Future steel and coke industry trends - BHP · PDF fileFuture steel and coke industry trends ... – Future Blast furnace trends • Implications for coke ... But the need for coke

Future steel and coke industry trends

Dr Neil J. Bristow Chief Analyst, Carbon Steel MaterialsIntertec European Coke Conference, DüsseldorfTuesday, 11th April 2006

DisclaimerThe views expressed here contain information derived from publicly available sources that have not been independently verified. Norepresentation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation should not be relied upon as a recommendation or forecast by BHP Billiton.

Nothing in this release should be construed as either an offer to sell or a solicitation of an offer to buy or sell shares in any jurisdiction.

Presentation outline• Background - steel industry trends

• Critical issues for the global steel industry– Future structure of China’s steel industry– Consolidation– Future Blast furnace trends

• Implications for coke

• Recent studies to understand coke its reactions & performance

• Summary and Conclusions

Key theme

The world has changed

But the need for coke and hard coking coal remains

Areas where the world has changed…….• Industry structure – consolidation; the new wave

• Regional consolidation moves global

• Price volatility – industry consensus; potential to be lower

• Increased market “power” re customers (flat products)

• Current high profitability in the steel industry continues

• Raw materials – too early to be definite, but potential move to higher quality seaborne raw materials

Areas where the world has not changed

• New phase of strong demand growth - BRICS

• China driving major uplifts

• Technology trends - BF still king

• Planned new capacity SE Asia, Brazil, India etc

• Drive for higher productivity = high quality RM’s esp coke

• Environmental conditions

• Raw materials – the benefits of high quality esp coke

0

200

400

600

800

1000

1200

1920 1930 1940 1950 1960 1970 1980 1990 2000

MtThe global steel industry continues to power on

BackgroundBackground

The golden ageThe golden age1945 1945 –– 1973 6.2%pa1973 6.2%pa

Oil ShocksOil ShocksFall of Fall of

Berlin WallBerlin Wall

The efficiency The efficiency ageage

1974 1974 –– 1995 1995 0.2%pa0.2%pa

The China The China age?age?1996 + 1996 +

>4.6%pa>4.6%paThe emerging ageThe emerging agepre 1945 2.8%papre 1945 2.8%pa

Consolidation

Privatisations

New New goldengolden

age?age?

The China Effect

Source: IISI

Rebuilding of Europe

Rise of Japan

Global steel growth rates have picked up a gearBackgroundBackground

CAGR (%) Comments

1970 – 1975 1.6 First oil shock, ending of Japan steel boom

1975 – 1980 2.2 Steady global recovery from oil shock

1980 – 1985 0.1 Second oil shock, recession, reduction in steel intensity

1985 – 1990 1.4 Strong steel efficiency drive

1990 – 1995 -0.5 Fall of Berlin wall, collapse of USSR, continued steel efficiency gains

1995 – 2000 2.4 Slow CIS recovery, signs of emerging China

2000 - 2005 5.9 China takeoff, US/EU recession then recovery, emerging steel demand SE Asia

Source: IISI

China remains the main driver of this growth

0

50

100

150

200

250

300

350

400

1949

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

Crude SteelPig IronJapan CSUS CS

The largest world steel producer since 1996

First and only steel producer over 200 million tonnes per annum in 2003: ~double production in Japan

13%

23%

JapanU.S.A

1985~2000, CAGR: 7% 2000~2005, CAGR: 22%

Trend Break

Source: CISA and other industry sources

First steel producer over 300 million tonnes per annum in 2005: >3.5x production in USA 31%


Steel 2005; 2 worlds – balanced & uncontrolled growthBackgroundBackground

Production Change 2005

-20

-10

0

10

20

30

40

50

60

70

80

EU 25 OtherEurope

N. America S. America CIS China Japan Asia Global

Mt

Crude SteelPig Iron

Source: IISI

• Market sentiment roller coaster – strong, weak and strengthening again

• China responsible for global increase – world ex China –ve growth in 2005

• Demand led by China, contribution from SE Asia: growing +ve signs US, Europe later

