Blog: The challenges ahead for the steelmaking materials markets

The challenges ahead for the steelmaking materials markets

The challenges ahead for the steelmaking materials markets

Dr Baris Çiftçi, Head, Raw Materials Markets, worldsteel

26 October 2017

Today, it is estimated that the global steel industry uses about 2 billion tonnes of iron ore, 1 billion tonnes of metallurgical coal and 550 million tonnes of recycled steel to produce 1.6 billion tonnes of crude steel annually.

Steelmaking materials are some of the biggest commodities in the world in terms of volume of production, consumption and transportation. For example, iron ore, with a production volume of around 2 billion tonnes and an export volume of about 1.5 billion tonnes, is the third largest commodity in terms of production volume - after crude oil and coal - and the second most traded commodity– after crude oil - globally. Ferrous scrap, with a global recycling volume of more than 600 Mt, is the largest commodity recycling activity in the world.

 World iron ore exports, 2001 – 2016, in million tonnes (Mt)

2001 2005 2010 2016
World iron ore exports (Mt) 476 755 1 130 1 544

World exports of iron ore, coal and crude oil in 2015, in million tonnes (Mt)
Source: UN COMTRADE (iron ore); IEA (coal) and IEA (crude oil, including Natural Gas Liquids)

Iron ore Coal Crude oil
World exports, 2015 (Mt) 1 447 1 308 2 216

The unprecedented growth of China’s steel production in the 2000s resulted in very strong growth in global demand for steelmaking materials. Global iron ore exports grew from half a billion tonnes in 2000 to 1.5 billion tonnes in 2016, while global metallurgical coal exports grew from roughly 180 Mt to about 310 Mt. Thus, Australia consolidated its position as the main supplier of steelmaking materials with iron ore exports growing from about 150 Mt to 800 Mt and its metallurgical coal exports growing from around 100 Mt to 200 Mt. The future for Australia suggests further growth but at a much slower pace.

This strong growth in demand for steelmaking raw materials resulted in a decline in the quality of the materials and led to a, still continuing, tightness in the market segments for higher quality materials. This has put pressure on the efficiency and the environmental performance of the global steel industry’s raw materials processing operations. However, the development of new technology and techniques has enabled the global steel industry to meet ever more stringent environmental standards.

Adverse weather conditions and accidents can add to the volatility in raw materials supply. For example, it is estimated that cyclone Debbie resulted in about 10 Mt drop in Australian supply of metallurgical coal this year, and this had a clear impact on premium hard coking coal markets in 2017 as Australia is the main supplier for this segment.  

Recently, we have also seen the continuing supply side reforms and environmental protection measures in China having a big impact on steelmaking raw materials markets. For example, the closure of outdated induction furnace capacity in China has led to an unexpected increase in the country’s crude steel production through the BF-BOF route this year and hence in its demand for iron and metallurgical coal.  

We expect increased demand for raw materials in India to meet forecasted steel demand growth over the next decades. The country has abundant iron ore reserves but very limited metallurgical coal reserves, which are mostly of insufficient quality. Hence, the country is expected to become the largest metallurgical coal importing country by 2020, taking over Japan’s leading position. 

A truck is unloading raw materials at HBIS Tangsteel

Add your comment here

  • 1

    Usually when a country adds large amounts of new capacity, there are opportunities for adopting leading-edge technologies that could not be easily fitted into operating steel plants. In addition to choosing the most modern and optimum-scale equipment, new plants also offer the chance for carrying out advanced ideas in plant layout and internal material flows as was done, for example, at Posco's Kwangyang plant. China had the chance as well to pioneer advanced concepts in the scale and lay-out of new steel plants. But, apparently, very little pioneering was done in the process of adding all that capacity.

