FOCUS: Demand for metallics to rise on higher EAF steel output

Consumption of pig iron, hot-briquetted iron (HBI) and direct-reduced iron (DRI) will increase globally in the long term because higher volumes of steel will be produced using electric-arc furnaces (EAFs), sources have told Metal Bulletin.

Steel output will reach 1.89 billion tonnes per year by 2025, according to estimates by Metal Bulletin Research (MBR).

In 2016, global steel output was 1.6 billion tonnes, as shown in the latest data available from the World Steel Association (Worldsteel).

In the same year, EAF-based steel production was 417.7 million tonnes, Worldsteel said.

“Share of steel output [from] EAFs worldwide is expected to increase because of environmental movements to reduce carbon footprints and other varieties of pollution,” one major pig iron supplier said.

EAF-steel demand rises in 2017
In 2017, consumption of merchant pig iron increased by 600,000 tonnes, the pig iron supplier said, once new EAFs were started up in the United States and Italy, the largest consumer nations for pig iron.

Big River Steel, a mini-mill in the US, started operations at the end of 2016, while Italy’s Arvedi replaced an old EAF with a new one in the second quarter of 2017.

In 2017, the annual average price assessment for pig iron in the US reached $364.57 per tonne cfr, while in Italy it was $351.35 per tonne cfr. In 2016, those average prices had been $262.98 per tonne cfr in the US and $259.25 per tonne cfr in Italy.

In 2018, the price of pig iron is continuing to rise on higher demand and increased prices for scrap and finished steel products. In the US, the annual average price so far this year is $403 per tonne cfr, while in Italy it is $396.56 per tonne cfr.

Metal Bulletin’s price assessment for US imports of pig iron decreased to $380-385 per tonne cfr on September 21, from $385-390 per tonne cfr a week earlier, on mixed expectations for the scrap and hot-rolled coil markets.

Meanwhile, the assessment for imported high-manganese pig iron in Italy was stable at $385-390 per tonne cfr on September 20.

Demand in 2018 has improved as well. In January-July, the US increased its total imports of steelmaking raw materials with higher shipments of pig iron, US Census Bureau data show.

Pig iron imports to the US totaled 3.5 million tonnes over the first seven months of 2018. That was 13.9% more than in the corresponding period last year, when 3.1 million tonnes were imported.

In Italy, pig iron imports reached 796,244 tonnes in January-May 2018. That was almost 50% more than over the same period last year, when imports came to 535,985 tonnes, according to data from the International Steel Statistics Bureau (ISSB).

Lower scrap quality to support demand on metallics
“The structure of steel will change. That will have a strong positive effect on pig iron and HBI demand,” the pig iron producer said.

Currently, steel mills use feedstock that typically comprises 60% scrap, 20% HBI and 20% pig iron. Because of the falling quality of the scrap component, he said, these proportions will in future be around 40% scrap, 30% HBI and 30% pig iron.

“The quality of scrap material is reducing due to the constant inclusion of more non-ferrous metal impurities each time steel is recycled. It is hard to get rid of this,” he added.

“Scrap quality is getting worse and, to keep the quality of finished products high, mills should increase the metallics content in steel [such as pig iron, DRI and HBI],” another source involved in the metallics market told Metal Bulletin.

There is currently a shortage of prime grade scrap in the US, the key consumer of scrap and metallics, due to the high volume of EAF-based steel output.

“The US exports a lot of low-quality scrap, but imports high-quality raw material. That means there is a shortage of prime grade scrap there,” the metallics sector source said.

In 2017, the US exported 13.94 million tonnes of scrap, of which around 65% or 9 million tonnes was HMS 1-grade scrap, MBR has estimated.

Metal Bulletin’s daily index for HMS 1&2 (80:20) from the United States imported into Turkey, the largest outlet for scrap exports from the US, closed at $326.43 per tonne cfr on September 26. That was down by $0.22 per tonne day-on-day, but up by $9.39 per tonne since September 3 on tight supply.

Meanwhile, US scrap imports in 2017 totaled 3.35 million tonnes. More than 90% or 3.1 million tonnes of this was higher grades of raw material, while only 264,000 tonnes was HMS 1&2, according to US Census Bureau data.

“In the US,” the metallics sector source said, “the shortage of prime grade scrap will be covered be higher consumption of pig iron and an HBI/DRI mix in the steelmaking process.”

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Marina Shulga

marina.shulga@metalbulletin.com

Published

Marina Shulga

September 26, 2018

18:32 GMT

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