• Chinese production remains buoyant strong steel and stronger pig iron growth


The China effect

-10%

-5%

0%

5%

10%

15%

20%

Dec

embe

rJa

nuar

yFe

brua

ryM

arch

Apr

ilM

ayJu

neJu

lyA

ugus

tSe

ptem

ber

Oct

ober

Nov

embe

rD

ecem

ber

Janu

ary

Febr

uary

Mar

chA

pril

May

June

July

Aug

ust

Sept

embe

rO

ctob

erN

ovem

ber

Dec

embe

rJa

nuar

yFe

brua

ryM

arch

Apr

ilM

ayJu

neJu

lyA

ugus

tSe

ptem

ber

Oct

ober

Nov

embe

rD

ecem

ber

Janu

ary

Febr

uary

Mar

chA

pril

May

June

July

Aug

ust

Sept

embe

rO

ctob

erN

ovem

ber

Dec

embe

rJa

nuar

yFe

brua

ryM

arch

Apr

ilM

ayJu

neJu

lyA

ugus

tSe

ptem

ber

Oct

ober

Nov

embe

rD

ecem

ber

Janu

ary

Febr

uary

Mar

chA

pril

May

June

July

Aug

ust

Sept

embe

rO

ctob

erN

ovem

ber

Dec

embe

rJa

nuar

yFe

brua

ry

1999 2000 2001 2002 2003 2004 2005 2006

Global YOY changeWorld YOY change ex China

Source: IISI, BHP Billiton

Monthly YOY % Change Crude Steel

-16

-8

0

8

16

24

32

40

January

Febru

aryMarc

h

April

May June

July

August

Septem

berOcto

berNov

ember

December

January

Febru

ary

Global EU(25) China Japan US

Monthly YOY % Change Pig Iron

-24

-12

0

12

24

36

48

January

Febru

aryMarc

h

April

May June

July

August

Septem

berOcto

berNov

ember

December

January

Febru

ary

Global EU(25) China Japan US

Crude Steel 12 month running totals

Pig Iron 12 month running totals

Changing trends emerged during the year

Source: IISI

700

750

800

850

900

950

1000

1050

1100

1150

1996 1997 1998 1999 2000 2001 2002 2003 2004 200555

60

65

70

75

80

85

90

95

100

12 months running total actual monthly data de-seasonalised monthly data

500

550

600

650

700

750

800

1996 1997 1998 1999 2000 2001 2002 2003 2004 200540

45

50

55

60

65

70

12 months running total actual monthly data de-seasonalised monthly data


Annualised steel and pig iron production trendsBackgroundBackground

Annualised pig iron production

680

700

720

740

760

780

800

820

840

January

March

May July

Septem

berNove

mberJan

uaryMarc

hMay Jul

ySep

tember

November

January

(Mt)

Annualised crude steel production

950

970

990

1010

1030

1050

1070

1090

1110

1130

1150

1170

January

March

May July

Septem

berNove

mberJan

uaryMarc

hMay Jul

ySep

tember

November

January

(Mt)

Seasonal Trends

2005

Totals2004 724Mt2005 785Mt

Seasonal Trends

Seasonal Trends

Seasonal Trends

2005

Totals2004 1066Mt2005 1129Mt

Chinese Government

actions

Production cuts to lower

inventories

Production cuts to lower

inventories

Chinese Government

actions

China China reaccelerationreacceleration

China China reaccelerationreacceleration

Seasonal Trends

Seasonal Trends

Seasonal Trends

2004 2004

Source: IISI


Massive steel de-stocking during 2005Inventories (Jan ‘99 = 100)

80

90

100

110

120

130

140

150

1999 2000 2001 2002 2003 2004 2005 2006

Inde

x

Nth America

Germany

Source: CRU

Far East

Successful price stabilisation – current prices turning upBackgroundBackground

Hot Rolled Coil Price

0

200

400

600

800

1986 1990 1994 1998 2002 2006

US$/t

EU Export

USA Domestic

Recent lows substantially higher than historical lows:

• Good demand• Consolidation (production cuts)• Raw material prices

China

Source: CRU, China – Shanghai spot

2005 price trough


Profitability remained very strongPROFITABILITY EBITDA Margin % Pre-Tax Margin % ROIC (EBIT) %