    avatarHans MuellerOct 29, 2017 2:48:52 AMReply

  • 2

    Great Article Dr. Baris. Building up on your article I would like to share few insights and action points with regards to my experience with the Indian Steel industry. Firstly, akin to China, a huge quantity of Steel approx 30 pct is produced in India through the IF route , which in metallurgical terms we regard as a Garbage in and Garbage out furnace. Most of the steel produced through this route is laden with impurities that results in fatigue/ failure in long term use and may lead to disaster. Thus, taking a cue from the Chinese, the Indian Govt. too should lay restrictions on IF to arrest the entry of spurious quality steel in the market. However, I foresee a bottleneck here. Most of the rural markets utilize these steels as they tend to be cheaper. This issue can be solved if the conventional producers operating on BOF/ EAF route dedicate their resources towards the largely untapped rural market and develop grades at lower price points. Secondly, it is good to note the increased demand of raw materials that stems from a burgeoning steel industry. However, a very high dependence on coking coal imports will and has left the industry open to supply chain risks and increases the OPEX considerably. At the same time India is blessed with vast reserves of non metallurgical coal and good reserves of natural gas that can be utilized more for the production of coal and gas based DRI. Hence, it is prudent to invest in more and more hybrid facilities in future steel mills that can exploit the strenghts from the available process routes and neutralize the threats. An example would be to operate on a BF- DRI- EAF route, which can utilize the best of both of the technologies to reduce energy costs, supply chain costs and thus, reduce the overall OPEX and mitigate potential supply chain risks. I believe this will go a long way in enhancing the sustainability of Indian Steel sector particularly with regards to touching the 110 and 300 MT mark in 2020 and 2030 respectively. There can be several other strategies, but the scope of discussion on this forum is limited. In the meantime , this preface. Thanks and Best Regards, Shantanu

    avatarSHANTANU RAIOct 31, 2017 9:35:41 AMReply

  • 3

    Hello Shantanu. Many thanks for your comments, Indeed it will be very interesting to see how Indian steelmaking raw materials requirements will evolve over the next several decades. Domestic raw materials availability is one of the factors considered in the choice of steelmaking technology. However, there are other factors too such as energy/gas availability, targeted scale/product portfolio/ market segments, investment/maintenance requirements ... I also believe that India currently produces much more coal of coking quality than what is used domestically by Indian steel industry, but most of this production is utilized in thermal coal production. I believe that diverting a bigger part of this production to steelmaking could also help meeting India's increasing metallurgical coal demand. What do you think?

