Global DRI push to be crimped by lack of pellet feed concentrate - sources

The global push toward using more direct-reduced iron (DRI) and hot-briquetted iron (HBI) could be derailed by the lack of iron ore concentrates used in the pelletizing process, sources told Fastmarkets

“The shortage of pellet-feed iron ore concentrates for producing direct-reduction pellets is one of the key challenges which the steel world will face in its push toward using more DRI as raw material,” a producer source in the middle East told Fastmarkets.

Iron ore concentrate is typically separated into sinter-feed and pellet-feed grades, with the former having a lower iron content of 66% Fe and the latter having a higher iron content of 67-68% Fe.

New DRI plants announced

DRI is a popular route to decarbonization, with equipment makers such as Midrex, Tenova and Paul Wurth touting lower energy consumption to melt DRI, a shorter melting cycle and reduced electrode consumption. There is also reduced tapping time and electricity consumption, as well as lower overall emissions due to less electricity needed.

The increasing popularity of using hydrogen as a reducing agent also means that less natural gas will be needed in the future.

DRI can also be further processed into HBI, which can be charged directly into a blast furnace or basic-oxygen furnace, offering steelmakers flexibility when weighing cost effectiveness of various raw materials in the volatile pricing environment.

There are more DRI plants being built by equipment maker Midrex, which listed the LGOK 4 DRI plant in Gubkin, Russia, the Tosyali Algerie 2 plant in Algeria and the Mikhailovsky HBI plant in Russia as the next start-ups. Industry peer Tenova will be building a hydrogen-based DRI plant for Baosteel at its Zhanjiang plant. Tenova has also been contracted to build DRI plant for Hebei Iron & Steel.

Steelmakers working to integrate DRI plants into their production plans as part of their decarbonization agendas include industry majors like ArcelorMittal, Salzgitter and SSAB.

Lack of pelletizing grade iron ore concentrate

But the growing momentum of using DRI in steel production is facing a growing problem of insufficient iron ore concentrate of the right quality to produce DR-grade pellets, market sources said.

“A lack of pelletizing-grade iron ore concentrates for DR pellets is the biggest challenge right now, as miners are not expected to be able to keep up pellet feed availability at the expected consumption levels,” an industry source in the Middle East told Fastmarkets.

Only a limited number of companies in the world are currently producing DR-grade pellets, including in Ukraine, Brazil and Australia, with some facing limited availability of feed for pelletizing.

The lion’s share of DR-grade pellet is also locked up in South America, with Swedish and Canadian producers seeing far smaller volumes.

“There is still room for DR-grade pellet capacity to increase, but there are some issues which are not easily solved,” the same industry source said.

More vertical integration

The fact that more steelmakers are looking to be increasingly vertically-integrated also means that there may not be sufficient spot availability of DR-grade pellets in the open market.

“Many market players in the [Commonwealth of Independent States] and northern Canada are vertically integrated, so a lot of DR-grade pellets produced will be consumed internally,” the same industry source said.

While this looks like an interesting emerging technology, an iron ore trader in Singapore said DRI will continue to remain a small part of steel production.

“Large blast furnaces in major steel-producing countries such as China, Japan and South Korea remain the most economical for steelmakers. Using DRI will help steelmakers improve their ESG and pollution-reduction efforts, but will not account for much in terms of production,” an iron ore trader told Fastmarkets.

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