2004 2005 2006E 2004 2005 2006E 2004 2005 2006EBlueScope* 18.0 18.9 11.5 14.0 17.1 8.2 24.3 34.3 14.6OneSteel†* 9.7 9.5 10.7 5.8 5.2 6.9 13.9 14.8 15.6Australasia (Mkt cap wgtd ave) 15.0 16.2 11.0 10.7 13.4 7.4 20.4 28.6 14.7JFE Holdings 17.8 23.1 23.0 7.5 10.8 16.1 12.7 24.8 25.0Nippon Steel* 13.9 18.0 19.0 2.5 10.9 13.6 8.6 17.1 21.2Sumitomo Met Ind. 15.4 21.2 23.9 3.6 13.7 18.9 6.4 13.8 23.5Tokyo Steel 13.0 34.2 30.7 8.2 31.6 26.8 18.9 136.4 100.5Japan (Mkt cap wgtd ave) 15.2 20.5 20.7 5.0 11.9 14.8 10.3 25.1 24.8Baosteel (G) 38.6 22.2 15.9 23.2 13.9 8.2 33.6 28.1 15.8Maanshan I&S 22.7 17.2 13.2 15.2 11.8 7.0 22.2 18.4 9.6Wuhan Steel 30.6 25.3 25.0 22.1 19.4 19.2 48.1 38.7 39.8China Steel 40.6 36.8 25.5 38.6 35.4 24.4 55.2 57.4 31.7POSCO 32.8 34.1 25.8 26.4 24.7 17.6 45.3 48.7 25.1Asia (Mkt cap wgtd ave) 34.4 28.9 22.7 26.7 23.0 16.5 42.3 41.5 24.7CSN* 47.0 46.5 45.7 28.6 28.9 27.3 30.0 33.3 29.2Usiminas 45.2 42.4 34.4 36.2 38.2 28.2 49.2 46.1 25.3Mechel* 24.4 19.3 20.1 42.5 14.1 14.7 52.4 28.9 25.0Severstal* 32.3 27.0 21.8 28.4 22.0 15.2 59.6 40.7 23.8Novolipetsk* 54.3 46.8 41.1 52.1 41.3 44.9 106.2 67.6 51.2Evraz* 33.6 28.4 23.6 28.1 24.6 19.9 86.4 48.4 35.0Tata Steel 25.6 35.5 35.5 23.5 34.7 32.6 25.5 48.9 42.9Emerging markets (Mkt cap wgtd ave) 37.3 35.4 30.7 32.9 29.3 25.7 54.4 47.6 33.5Arcelor* 15.2 17.3 13.3 10.5 13.3 9.9 23.3 25.1 18.8Corus 10.0 10.1 8.6 6.1 5.7 4.9 16.7 17.7 14.5SSAB 20.6 23.7 19.9 19.4 20.4 16.4 28.4 38.5 31.6ThyssenKrupp Group* 8.1 8.2 7.8 4.0 4.4 4.2 7.6 9.0 7.5Europe (Mkt cap wgtd ave) 12.6 15.8 12.1 8.3 11.8 8.6 17.4 23.1 17.2Nucor 19.5 19.7 18.7 15.9 16.7 15.9 55.1 60.8 61.1US Steel 14.1 12.8 11.4 10.5 9.4 8.1 91.6 64.9 40.6North America (Mkt cap wgtd ave) 19.3 19.5 19.1 15.4 16.0 16.0 63.0 56.6 52.3Carbon Steel Sector (Mkt cap wgtd ave) 24.7 24.8 21.5 18.2 19.0 16.5 34.2 36.7 28.1

Source: UBS *: Company report from full year

Summary – background steel industry trends• Strong steel growth phase continues led by China

• Industry highly successful, current steel prices maintained at historically high levels

• Industry profitability currently very strong

• Consolidation benefits

• Widening differentials between global and Chinese steel prices

Future critical issues for the steel industry

1. Future structure of China’s steel industry

2. Consolidation

3. Future blast furnace trends

Future structure of China’s steel industryFuture structure of China’s steel industry

Demand driven by construction, infrastructure & machinery

233Total kg/capita

2005

14Construction

16Infrastructure

19Machinery

20Automobile

16Cons. Durables

21Shipping

13Container

40Others

19Total

00~05

CAGR %

233Total kg/capita

2005

14Construction

16Infrastructure

19Machinery

20Automobile

16Cons. Durables

21Shipping

13Container

40Others

19Total

00~05

CAGR %China Steel Demand by End Use Sectors

Construction

Infrastructure

Machinery

AutomobileConsumer durables

ShipbuildingContainer Others

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2000 2001 2002 2003 2004 2005