    avatarBARIS CIFTCINov 3, 2017 10:34:22 AMReply

  • 4

    Many Thanks, Dr. Baris. It's indeed a pleasure to exchange views with you. It would be prudent, to begin with discussing the coking coal consumption pattern in India. The BF-BOF route of steelmaking currently accounts for on an avg. 50% of the steel production in the country. Now, at the current domestic production level of 100 Million Tonnes Per Annum (MTPA) of Liquid Steel, approx. 50 MTPA of steel is produced through BF-BOF route. Considering a conservative coke rate of ~ 650 Kg/ T Hot Metal in Indian conditions and a 90% hot metal input in total metallic charge for BOF, the coke requirement works out to be 32.5 MTPA. Considering ~ 75-80% yield of coke ovens and handling losses, the gross coking coal requirement comes out to be ~ 45 MTPA. Though India produces around 50 MTPA of coking coal per annum, a very high % of this is not amenable for Steel production owing to high ash + sulphur content and poor strength, hence, around 67 % of the demand to the tune of approx. 30 MTPA is met through imports. Now, coming to the alternative: India has huge proven reserves of non-coking coal to the tune of 90 Billion Tonnes and produces on an average 450 MTPA of non-coking coal per year, which can be used as a reductant and energy source for DRI production that can be further melted in EAFs/IFs for Steelmaking, a trend which is gradually picking up. India currently, produces approx. 45 MTPA DRI (36 MTPA coal-based + 9 MTPA gas based ). However, there are trade-offs that have to be considered and techno-economics to be worked in detail on a case to case basis. The total gross non-coking coal requirement works out to approx. 22 MTPA, which can be easily met by current domestic production levels, however, again in this case too high ash content of Indian coal limits its utilization and a substantial amount of coal has to be imported from South Africa and Indonesia in order to blend with Indian non-coking coal. Hence, it is prudent to invest in coal washing and beneficiation facilities in order to enable better utilization of Indian non-coking coal for metallurgical purposes. Further, coal-based DRI is associated with higher gangue (impurities) that lower down the yield and tap to tap time (TTTT) when compared to BF-BOF Steelmaking. For Example, in an average scenario, an EAF operating on 90% coal based DRI charge shall have a yield of ~75 % and a TTTT of 60 mins, compared to a figure of 85-90% and 40-45 mins respectively in case of BF-BOF Steelmaking route. Also, energy costs need to be considered. In the above example, the energy requirement would be approx. 700 Kilo-Watt hours/tonne compared to a value of 350 kwh/tonnes for an equal amount of scrap. Again, we need to weigh the trade-offs w.r.t. scrap/DRI cost and per unit electricity costs. Also, it is difficult to produce premium steel grades through coal based DRI-EAF steelmaking. The values are much improved and tend to touch the production values/ ability to produce premium grades is greatly enhanced as in case of BF-BOF route if we use Gas-based DRI primarily owing to higher metallic and lower gangue content in input charge. Primarily, gas-based plants operate on Natural Gas. India has decent reserves of Natural gas and the current availability stands at around 300 mmscmd, but the total demand at roughly 400 mmscmd outstrips availability and hence, only a very meagre proportion of the total availability is allocated for the steel sector as other consumers of NG demand higher priority. In such a scenario the available alternatives are: 1- Use of advanced gasifiers such as SASOL-LURGI gasifier to produce coal gas of high quality that can be used in lieu of NG, but the capital cost is very high. 2- Utilization of coke oven or Corex gas for DRI production if the facility is present in an Integrated Steel Plant complex. 3- Utilization of other iron making technologies such as COREX/FINEX, but the adoption of these technologies is not much in vogue because of limited reference list and production module availability. Additionally, cost-effective Chinese make gasifiers that are generally used in ceramics and other industries can be used to produce coal gas, though not of the same quality of that produced by the SASOL-Lurgi one. The coal gas such produced is not much amenable to be used in Iron & Steel making processes, but can be used to replace/used in blend with fuel oil as an energy/heating source in multiple heating and other applications. I did a study on utilization of coal gas in Straight grate Iron oxide pelletization process and found that there is a potential to save around 4 Mn Euros in a typical 1 MTPA Iron-Oxide pellet plant. However, there is a huge ash residue generation through the aforementioned gasifiers and an effective disposal mechanism has to be worked out in order to ensure sustainability of this operation. Hence, we can see that there is a complex interplay of multiple factors that will influence the evolution of Steel industry in general and raw materials requirements in particular , but I trust as the per capita consumption picks up, with more governmental and regulatory support, advent of newer technologies, and research and analytics support, will enable a more detailed and scientific approach for raw material selection vis-a-vis local and global conditions, overall supply chain shall become more flexible, and industry dynamics will become gradually favorable over time for both the Global and Indian Steel industry. It would be great to know your thoughts on the above. Thanks and Best Regards, Shantanu

    avatarSHANTANU RAINov 4, 2017 3:48:39 PMReply

  • 5

    Very Informative article Dr. Baris, Thank You. How is the South Africa and the SADAC Region performing in contributing to global steel production? I ask because at Lilitha Minerals (South African) we supply the local foundry market and steel industry - and soon the global market - with feCr, FeMn, coal, iron ore and copper. I am learning that most of our smaller or new material producers, struggle to access the global steel production market. We currently have opportunities of being approached by mining operations, of iron ore, coking coal and copper, who are struggling to penetrate the global market. Most of these operations were established due to limited local requirements. And most of these mines have a deeper offering.

    avatarThandi DywiliDec 8, 2017 5:59:33 PMReply

  • 6

    Hi Tandi - Many thanks for your comments. We saw severe volatility in metallurgical coal markets and shortages in electrode, needle coke and refractories markets this year. These developments suggested that there might be a need for additional investments in the seaborne supply of some steelmaking materials. South Africa is well positioned to meet increasing demand from some developing countries, particularly from India.

    avatarBARIS CIFTCIDec 13, 2017 11:32:15 AMReply

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