NAIS 2019: Egypt’s DRI output to grow again in 2019

Egypt, the largest producer of direct-reduced iron (DRI) in Northern Africa, will increase its output further in 2019, Fastmarkets heard at the North Africa Iron & Steel Summit in Cairo on April 16-17.

In 2019, DRI production in Egypt may reach 6.6 million tonnes, one steel producer in the country estimated, depending on the balance between the supply of natural gas to power the smelting process and growing steel output.

In 2018, Egypt produced 5.75 million tonnes of DRI, according to the World Steel Association (Worldsteel). This was an increase of 23% compared with 2017, when output was 4.67 million tonnes.

Egypt produced 1.1 million tonnes of DRI in January-February 2019, Worldsteel said. That was a 16.63% increase against the corresponding period in 2018.

“DRI production was suffering in Egypt due to a drop of natural gas supply. But since 2017, supply has started to increase. Now we have the perfect correlation between natural gas supply and the volume needed for DRI production,” the source said.

“But even with the large increase of DRI output over the past two years, the capacity utilization rate is only 63%. With [an expected] 12% increase in DRI production in 2019, utilization will still be no more than 75%,” the source added.

The largest DRI producer in Egypt is Ezz Steel, which has a design capacity for 5.1 million tonnes per year. Compatriot producers Suez Steel and Beshay Steel are each able to make slightly less than 2 million tpy of DRI.

But Beshay Steel only started DRI output in early April 2019, Fastmarkets has learned.

“Once the local market is better protected, it will be more reasonable for integrated mills to increase steel melting,” another source told Fastmarkets.

Egypt has imposed a temporary additional duty on imports of rebar and billet, which came into effect on April 15.

The cost of natural gas may restrict further growth in DRI capacity utilization, the first source said. But if that price should go down because of improved supply, DRI producers will continue to increase their output.

“The theoretical minimum energy requirement to convert 1 tonne of pellets into DRI is 10.9 million BTU. Current natural gas costs are $77 per DRI tonne, which represents nearly 30% of DRI production costs,” the steel producer said.

In Egypt, the price of natural gas for the steel industry is $7 per mBTU, the source said. This compared with $2.80 per mBTU in the United States and $0.50 per mBTU in Algeria, another Northern African country which has increased its DRI output.

Tosyali Algeria commissioned its new DRI plant in December 2018.

Growing DRI output in the region has led to higher demand for DR-grade pellet. Around 1.45-1.50 tonnes of DR pellet is required to produce 1 tonne of DRI, sources have estimated.

Fastmarkets’ iron ore DR-grade pellet premium increased to $80.50 per tonne on March 29, from $76.00 per tonne in February, due to the instability in the market after the collapse of a tailings dam at an iron ore mine in Brazil operated by Vale.

Meanwhile, the DR pellet premium in contracts for supply in 2018 was around $62 per tonne. The premium went up, sources said, mainly due to the constant shortage in the DR-grade pellet market.

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.