dri explored – how is dri being utilised globally?
DESCRIPTION
Metal Bulletin Research's Senior Metals Analyst Atilla Widnell discusses the developments in DRI/HBI production and trade in the rest of the world. He also looks into the key growth areas/regions for future production.TRANSCRIPT
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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
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Disclaimer:
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Introduction
Latest Developments
Forecasts
Conclusions
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• 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
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Introduction
Latest Developments
Forecasts
Conclusions
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©2013 Metal Bulletin Research www.metalbulletinresearch.com 6
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
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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
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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.
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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
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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)
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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.
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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)
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Introduction
Latest Developments
Forecasts
Conclusions
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©2013 Metal Bulletin Research www.metalbulletinresearch.com 15
Source: ISSB, GTIS, MBR.
• 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)
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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 (%)
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Source: ISSB, GTIS, MBR.
• 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)
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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)
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Introduction
Latest Developments
Forecasts
Conclusions
Market Analysis | Forecasting | Price Movements | Archive | Breaking Views | 24/7 Online Access
©2013 Metal Bulletin Research www.metalbulletinresearch.com 20
• 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
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• 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.
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Thank you for your attention
Questions & Answers
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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