Kt, fi

nishe

d stee

l

Source: CISA


China per capita steel consumption still below Asian standardsPer Capita Steel Consumption Comparision Between China's Tier I Cities in 2005 &

Global Major developed Countries

0 200 400 600 800 1000 1200

HebeiFujian

ShangdongLiaoning

GuangdongUkraine

France 1976Tianjin

JiangsuGermany

Spain 2003Zhejiang

Italy 2004CanadaBeijing

ShanghaiUSA 1973

Japan 1990Taiwan 2004

S.Korea

Kg/Capita

Source: China Metallurgical Planning and Research Institute, IISI, BHPBilliton


Coastal provinces are the key steel consumers in China

China's Per Capita Steel Consumption by Provinces in 2005e

212

688

268

0 100 200 300 400 500 600 700 800

TibetGansu

NingxiaInner

QinghaiXinjiangHainan

GuangxiYunnan

GuizhouJiangxiShanxi

SichuanAnhui

ShaanxiHenanHunan

JilinHeilongjiang

HubeiChongqing

HebeiFujian

ShangdongLiaoning

GuangdongTianjin

JiangsuZhejiang

BeijingShanghai

Kg/Capita

Tier I

Tier II

Tier III

Source: China Metallurgical Industry Planning & Research Institute, BHPBilliton


China steel industry is very fragmented

Top 10 Crude Steel Production Provinces in 2005

73.9

32.8 31.8 30.6

19.316.5 15.7

12.3 11.1 10.9

21.1%

73.0%

30.5%

39.7% 48.4%

53.9%58.7%

63.2%66.7%

69.8%

0

10

20

30

40

50

60

70

80

Hebei Jiangsu Shandong Liaoning Shanghai Shanxi Hubei Henan Anhui Sichuan

MT

0%

10%

20%

30%

40%

50%

60%

70%

80%

Cumulative share of China total

Source: CISA


Top 10 steel mills only account for 35.4% of total in 2005

Top 18 Steel Mills With Crude Steel Production of 5+ MT in 2005

22.7

16.1

13.011.9

10.5 10.4 10.4 10.3 9.68.5

7.3 7.0 6.5 6.2 5.8 5.7 5.4 5.0

0

5

10

15

20

25

Bao

stee

l

Tang

shan

WIS

CO

Ans

han

Sha

gang

Sho

ugan

g

Jina

n

Laiw

u

Mas

teel

Val

in

Han

dan

Bao

tou

Ben

xi

Pan

zhih

ua

Any

ang

Jiuq

uan

Taiy

uan

Jian

long

MT

0%

10%

20%

30%

40%

50%

60%Cumulative share of total China

Source: CISA


China’s new steel policy 2005• Objective

– Competitiveness of China Iron & Steel Industry to be improved significantly– Top 10 steel mills should account for > 50% of total by 2010, and 70% by 2020

• Technology & equipment upgrade policy– Outdated processes, equipments and techniques; highly pollutant, raw material

& energy consumption and low efficiency to be phased out– Pollutant discharge and efficiency standards raised

• Foreign investment policy– In general, foreign companies are not allowed to acquire a controlling stake in

Chinese steel makers, especially medium and large ones– No greenfield project is allowed– Advanced technology with intellectual property is needed

Source: NDRC


Plans and Implications

• Industry structure optimization policy– Steel mills, especially big ones, are supported to grow through M&A

• Industry layout improvement policy– Steel mills encouraged to relocate or build greenfield plant in coastal or along

Yangtze River areas to take advantage of markets and overseas raw materials– Inland steel mills should cap the capacity based on the available ores in line

with the local markets and the mineral resources – Those steel mills locate in provincial capital and tourism cities are not allowed to

expand capacity of iron-making & steel-making

• Raw materials policy– International cooperation with the overseas mineral resources should be enhanced

