Emirates Steel, which predominantly produces steel products via the direct-reduction iron (DRI) route, has gradually increased the volume of scrap it purchases to 225,000 tpy in 2017, up from only 85,000 tpy in 2015.
“We have developed a total-cost-formation model and, based on this and current [raw materials] prices, we will decide to use either more scrap or more DRI or even hot briquetted iron [HBI] as feedstock,” Saeed Al Ghafri, vice president of supply chain management at Emirates Steel, told delegates at Metal Bulletin’s 6th World DRI & Pellet Congress in Dubai on Wednesday April 25.
“Some electric-arc furnaces [EAFs] are equipped to be charged with 100% scrap input but this is not the case for us. What we have done is to add carbon injectors, and that allows us to charge 20-30% scrap when we are using the right mix of [different] scrap [grades],” Al Ghafri said.
The UAE is currently the tenth-largest exporter of ferrous scrap globally, generating around 1.50-2.0 million tpy, of which around 70-80% is exported to India and Pakistan, according to Emirates Steel.
“The scrap market in the United Arab Emirates is not developed but we have worked closely with scrap-generating companies and formed long-term supply arrangements with them,” Al Ghafri said.
The UAE government is looking to reinforce a decree imposing a $68 per tonne duty on all exports of scrap, but “this has not yet been reflected in the market,” Al Ghafri added.
DRI-based production costs have risen sharply, supported by large increases in the premiums for both direct-reduction (DR) grade pellets and blast furnace (BF) grade pellets, as well as higher graphite electrode costs, Al Ghafri said. This prompted the consideration of ferrous scrap as an alternative raw material.
Metal Bulletin’s monthly DR-grade pellet premium assessment for March 2018 was $62.50 per dry metric tonne amid tight supply and strong demand for DR-grade pellets. This was up year-on-year from $56 per dry metric tonne in March 2017.
“I don’t think scrap would completely replace DR-grade pellets because I don’t think the supply is there. In our case, we added more BF-grade pellets in our plants to reach our desired production level,” Al Ghafri said.
“Scrap is basically used for its improvement in yield but, overall, from a total cost perspective, in some instances today it really doesn’t make any sense to use scrap,” he added.
Metal Bulletin’s daily ferrous scrap index for Northern European HMS 1&2 (80:20) material has averaged $354.14 per tonne cfr Turkey so far in 2018, up from an annual average price of $294.00 per tonne cfr Turkey in 2017.
The removal of government subsidies for electricity and natural gas costs has added further cost pressures for steel mills in the Gulf Co-operation Council (GCC) region.
Mill costs for the EAF steelmaking route and DRI-based production have risen to $50-60 per tonne from $20 per tonne, depending on electrode usage and the feedstock mix put into the furnace, Al Ghafri said.
The supply tightness in the DR-grade pellet market has also seen other producers in the Middle East-North Africa (Mena) region turn to alternatives for primary feedstock.
Egypt’s biggest steel producer, Ezz Steel, has used a product mix including a maximum of 40% BF-grade pellets in its DRI reactor, plant manager Gopal Seenivasagam told conference delegates on April 25.
He added that Ezz Steel has even used a product mix involving 5% of lump iron ore.
UAE long steel producer Emirates Steel has developed a light steel scrap shredder with capacity for 350,000 tonnes per year so it can use local scrap as an alternative feedstock during periods of high price volatility.