Direct Reduced Iron In The Circum-Pacific Region

INTRODUCTION Direct reduction processes reduce the various commercial forms of iron oxide (pellets, concentrate, fines, etc.) to metallic iron at temperatures lower than that of molten iron. Thus, this technology includes practically, all iron reduction processes other than blast furnaces and electric pig iron furnaces (whose output in terms of world production is negligible). The product of these processes which is known as direct reduced iron (DRI), or sponge iron, is primarily used as a source of metallic iron in steel-making operations. Interest in DRI, which has been significant since the early 1960s, increased significantly in recent years with the rapid growth of DRI installed capacity throughout the world. The importance of the subject for the Circum-Pacific region stems directly from the influence that DRI has on iron ore consumption and on future steel development for this region. Although there is widespread agreement that electric furnaces will continue to increase their share of global steel output, and especially so in the countries of the Pacific Steel community, some doubts exist about future scrap supplies being adequate to support growth at past rates. The authors believe that such doubts are soundly based. As this paper points out, the total supply of all metallics used in electric furnaces may not be adequate to support the extrapolated rapid growth in electric furnace steel production. This paper seeks to provide perspective on the global and Circum-Pacific prospects for DRI in light of recent energy price developments and the current recession. In this regard, the demand for DRI within the context of recent evolutionary patterns in steel-making, the outlook of DRI supply in terms of prevailing production costs, and the prospects of new technology are discussed. THE DEMAND FOR DRI Although several reports published in the last 10 years predict high rates of growth in DRI, the subject remains a controversial one. Significant growth has indeed occurred, but not to the extent anticipated in the studies summarized in Table 1. The substantial difference between previous expectations and present reality can be ascribed primarily to: (1) lower growth in steel production than formerly anticipated; (2) numerous cancellations of DRI facilities that were previously announced; and (3) a fundamental and probably irreversible change in the economics of DRI production. Note that DRI capacity at the end of 1980 was about 16 million tonnes, a significantly lower figure than any of the projections above. In addition, DRI production was only about half of capacity, reflecting the abnormally low rates of capacity utilization in this industry. [ ] Before examining the current outlook in steel, it is pertinent to note that the market for DRI is usually different in the industrialized countries of the West from that in developing countries. In the former, the available infrastructure and industry's diversification extends DRI's potential markets to numerous steelmaking, foundry, and other industrial applications, although competition from scrap and other forms of metallic iron is constant. Scrap is generally available in these countries and, therefore, DRI competes with it in electric furnace steelmaking, basic oxygen steelmaking (as a coolant), cupola foundry operations, or as an additive in the metallic charge for open hearth and blast furnaces. On the other hand, DRI in developing countries is often allocated exclusively to domestic electric furnace steelmaking or, when capacity exceeds domestic captive requirements, to export. Notwithstanding quality considerations, DRI is being and is likely to continue to be used predominantly as a source of metallics in iron and steel-making. Other uses of DRI, such as in copper cementation represent a marginal market in terms of overall tonnage and can be ignored at this point. Therefore, DRI demand is-determined by the overall availability of metallic scrap in its various forms--a function of steel production and its probable evolution. The Global Steel Outlook Given the present recession, an objective appraisal of the long-term outlook for steel is particularly difficult. On the one hand, historical trends and, especially, the inertial forces associated with such a basic industry as steel must be recognized; such trends suggest that the current stagnation with