Source: NDRC


Consolidation targetsThe Weight of China's Top 10 Steel Mills

47.642.3 42.2

37.1 34.7 35

50

70

01020304050607080

2000 2001 2002 2003 2004 2005 2010F 2020F

%

Source: CISA


Target 100Mt pig iron closed…….but will take time

Iron-Making Steel-MakingSintering

Phas

e Ou

t BF ≤ 300 M3 BOF ≤ 20 Mt

EAF ≤ 20 Mt

≤ 30 M2

Brow

nfiel

d B0F ≥ 120 Mt

EAF ≥ 70 MtBF ≥ 1000 M3≥ 180 M2

Deep

Por

t

Gree

nfiel

d

B0F ≥ 200 Mt

Crude steel

Capacity ≥ 8 Mt Mln

BF ≥ 3000 M3≥ 180 M2

Source: NDRC


Consolidation increased in 2005 more underway

Nanjing/Arcelortake over Tieben

Tangshan-XuanhuaChengde

Mittal 36.67% (2nd largest shareholder)Valin

Hangzhou 44.39%Ningbo Jianlong

CITIC Pacific:Xingcheng (79%)Daye (58%)Shijiazhuang (65%)

WISCOEcheng (51%)Liuzhou (51%)

JianlongTonghua (36.19%)Fushun

Arcelor-Laiwu (38.41%)

Anshan take overBenxi

Capital take overShuicheng (34.56%)

Done deal

Source: Public Media

Implications of future structure of Chinese steel industry• Consolidated more profitable industry

• Larger capacity, more efficient BF production

• Rising higher quality flat product production

Overall implications likely to see rising demand for higher quality coke made with increasing quantities of higher

quality hard coking coals

Page 30

Steel industry consolidationSteel industry consolidation

Consolidation will improve market conditions and profitability

ConsolidatedSteel

Industry

Financial Performance

Globalisation of Steel Markets

Fragmentation & Overcapacity

• Emerging regions building own capacity

• Technology diffusion• Capacity creep• Low entry/high exit

barriers• Economies of scale

• Opening of import/distribution channels• Global sourcing/rapid information flow • Global customer sourcing and specifications • Consolidated supplier and customers• Convergence of product standards• Increased JV’s

• SOx, NOx, Dioxins• CO2• Effluent discharge• Hazardous chemicals • Waste management• Poor public perception

• Ending “Social/national” business• Government support/interference• Shareholder value destruction• Inability to retain cost reductions• Inability to raise capital

Environmental Concerns

• Worldwide move to privatisation• Shareholder demand for value creation• Capital & opex constraints• Withdrawing of Bank supports• M&A/Alliances, regional consolidation


The steel industry remains fragmented, despite M&A activityConsolidation:

• has increased slightly (+3 and +5 percentage points for the top 5 and 10 steel producers respectively from 2000 to 2005)

• favoured by strong cash flows and increasing desire to escape sluggish and expensive home markets (Europe, US)

• ‘hot spots’ in the US, E. Europe, CIS and China

• currently appears to be enabling improved production control - aligning demand with supply

68

47

36

33

33

28

23

21

20

19 1.4%

1.5%

1.6%

1.7%

2.1%

2.4%

2.5%

2.7%

3.5%

5.1%Mittal*

Arcelor

POSCO

Nippon

JFE

Baosteel

ThyssenKrupp

US Steel

Nucor

Corus

2005 Crude Steel Production (mt)

Market share (% global steel output)

2000 Current

Top 5 16% 19%Top 10 23% 28%

* Mittal data includes ISG (16.1mt) and Kryvorozhstal (7.7 mt)

Source: IISI, Metal Bulletin, BHP Billiton

Regional consolidation:• China, with government support but low foreign involvement (ownership limited to minority

stakes)• CIS: further consolidation, especially as focus shifts from raw material acquisitions• Smaller acquisitions between second tier producers in Europe and North America

Global / Cross-regional consolidation:• Mergers between groups (competition issues?): catalyst for rapid consolidation • Russian mills going global• Acquisitions in Latin America, Middle East, Ukraine (partly driven by captive raw materials)

Product consolidation: • Focus on flat products• Limited in long products: Ample opportunity but disincentives

Further consolidation directions:Steel industry consolidationSteel industry consolidation

Regional consolidation: CIS, China and Brazil; Europe and N. America


EU, Eastern Europe

China: government supports consolidation, but not foreign

majority stakes

Regional consolidation: likely to result in more benefits than global consolidation: • Operations are strongly linked (both customer and supply side) to regional markets• Most products sourced regionally with some global support, even though ~20% of

steel production is aimed at global customersSource: Company reports and news coverage; World Steel Dynamics

US / Canada

Brazil

?

