more than that 20 years of research and development at a cost of A$600 million.

Construction will commence early 2003 with commissioning scheduled for 2004. Rio would initially source ore for the project from its own reserves and those of fellow iron ore producer Portman Ltd.

Its joint venture partner Nucor consumes about five million tonnes of pig iron annually making it an obvious customer of the HIsmelt product.

Rio Tinto would consider doubling the project's capacity to 1.5 million tonnes a year in 2005, which ultimately could lead to the construction of a steel plant in about 2006/07.

Austeel

Austeel is planning a plant at Cape Preston some 100 km south of Dampier to produce 4.62 mtpa of DRI/HBI and use 210 terajoules of gas per day. The HBI will be shipped to Austeel at Newcastle in New South Wales. 

In December 2001, agreement was signed by the state, Mineralogy Pty Ltd and six co-proponent companies for the mining and processing of magnetite iron ore deposits near Cape Preston, 85 kilometres south west of Karratha. The project, which involves capital expenditure of $5.6 billion, is expected to create 20,000 jobs nationally and generate an annual output of $2.5 billion. It involves the development of a new open pit iron ore mine in WA's Pilbara region, processing of ore into a hot briquetted iron (HBI) and shipping of the HBI through a new port at Cape Preston to the planned steel mill in Newcastle. Mineralogy holds mining leases over the several ore bodies and has a established a consortium to develop the project based on the deposits. National and international players which have indicated their support for the project include Italian steel producer Danieli, engineering group Lurgi, Macsteel International Holdings BV (a joint venture between the Macsteel group and Iscor of South Africa), Chevron, Industrial Bank of Japan and mining contractor Thiess Pty Ltd, a subsidiary of Leighton Holdings. 

In addition, Austeel last year signed a memorandum of understanding between with the Woodside Petroleum Ltd-operated North West Shelf project for the supply of gas to the project. Palmer told reporters he expected to finalise all regulatory hurdles by mid 2002 and achieve financial closure three to four months later, enabling development work to begin. The three year construction timeframe would see the project move into production in 2005.

Electric arc furnaces.

April 2001. Rapid advances in EAF technology has led to an estimated 15 to 20 per cent fall in EAF operating costs in real terms in the last 10 years and another 10 to 15 per cent reduction feasible over the next 10 years. 

A study by AME found EAFs, which now account for 34 per cent of world crude steel production, are playing an increasingly important role in regions such as the former Soviet Union and China. These regions are in the process of renewing their steel industries and currently enjoy input price advantages, particularly in labour while Russia is enjoying low energy costs. 

In Western Europe the major players in the industry have progressively been consolidating through acquisition, mergers and rationalising operations. New crude steel capacity planned for the next two years is EAF based while there is likely to be a reduction in blast furnace capacity. In North America there has been a series of steel company failures in the wake of record levels of low priced imports and rising energy prices although some companies have been investing in new technology and increasing capacity. Almost half of North America's crude steel is produced by EAFs. According to the report, plants in Middle East and North Africa commonly use direct reduced iron as metallic feed for EAF based plants to take advantage of low cost natural gas in the region.

1998 information follows

 


A composite of the overheads used and included in the report.

Direct Reduced Iron

The current (1998) world market for DRI is estimated at 30 mtpa (4 per cent of crude steel steel production - but only around 4mtpa is traded as most is owned by steel producers). World growth has been rapid from zero in 1970 and projected to around 45 mtpa by year 2000. Thus with pig iron at around 500 mtpa (three-quarters of production) and scrap at 350mtpa, by end of decade DRI will represent at least 6 per cent of total production.

World steel production will continue to be dominated by blast furnaces using coal. The higher value of gas compared with coal and higher construction costs will mean WA for the foreseeable future at least, remain largely an exporter of lump ore for overseas blast furnaces. Important to an iron ore produced like BHP, is that DRI provides a market for the fines co-produced with the exported lump ore helping the viability of the DRI project.

Market

Though there is a market for DRI, it is valuable to steel recyclers as a complements in use in electric arc furnaces as well as a diluent ("sweetener"). DRI can be used as a diluent sweetener because scrap steel often contains unacceptable levels of contaminants such as copper, nickel, chrome, and molybdenum. Thus while DRI also contains certain impurities (5 to 7 per cent), these are different and complementary extending the prospects for further recycling.

