IRON ORE
DRI/HBI: Production and Trends
October 2017
Global DRI/HBI production was 73Mt in 2016 and annual growth is forecast at 6% p.a. until 2020. Currently, Iran leads the world in DRI production and capacity, utilising 65% of its iron ore supply to produce DRI. Europe and North America have proposed further DRI projects to reduce carbon emissions and improve steel making economics.

Direct Reduction Iron (DRI), also known as sponge iron, production since 2010 has grown at an average rate of 2%. Production growth has roughly followed iron ore supply growth. Capacity utilisation has been falling since 2010 from 70% to 60%. The decline in utilisation is a result of declining production from India’s rotating kilns that use coal to create reductant gas and an increase in the use of MIDREX technology. MIDREX plant can be run efficiently at levels below capacity thus providing operators flexibility to meet demand. The declining utilisation trend is expected to reverse over medium term as demand for DRI increases and an increasing proportion new plants are commissioned primarily in the Middle East and idle older coal based plants are permanently closed.  

 


 

DRI is able to be utilised in a wide number of process in the production of crude steel. Most commonly DRI is used as both a complement and a competitor to scrap in the Electric Arc Furnace (EAF) process route. In the EAF route DRI can be used as a complement to scrap to balance steel chemistry due to this known composition. At the right price point DRI can become a direct competitor with scrap, displacing it in the EAF particularly in regions and markets where there is low availability of scrap steel. DRI, although less common, can also be used in the Blast Furnace (BF) and Basic Oxygen Furnace BOF processes. BF capacity can be increased by using DRI as it contains significantly higher iron content and reduces the coke requirement. In the BOF process, DRI can be used as a coolant to achieve thermal balance and is a direct competitor with scrap steel.  


The production of DRI currently consumes 5% of the world’s iron ore supply and requires high grade DR pellets, typically 67% iron content. The ferrous feed and subsequent DRI are required to be low in gangue as it is most commonly used in electric arc furnaces that have limited refining capacity. 

 

Magnetite ores are the most commonly used as they are more suitable for upgrading by concentration; the concentrates are of a suitable particle distribution for balling into pellets; they have a higher iron content than hematite; and they have an exothermic reaction during reduction thus reducing the external energy required.   


The majority of DRI production is captive and supplied to an adjacent steel plant. Hot Briquetted Iron (HBI) is a sub set of DRI production which is compressed while hot into bricks. These are less susceptible re-oxidation and spontaneous heating than DRI and can be safely transported and traded on the seaborne market. Around 20% of DRI is converted to HBI. There is no change expected to the composition of the market in the next three years.  


India and Iran are the largest producers of DRI accounting for 25% and 22% of production respectively. Iran is the fastest growing user of DRI technology. Over the past five years it has reported 9% year on year growth in production and 20% in capacity. An estimated 65% of Iranian iron ore supply is used to produce DRI. Iran has chosen this route as most of its domestic iron ore is magnetite and the low cost of natural gas leading to reduced costs to produce pellets, DRI and electrical power generation. Iran also has limited availability of scrap steel and has required As Iran’s steel production continues to rise DRI is also forecast to continue to grow. AME currently identify six projects in Iran that are in various stages of construction with a combined capacity of 6.3Mtpa. The Middle East dominates the production of DRI with 45% of supply due to the availability and low cost of natural gas, but unlike Iran the remaining Middle East countries import ferrous feed which has limited their economic viability to build a substantial DRI industry.  


Indian DRI production normally uses coal to produce the required reductive syngas. In recent years the cost of coal, government environmental controls, and permitting restrictions in India have reduced the production of DRI from a peak of 23Mt in 2010 to 18Mt in 2016. This is despite the growth in India’s steel production of 40% over the same period.  

 

 

 

New HBI and DRI Projects & Expansions 

In late 2016 Austrian steel producer Voestalpine completed the Corpus Christi HBI plant in Texas, United States. The project imports 3Mtpa of iron ore pellets to a dedicated port adjacent to the site and produces 2Mtpa of HBI. The project is distinct as the largest producer of seaborne supply of HBI. Voestalpine will ship 40% of production to its steel plants in Europe and 60% of it will be sold to external customers. Voestalpine chose the location due to the low cost of energy and political stability. It selected the DRI/HBI route to reduce CO2 emissions through the steel production chain. The long term success of the project could see other manufactures follow suit in establishing DRI/HBI plants in low energy cost locations and then shipping the iron product to steel mills.  

 

Metalloinvest has increased the capacity at its LGOK operation in Russia with the addition of 1.8Mtpa HBI plant bringing the sites total capacity to 4.1Mtpa. Ferrous feed is supplied by Metalloinvest’s adjacent Lebedinsky 
mineand pellet plant. LGOK is now the world’s largest single site producer of HBI. Approximately 55% of production is consumed internally with the rest sold to third parties in Russia including Evraz, Mechel, and Severstal.  

 

Cleveland Cliffs announced in June 2017 plans to build a DRI/HBI plant at Toledo in Ohio, United States. The plant will be the first HBI supplier in the Great Lakes area supplying to EAF steel mills in the region. The plant has a planned capacity of 1.6Mtpa and will receive its pelletised ferrous feed from Cleveland Cliffs taconite operations in Michigan and Minnesota. Commercial production is forecast for 2020. In contrast to Voestalpine, Cleveland Cliffs determined to locate their plant near the supply of iron ore and steel customers and aims at servicing the United States domestic industry.   

Danieli and the Venezuelan Government plan to increase production at the Sidor plant. The current installed capacity of the operation is 4.2Mtpa. The expansion will increase capacity by 1.2Mtpa taking full capacity to 5.4Mtpa. Sidor currently has two Midrex plants and one HYL II plant. The expansion is planned to be a HYL III plant but has been in construction since 2008 suffering numerous delays.   

 

New DR quality ferrous feed 

In response to rising demand for high grade concentrates there are several development projects targeting the market for DR grade concentrates and existing projects which could convert to supply the market.  
In Australia, Carpentaria’s Hawsons project in South Australia plans to produce 10Mtpa of magnetite concentrate at an iron grade of 70%. The project is in the feasibility stage but has been strongly supported by the market with a number of interested buyers of the concentrate signing to offtake agreements.  


While in Canada, Baffinland’s Mary River project produces high grade lump at 66% iron. The project currently produces about 4Mtpa and has long term plans to expand to 18Mtpa. The product is currently supplied to steel mills in Europe but it has the potential to be used as lump feed to a DR process. Champion Iron’s Bloom lake and Fire Lake North may have the potential to produce a DR quality pellet. Currently they are planning to produce a coarse high grade sintering concentrate at 66% iron. It may be possible to grind the concentrate finer, further upgrade and then pelletise. The additional grinding and pelletising cost would need to be economically weighed against the premium that could be achieved.   

 

Finally, Vale and BHP’s Samarco operation in Brazil produced 13Mtpa of DR quality pellets prior to suspension of operations in 2015. The project is expected to recommence in 2018 but initially at a reduced production rate producing 5Mtpa of DR quality pellets.  

 

Supply of DR quality ferrous feed remains tight and with the expected increases in DRI production this market condition is expected to continue. While DRI does continue to grow its total contribution as an input to the world steel supply remains low and this is not expected to change in the medium term.