CIS: Regional consolidation

between CIS countries

Japan: consolidate to two companies

Strong Regional Consolidation

Second Tier Firm Consolidation


Fragmented industry now consolidating – regional impact

12.513.1 13.3

14.715.5

1717.4 17.7

17.1 16.9

10

12

14

16

18

20

% s

hare

of t

otal

pro

duct

ion

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Total Crude Steel Production750Mt 799Mt 777Mt 788Mt 847Mt 850Mt 902Mt 934Mt 1069Mt

1129Mt

Share of top 5 producers

Note growth in Chinese steel has countered global consolidation impacts – although regional consolidation has occurred

Source: IISI, Metal Bulletin, BHPBilliton


Even after recent mergers, industry concentration is low

0%10%20%30%40%50%60%70%80%

Steel

Chemicals

Copper

Paper Oil

Autos

Iron O

reGlobal market share of top 3 producers, 2005e

Source: CRU Analysis, Deutsche Bank


Flat products is relatively consolidated, unlike long products

20%

40%

60%

80%

West Europe North America Japan China

Plate Hot rolled Cold rolled Galvanised

Flat Products• High regional consolidation in W. Europe, USA,

Japan• Scope for consolidation in:

– China: flat product consolidation has fallen– North America (limited scope)– Western European plate capacity

20%

40%

60%

80%

West Europe North America Japan China

Rebar Wire rod Merchant bar Beams• Significant consolidation is unlikely: the rationale

is less compelling: – local markets, – low barriers to entry – low economies of scale

• Consolidation isolated: – Beams and structural products– Gerdau, CELSA, Nucor and Mittal

Regio

nal M

arke

t Sha

re of

Top

3 Pr

oduc

ers:

Long Products

70%

70%

Source: CRU

Arcelor & Mittal Steel Plant LocationsArcelor PlantsMittal Steel Plants

• Major player in Western Europe, South America• Minor operations in North America, Eastern Europe, Asia• Arcelor has decided to turn their external growth efforts to

countries such as Brazil, Russia, India, China, Eastern Europe and Turkey.

• Production of 47 Mtpa of steel in 2005

Global share 10-11%

• Major player in NAFTA market, Eastern Europe, Africa and Kazakhstan

• Limited in Western Europe in production and distribution, no presence in South America

• Annual production capacity of Steel of 70 Mtpa

Atlantic share ~20%


Source: Public sources, BHP Billiton


Mittal is vertically integrated using high levels of domestic coal

MITTAL ARCELOR MITTAL ARCELOR

Brazil (Fines) 20% 54%Brazil (Pellets) 10%Australia 6% 10% 49%CIS 9% 13%Canadian 13% 12%Mauritania 11%Sweden 5%

Own/ Dom Mines / Strategic LT Contr 54% 3% 76%USA 24%South Africa 6%Poland 5%Others 4% 10% 1% 4%

IRON ORE COKING COAL

About 50% of iron ore and 70% of coking coal consumed by Mittal are supplied by own resources or sources outside the “seaborne” markets generally lower quality than seaborne supplied materials

Source: Mittal, Public sources, BHP Billiton


Mittal Mining Operations:

USAProd.: 8.2 Mt

Contr.: 13.0 MtRes.: 500 Mt

MexicoProd.: 2.3 MtExpan.:3.5 Mt Res.: 250 Mt

LiberiaUnder Develop.

Prod.: 15 Mt by 2010Res.: 1Bt

S AfricaProd.: 10.2 Mt

AlgeriaProd.: 2.0 MtRes: 100 Mt

BosniaProd.: 1.5 Mt

Expan.: 1,0 MtRes: 100 Mt

UkraineProd.: 9.4 Mt

Expan.: 6.0 MtRes: 1Bt

KazakhstanProd.: 6.0 Mt

Expan.: 2.5 MtRes: 2.3Bt

KazakhstanCoking CoalProd.: 5.5 Mt

Res: 1.5Bt

USA: captive supply contractS Africa: cost plus contract

Prod: ProductionContr.: Contract

Expan.: ExpansionRes.: Resources

Iron Ore: 50 Mtpa of Curr. Prod. / Add. 28 Mtpa by 2010 / Res.of 5Bt Coking Coal Curr. Prod. of 5.5 Mtpa / Res. of 1.5 BtSource: Mittal

Summary steel consolidation - implications• Steel industry will continue to consolidate