The price of DRI is generally at a small premium to merchant grade scrap iron. The world price for DRI is around US$160 representing a small premium over scrap steel.

In newly developing countries, there is a shortage of scrap and with freight costs of scrap to those regions typically at US$30 per tonne, there is an important a margin available for DRI used in electric arc furnace. There is little market in countries such as Japan with the efficient integrate steelworks (and available scrap steel). Also in Australia, with only 5 per cent of the product produced by BHP at the Rooty Hill mini-mill with 95 per cent sold to Asian countries.

Processes

The Midrex process that requires pellets, is still the most popular representing two-thirds of world production. The COREX process is being modified (by Posco of Korea) to the Finmet process with Voest Alpine to use fine ore.

Ore

No melting or refining takes place in the DRI process and almost all impurities in ore feed are also present in the DRI product. The iron contents should therefore be high with low impurities. Feed grade of at least 67 per cent iron is necessary which is higher than the grades used in blast furnaces.

The DRI processes have been used since the 1950s but many are being modified to use the lower cost fine ores.

A typical price for ore in 1996 was $22 per tonne (per dry long ton unit) with fines around 75 per cent of the price of lump ore.

Iron ore is negotiated on the iron content where 1 per cent of iron ore is one unit. In Jan 1998 it was announced that the price was US0.3879 cents (A$0.584 cents) per dry long ton unit and fines would be US$0.2992 cents (ie. 75 per cent of the lump ore).

The value of the fines is underpinned by its use in sinter plants and pelletising plants for blast furnaces but requiring a discount to be competitive against lump ore.

Pellets
World pellet production is around 220 Mtpa (65Mtpa is traded) of which Australia currently produces only 1.5Mtpa. New DRI projects may require more than 20Mtpa of pellets.

Gas

An important advantage for the DRI process is to be located near low quality gas. Most DRI processes such as Midrex, can use low quality gas with a low opportunity value to the gas producer and hence providing an important advantage for the DRI producer. The use of second grade gas, avoiding the installation of gas refiners provides an important cost advantage.
bulletNote that gas fired processes require the gas to be reformed (reacted with water to a mixture of hydrogen and carbon monoxide). Significantly, most DRI processes can use gas with high levels of inerts (carbon dioxide and nitrogen) and even at 30 per cent level, the energy loss is typically only around 10 per cent of the energy content (due to chemical, thermodynamic and physical losses). Avoiding gas stripping facilities, reduces the cost of gas to the user.

 

Gas prices around US$1 per gigajoule are being negotiated which while higher than in the Middle East and Venezuela at US$0.75, are less than one-half those of competing regions such as India and Thailand.

Electricity

DRI requires about 120 kW hours of electricity per tonne implying electricity would represent about 4 per cent of the final product. For comparison, steel produced in an electric arc from DRI requires around 650 kW hours per tonne to equal around 13 per cent (therefore a total of 17 per cent of the finished product). Therefore DRI will be produced by low energy cost and gas rich countries. It will continue to compete against pellets which represents nearly double the market for DRI and main markets in high recycling areas such as Western Europe and North America.

The Direct Smelt Process

A variation is the newly developing direct direct smelt processes that can avoiding coke, pellet and sinter plants, using coal which is often cheaper than gas. These include HIsmelt (under development by Rio Tinto at a facility at Kwinana, Western Australia), Fastmet by Midrex and Circofer by Lurgi that importantly can use fine ore.

HIsmelt

UPDATE: May 2000. The pilot plant at Kwinana has been closed and Rio Tinto has announced it would develop the second stage in the US adjacent to US steelmker Nucor Corporation. Nucor will use the 600 000 tonnes of pig iron from the second stage plant. Rio Tinto aims to set up a 1.5 million tonne plant in the Pilbara by around 2007 to use the high phosphorus containing iron ore as the HIsmelt process reduces the phosphate content allowing the product to be sold at a higher price.

