Insight
China's steel capacity shift – implications for iron ore price premiums
Report summary
Chinese steel makers are being encouraged to swap smaller blast furnaces for bigger ones - they are cheaper and kinder to the environment per tonne produced. But when we look at the subtleties of blast furnace design, we see that the change will result in a greater need for premium steel-making raw materials. This will provide long-term support for iron ore price spreads and further entrenches the two-tier iron ore market. Read this insight to find out why. Short on time? You can watch a three-minute video highlighting our conclusions.
Table of contents
- Short of time? Watchthis three-minute summary video:
- Capacity replacement: why commit the capital?
- Bigger blast furnaces are surprisingly less productive per unit volume
- How can the productivity gap be bridged?
- Bigger furnaces need quality raw materials
- The two-tier iron ore market is here to stay
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Further evidence supporting price premia
- Supply constraints
- Steel mill profitability
- Modelled result in charts
Tables and charts
This report includes 7 images and tables including:
- Real world operating data shows a clear relationship – as furnace volume increases, productivity decreases.
- A proportionally bigger dead man zone and a longer stack mean bigger furnaces require raw materials with superior physical and chemical properties
- Bigger furnaces use less coke per tonne of hot metal produced.
- Bigger furnaces use less electricity per tonne of hot metal produced.
- Bigger furnaces emit less waste gas per tonne of hot metal produced. They are therefore more likely to comply with Chinas increasingly strict environmental policies.
- Bigger furnaces result in less waste slag generation. Typically, in China, steelmakers are able to sell slag for a small credit. This is a positive but expense is still required in managing slag chemistry and finding a buyer.
- Steelmakers can use premium raw materials to bridge the productivity gap. A 5500m3 furnace with a 65% Fe blend could produce 20% more hot metal than when feeding a 60% Fe blend.
What's included
This report contains:
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