integrated production chain from chromite to stainless steel · integrated operating model mine...

Integrated production chain

from chromite to stainless steel Mauri Kauppi VP – Sales & Marketing Outokumpu Chrome Oy 1 July 2016

7/1/2016 2

Contents

1. Outokumpu Ferrochrome

2. Business fundaments FeCr

3. How to tackle the Asian challenge?

4. Making most of integrated production chain from chromite to stainless steel

5. Conclusions

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Outokumpu Ferrochrome Integrated operating model

Mine

Works

Sales

2,7 Mt ore

850 kt FinCon

400 kt Lumpy ore

530kt FeCr

370MNm3 CO-gas

625kt slag product

~430kt internal

~100kt external

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Contents





5. Conclusions

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Predictable

• Currency changes in the near term, interrelated dependencies; oil, gold,..

• Approach of summer season

• Supply/demand - capacity / utilisation

• World economy in the near to medium term

• Ni ore export ban from Indonesia

• Import duties against Chinese and Taiwanese stainless steel are temporary

• Asian tiger (China) is not resting; introduction of Ni pig iron, building FeCr capacity, Tsingshan model

• Speculation that leads to either destocking or restocking, thus increasing cyclicality

Business fundaments FeCr

(commercial commodity)

Ferrochrome production by country1 1994-2014 [Ktonnes2]

• China became the largest producing country in 2012, with the help of chromite imports from South Africa.

• However, South Africa should be in the position to reassume its dominance, IF it can ensure reliable &

inexpensive supply of electricity.

0

1,000

2,000

3,000

4,000

5,000

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

[Ktonnes] South Africa

China

Others

China & South Africa as the major producers Will China maintain its leading position?

China vs. South Africa

China South Africa

Reserves Very limited,

practically

imports all

~74% of

world total

Industry &

capacity

Fragmented,

high-cost, but

new capacity

being added

Consolidated,

mostly low-

cost

Electricity

costs

High &

increasing, but

differ by region

Increasing,

shortages &

cuts expected

Currency Appreciated Depreciated

Investment

climate

Good, but credit

outlook

uncertain

Poor

1 CRU Market Outlook (May 2015)

2 Gross weight, high-carbon ferrochrome 11 June 2015 6

Japan ferrochrome industry collapse Similarly China has invested in self-sufficiency but will it be sustainable?

Ferrochrome and stainless steel output in Japan & China [Mtonnes, Ktonnes]

Source: Heinz Pariser 11 June 2015 7

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Melting Capacities in China MILL 2009 2010 2011 2012 2013 2014 2015 2016

TISCO 3.000 3.000 3.000 3.000 3.300 4.000 4.000 4.000

Baosteel/Desheng 1.600 1.850 2.300 2.500 2.700 2.700 2.700 2.700

Posco 800 800 1.000 1.000 1.000 1.000 1.000 1.000

Ansteel/Lisco 800 1.200 1.600 1.600 1.600 1.600 1.600 1.600

Jisco 600 800 1.000 1.200 1.200 1.200 1.200 1.200

Established major mills 6.800 7.650 8.900 9.300 9.800 10.500 10.500 10.500

Tsingshan Group 200 200 200 1.100 3.250 4.500 6.000 6.000

Taishan Steel 400 600 600 600 600 1.000 1.000 1.000

Sichuan Jinguang 600 600 600 850 1.000 1.400 1.400 1.400

Fujian Wuhang 400 600 800 800 800 800 800 800

Jinhui/Shengyanbg 20 180 600 600 800 800 1.400 1.400

Jinxin Li 300 300 300 300 300 300 300 300

Eastern 100 400 500 500 500 500 500

Chengde Beihai 600 1.200 1.200 1.600 1.600 3.400

Formosa Plastics 360 720 720 1.440

Jinhai 500 1.000 1.000 1.000

Huale 600 800 800 800

Sinosteel 200 500

Delong 300 1.000

Shangtai 1.000

New major private mills 1.920 2.580 4.100 5.950 9.910 13.420 16.020 20.540

Total 8.720 10.230 13.000 15.250 19.710 23.920 26.520 31.040

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Unpredictable

• Brexit

• Over night changes in export /import duties esp. in China

• Oil price movements, important for FeCr; each 10 USD/barrel up means higher FeCr

consumption



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Destined to happen but when

• Hard landing in China, debt ratio >240% GDP

• Chinese companies producing Ferroalloys and stainless steel must make profit, hard

to compete with “state capitalism”

• Consolidation in China

• Pollution issues in China become important

• Grexit



Charge/HC FeCr Producer Ranking 2014 (Partially estimated, Preliminary Data)

11

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35%

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Total Selected

Market Share: 72%Excluding China Domestic of 4.1 Mill t:

Top3 Market Share ~ 55%

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Contents





5. Conclusions

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• Forecasting tools are important for commodity business like FeCr, seeing the turning

points on time means right decisions; advantage being part of a global stainless steel

company

• Despite heavy overcapacity the market is not always in balance

• Sales strategy; important to keep long term focus, diversification by market segments

and geography. Sometimes selling solutions

• As FeCr is a commercial commodity, it is essential to maximize output to minimize unit

costs. This leads us to be an active seller as well as an active buyer on the market

How to tackle the Asian challenge?

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Contents





5. Conclusions

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Mining operations are fine tuned for internal consumption, only

• The ore body is poor but large, enough for 100 years.

• Just on time production, low inventories, only homogenization stocks at the

concentration plant

• Environmentally friendly; no stocks in open air

• Minimizing capex

• Mine product optimization;

Making most of integrated production chain

from chromite to stainless steel

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FeCr smelter consists of 3 furnaces; 40, 75 and 135 MVA, principally the same technology for all furnaces

• Capacity 530000 mts/a, the new furnace biggest in the world with capacity 270000 mts/a

• Totally closed furnaces, pelletized feed, hot charging

• CO gas utilized by 95% efficiency, at FeCr plant but also at steel mill, lime plant and power station

• Lowest carbon footprint among stainless steel mills

• All FeCr slags are commercialized with CE marking

• Unique technical solutions give annual availability > 99% for SAFs over 4 years maintenance cycles



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Stainless steel meltshop; examples

• Cr converter utilizes liquid FeCr to boost capacity as well as it saves electric energy. It is the most ideal line to produce ferritic grades. Annually up to 140000 mts liquid FeCr is used

• Low FeCr inventories needed thanks to the vicinity of the FeCr plant as well as the predictability of FeCr production

• Meltshop is capable of using FeCr Fines as well as recovery products from FeCr slag recovery plant

• Ability to charge hot slabs to hot rolling plant; in case it is not possible right away, hot keeping pits are an option

• Efficient water cooling of coil cuts 2 days from the cooling time thus shortening the lead time correspondingly



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Contents





5. Conclusions

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• Keep focus on the issues under you own control

• Short to medium term forecast is needed to manage daily business

• Long term forecast is needed to update the strategy

Conclusions

integrated production chain from chromite to stainless steel · integrated operating model mine...

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