• Moving from regional to global industry players

• Flat product will continue to lead consolidation

Overall implications likely to see more profitable steel industry operating more efficiently requiring high quality

coke likely to be made with increasing quantities of higher quality hard coking coals

Future BF trendsFuture BF trends

Blast furnace – trends in operating philosophy/practice

European Survey 2003 Blast Furnace Productivity

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57

Blast Furnace

Prod

uctiv

ity (t

/m3

24h

- WV

basi

s) Design = 2.5

Most modern EU-15 Blast Furnaces operate at less than design productivity of 2.5 t/d/m3, further improvements will be made

Source: European BF committee, Hatch


BF technology changes will be delayed to well after 2013.Pe

rcen

t Bla

st F

urna

ce R

elin

e / N

ew 1009080706050403020100

2005 2010 2015 2020 2025

Mid-life BF ~2005

Need Reline

New BFs

+20 year life

+20 year life

BFs NeedReline

This group offers opportunity for new technology implementation

+20 year life

Blast Furnace will remain the mainstay of steelmaking processes


The BF’s domination of virgin iron unit production will remainBlast Furnace Hot Metal as a Source of Virgin Iron

Trend to 2025

82%

84%

86%

88%

90%

92%

2000 2005 2015 2020 2025Glo

bal B

last

Fur

nace

Hot

Met

al

Prod

uctio

n (%

)

1807050Other (MT)Blast Furnace (Mt)Virgin Iron Units (Mt)

11208004001300870450

Yr 2025Yr 2015Yr 2000

Source: Hatch


ULCOS (Ultra Low CO2 Steelmaking) program likely impact after 2025 • Step 1 (2005–10) exploring wide

range of steelmaking concepts

• Including future BF concepts– O2 blast– Biomass/plastics injection– Top gas recycling with CO2 removal– CO2 sequestration


Blast Furnace - future evolution

Pre-Heated Burden

Fine IOMid-Furnace

Injection (Oxy)

Plastics

Top Gas Recycling

Scrap/Metallic DRI

New hearth for high liquids drainage

• Outlook for the BF– Decline in no = higher

productivity– Expanded campaign life >20

years– Shorter down periods– Higher PCI, O2, lower fuel rates– More stable operations– Enhanced computer models

and control, value-in-use– Enlargement during relines– New hearth designs

Summary future BF trends and implications• BF will remain the main source of iron for steelmaking

• Longer lived, high productivity & efficiency future for the BF

• Size will increase as MBF’s move to larger >3000m3

Overall implications likely to see more productive, efficient BF operations requiring high quality coke likely to be made with increasing quantities of higher quality

hard coking coals

What happens if you use poor quality…………

Blast Furnaces must be looked after!

Overall implications for coke in the new world• Current trends:-

– China’s future, growth and structure– Industry consolidation– Future BF trends

• All lead to the conclusion that– Coke will remain vitally important to steelmaking– Coke quality trends are likely to be for higher quality– Coke ovens are a valuable asset– Implications are for continue requirements for HQHCC

Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performance

Understanding coke reactions and performance• Are traditional methods for assessing coke still relevant

• BF operations have changed and will continue

• Coke characterisation tests developed 20 years ago!!– Cold strength probably OK

– Hot strength(CSR) generally useful

• New techniques/evaluations for the new world????

• Role of coking coals in making coke

Simulating coke conditions in the blast furnaceRecent studies of coke its reactions & performanceRecent studies of coke its reactions & performance

Does CSR adequately account for high temperature coke properties?

CSR/CRI

European BFAustralia BF conditions

CSR represents one reaction, under one set of conditions

Conditions vary through (gas, temp) but are also different in various parts of a blast furnace.

0

200

400

600

800

1000

1200

1400

1600

0 100 200 300 400 500

Time (min)

Tem

pera

ture

(C)

0

0.1

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0.6

0.7

0.8

Temperature CO CO2 H2 H2O N2

0

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1600

0 100 200 300 400 500

Time (min)

Tem

pera

ture

(C)

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0.8

Temperature CO CO2 H2 H2O N2

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0 50 100 150 200 250Time (Minutes)

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pera

ture

(C)

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tent

(%)

Temperature%CO2

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0 50 100 150 200 250Time (min)

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pera

ture

(C)

0%

10%

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Gas

Mix

ture

(%)

TempCOCO2H2H2O

High temperature coke reaction furnace (HTCRF)Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performance