The HIsmelt process is a joint venture of Rio Tinto and Midrex managed by HIsmelt Pty Ltd. It aims to use iron ore fines and non-coking coal - both lower cost raw materials and, importantly for Western Australia, able to use the low quality coal from Collie.

Collie, located south of Perth, has some 1600 million tonnes of coal (one-third accessible by open-cut). It has a specific energy of only 20 gigajoule per tonne and is non coking (with medium volatility) precludes competitive exports reducing its opportunity value. With a low sulfur and low ash content, the coal could be used for the HIsmelt process.

HIsmelt uses oxygen with supplementary coal injection. The process is unique in that the combustion reaction and heat transfer occurs above an intensely stirred molten iron bath.

In addition to using cheap raw materials, the process can accurately control the carbon content, slag basicity and in particular, reduce the impurities that are retained in other processes. The labour intensity is reduced by requiring minimal raw material pretreatment, and avoiding coke, pellet and sinter plants. For Rio Tinto's Hamersley Iron, which is under pressure to begin secondary processing of iron ore, HIsmelt would enable the use of lower grade (cheaper) ores to around 62 per cent iron and higher levels of phosphorous and alumina.

Rio Tinto has reputedly spent some $300m in research on its HIsmelt process, but is keeping a relationship with Misubishi which holds a license from an iron carbide process that produces enrcihed iron from iron ore fines. This process uses fluidised bed reactors using methane as reductant. (The Circo-red [circulatory reduction] process owned by Lurgi is another process that produces a similar product).

Australia

BHP's investment in Western Australia will initially represent about 5 per cent of world production of DRI (using around 3 per cent of BHPs and partners' production of ore in WA).

BHP has commenced production in February 1999, with briquettes of 93 per cent iron. The plant, capable of producing 2.5 Mtpa cost between A$2.2 to A$2.5 billion. The HBI is worth around US$105 per tonne (1997). 

In Feb 2000, production failed to exceed 900 000 tonnes pa due to mechanical problems with BHP writing the project down to A$1.3 billion.  One analyst has speculated about the future of the project unless production improves.

Scale

There are some 65 DRI plants operating globally of which one-half produce at less than 0.5 Mtpa, 14 at 1 to 1.5 Mtpa and five at more than 1.5Mtpa. Even at phase 1, the BHP project will be one of the largest in the world.

It is worth noting that Kingstream Resources is planning a steel plant at Geraldton.

Other DRI starters include AuIron in South Australia, and, Western Australia,Mt Gibson Iron Ltd at Geraldton with 2Mtba
bulletAustralian United Steel at Cape Lambert
bulletCompact Steel using coal but location unclear.
bullet

The Austeel project, located 80km south of Dampier, is one of the biggest projects ever developed in Australia. It involves the development of a new iron ore mine, an integrated iron and steel plant, and associated infrastructure including a power station, port and rail link. The project will generate annual exports of finished steel products worth more than A$2 billion.

It is being developed by a consortium of Australian and international companies that are recognised as industry leaders in their areas of expertise. The consortium comprises:
bullet

Austeel Pty Ltd, the project company;

bullet

Group companies of Corus, the world's third largest steel producer.,

bullet

Danieli & C.SpA., a world leader in construction of steel mills;

bullet

Lurgi Australia Pty Ltd, a subsidiary of German process technology company Lurgi AG;

bullet

Marubeni Corporation, one of Japan's largest trading companies;

bullet

Thiess Contractors Ply Ltd, an Australian engineering and mining contractor;

bullet

Clough Limited, a Perth‑based engineering company;

bullet

Macsteel International BV, owned 50:50 by giant South African steel producer Iscor and the Macsteel Group, is one of the world's leading steel traders;

bullet

Andhika ShipManagement Pte Ltd, a Singapore‑based shipping group; and

bullet

Mineralogy Pty Ltd, a West Australian resources company.

For further information, please contact,

Olive Farmer, Chairman, Austeel Pty Ltd  (08) 9324 2227

If all were to proceed, an investment of A$10bn is required to produce some 12 million tonnes of DRI per year (and 4 million tonnes of crude steel).

Some will use iron ore with a high silica content commercially unacceptable for blast furnaces.

