Insight
China's steel capacity shift – implications for iron ore price premiums
*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
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 the following images and tables:
- 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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