Figure 2. High Temperature Coke Reaction Furnace (HTCRF)

Heating Elements

99.8% aluminaworktube

Control TC

1. Up to 200g coke

2. 1600°C Sample temperatures

3. N2, CO2, CO, H2 controlled atmospheres

4. Programmable gas-temperature regimes

More realistic BF Conditions vs CSR and CRI


72.0073.0074.0075.0076.0077.0078.0079.0080.0081.00

0.9 1.1 1.3 1.5 1.7Coal Rank

+10m

m W

all p

rofil

e

01020304050607080

CSR

Val

ue

BF Wall

CSR

0.02.04.06.08.0

10.012.014.016.0

0.9 1.1 1.3 1.5 1.7Coal Rank

Wal

l Pro

file

Wt.

Loss

0

10

20

30

40

50

CR

I Val

ue

BF Wall

CRI MV/LV Blends

MV/LV Blends

Key Findings1. CRI/CSR indices similar, but there is less differentiation between cokes under the

blast furnace profile. CSR and CRI overestimate the differences in cokes

2. Strength indices show different behaviour between CSR and BF profile. The drop at high rank is likely due to thermal damage (as shown in nitrogen data)

3. High rank coals increase fines when 100% of battery feed, but do not appear generate increased fines when present in blends.

Source: BHP Billiton


Different parts of the blast furnace

0.0

5.0

10.0

15.0

20.0

25.0

30.0

0.9 1.15 1.4 1.65Coal Rank

% P

assi

ng -2

mm

aft

er 6

00re

vs

BF Wall

BF Centre

Nitrogen76.0

78.0

80.0

82.0

84.0

86.0

88.0

0.9 1.1 1.3 1.5 1.7Coal Rank

+10m

m c

entr

e pr

ofile

01020304050607080

CSR

Val

ue

BF Centre

CSR

Key Findings1. Coke behaviour depends on where you are in the BF.

2. At the centre, thermal effects predominate.

3. At the walls (and most likely the mid radial locations, chemical attack via CO2 becomes much more significant).

4. Similar, non-additive behaviour MV/LV blend.


New methods for looking at coke structureX-ray computer tomography (CT) is a non-destructive imaging technique that has been applied extensively in medical and engineering fields to visualise internal features of humans and objects

X-ray micro-tomography (XRMT) is based on the same essential principles of X-ray absorption as standard X-ray CT but differs in sample transport and in size of the X-ray source


Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performanceX-Ray Micro Tomography (XRMT)-

Effect of gasification on coke structure

Coke microstructures showed significant difference between the effects of

• CSR conditions &• a typical BF gas-temperature profile

• CSR reaction penetrated deep into the coke lump for all cokes studied

• BF profile resulted in reaction confined to lump surface.

Use High Temperature Coke Reaction (HTCR) furnace & XRMT to study the change in coke microstructure through the BF.

Coke made from higher rank coals showed a more limited change in coke microstructure.


US LV v Aust LV Coals – Effect on coke strength

50

55

60

65

70

75

80

85

CSR ASTM Stab ASTM Hard M40

(%)

25% USLV 25% Aust LV


Measurement of oven wall pressure (OWP)Recent studies of coke its reactions & performanceRecent studies of coke its reactions & performance

• Moveable wall pilot coke ovens provide a direct measurement of OWP

– Research Coke Oven at Newcastle completed over 750 experiments since 1994

Standard ConditionsMoistureBulk density

GrindHeating

5%825kgm-3 (db) box

charge85% minus 3.35mm

Simulation of Australian slot ovens


Oven wall pressure studies

0

2

4

6

8

0 5 10 15 20Elapsed Time / hours

Ove

n W

all P

ress

ure

/ kPa

Base containing 25% US low vol

Aus LV replacing US low vol


Oven wall failure

And the end of the road

Summary• The global steel industry remains firmly in the “new world” led

by China

• Future trends in China, industry consolidation and changing BF practices all suggest the need for higher coke quality

• Traditional techniques to characterise coke lack the precision to provide superior BF performance

• OWP remains an important parameter esp. with aging ovens

• High quality Australian hard coking coals esp. low vols will remain a core part of current and future coke blends

Documents

Future steel and coke industry trends - BHP · PDF fileFuture steel and coke industry trends ... – Future Blast furnace trends • Implications for coke ... But the need for coke