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Iron ore

Iron ore production is around 1 000 Mtpa of which 60 per cent is produced by Australia and Brazil. Western Australia produces around 133Mtpa of which 40 per cent is supplied to Japan and 20 per cent to China.

Australia has a freight cost advantage of delivery to Japan of US$5 per tonne

WA Ores

BIF

It is relevant to note that the Pilbara in Western Australia has some 6 000 billion tonnes of or banded iron-formation (BIF) with an iron content of typically 25 to 35 per cent. For perspective, the total reserves or iron ore is around 34 000Mt though less than 10 per cent (ie. half the BIF reserves) is premium grade, low phosphorus ores that have been produced to date. BIF (a taconite or itabrite) is a chemically precipitated sedimentary rock comprising or alternating layers of iron-rich and iron-poor bands. BIF is used by the world's steel producers (e.g. US, Russia and China) but transport costs precludes their export and use in Australia.

BIF with magnetic iron ore (magnetite) can be enriched to over 70 per cent iron - a process being considered by Mineralogy Limited. Naturally, this enrichment process requires the ore first to be ground which is ideal for DRI processes that can use fine ore. Obviously the ability to use the low cost BIF in a DRI process provides a significant commerical advantage.

Iron ores

Iron ore is primarily found as the oxides or iron, notably haematite and magnetite and hydroxides as goethite and limonite. Small amounts are found as the carbonate siderite, the sulfides as pyrites and silicates as chamosite and greenalite.

Broadly iron ores may be grouped as:
bulletDirect shipping ore generally better than 60 per cent iron (Fe) which is mined and used in blast furnaces requiring only simple preparation.
bulletBeneficiable ore which contain as little as 25 per cent Fe though upgradable to around 60 per cent Fe by magnetic or heavy media separation.
The presence of impurities such as sulfur, titanium, silica and alumina, and the friability influences and even preclude any commercial value.
bulletAbout 75 per cent of ore mined in WA is contain more than 55 per cent Fe and is of the Haematite type. This ore is found in BIF where the silica in the primary BIF (of 30 per cent Fe) has been replaced by iron oxide to contain more than 60 per cent Fe.
bulletAbout 20 per cent of ore is of the limonite form which is of similar iron content to the haematite ore of around 55 to 60 per cent iron but containing some water.
bulletAbout 5 per cent is of the clastic haematite form is found on islands in Yampi sound and has a high average iron content of 67 cent (and little phosphorus).
Royalties
In Western Australia, royalties are payable at 7.5 per cent for lump ore; 5.625 per cent for fines and five per cent for magnetite or beneficiated ores. Royalties are 0.5 per cent lower for low-level processing such as producing pellets, 1.0 per cent lower for medium-level processing (such as direct reduced iron), and reduced 2.0 per cent for steel production.

Mine development

Rio Tinto's Hamersely Iron announced (September '97) to develop a new mine at Yandicoogina (150 km east of Tom Price and 100 km east of the company's Marandoo mine). Other mines operated by Hamersley are Parabardoo, Channar, Mount Tom Price, Brookman connected by rail to Dampier.

Steel Notes

Smorgons operate a scap-feed minimill at Laverton near Melbourne. ANI has similar arc furnace in Newcastle which converts scrap into steel balls for crushing ore and steel pipe for the building industry.
ANI and Smorgons are merging with combined capacity of 800 000 tonnes of billet from scrap per year and sales of $2 billion. The merger will incorporate Smorgon Steel Mill, Comsteel, Smorgon ARC, Welded Mesh, Steelmark, Smorgon Wire Products, and Palmer Tube. Reinforcing products will be 650 000 tonnes per year. It has a technical and training agreement with German steel giant Badische Stahl.

BHP operates a mini-mill at Rooty Hill in Sydney New South Wales.

BHP Steel operates a 600 000 tonnes rolling mill at Whyalla (operation at 400 000 tpa in 1999). Crude steel production at Whyalla is 1.2 million tonnes. Whyalla may be closed by year 2013. Employment at Whyalla has fallen by two-thirds since 1982 to 2 000.

Newcastle closed in October 1999.

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