Forget Scrap -- Direct Reduced Iron is New Big Trend in Steel Industry

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Researched by Industrial Info Resources (Sugar Land, Texas)--Affordable natural gas seems to be boosting investments in direct-reduced iron and hot-briquetted iron (DRI/HBI) in North America, particularly in the U.S. Companies like Nucor Corporation (NYSE:NUR) (Charlotte, North Carolina), Voestalpine (Linz, Austria), Republic Steel (Canton, Ohio), North Star BlueScope (Melbourne, Australia) and newcomer International Metallics Corporation (Reston, Virginia) are making huge investments in DRI/HBI. Altogether, companies have spent approximately $300 million to $800 million on recent DRI projects in North America.

Industrial Info is tracking more than $2 billion worth of active DRI/HBI projects in the U.S. as part of its North American Industrial Project Database.

Nucor recently began operations at a 2.5 million-ton-per-year DRI plant in Convent, Louisiana. The first phase of the project was constructed at a cost of $750 million, and the second phase is expected to increase annual capacity to 5.5 million tons.

Voestalpine is planning a $740 million DRI project in Corpus Christi, Texas, that will utilize 250 million standard cubic feet per day of natural gas. Voestalpine is still in the process of obtaining permits, with hopes to begin construction early in the second quarter.

International Metallics has cleared the first step in building an $800 million DRI plant in Superior, Wisconsin. The Douglas County Board of Supervisors approved an agreement with the Redevelopment Authority of the City of Superior to transfer the Parkland Industrial site to the city's Redevelopment Authority. International Metallics plans to build the DRI plant at the site, and a feasibility study is expected to follow the site's acquisition. The plant is expected to be operational in 2017.

Republic Steel & North Star BlueScope are each studying expenditures of about $300 million to build DRI plants to replace some of the current higher priced scrap and pig iron supply. Republic Steel plans to utilize iron ore from U.S. Steel's (NYSE:X) mine operation to produce steel bar, which will be used by the adjacent U.S. Steel's Lorain Tubular Mill (Lorain, Ohio) to produce seamless steel pipe for usage in oil & gas industries. North Star BlueScope expects to begin construction in the second quarter of the year with commissioning expected in 2015.

As scrap prices continue to rise and natural gas prices continue to become more affordable, DRI (a substitute for scrap) will become more attractive. DRI has become a very important raw material for most steelmakers in the use of electric arc furnaces. DRI is made through a process involving natural gas and iron ore pellets.

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