Worldwide Direct Reduced Iron Production Rate on the Rise

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Researched by Industrial Info Resources (Sugar Land, Texas). Proximity to raw materials and low production costs, according to economists, gives one a competitive advantage in the manufacturing arena. This would appear to be true in the Direct Reduction Iron (DRI) production business sector. DRI, an intermediary in steel production, is an ore concentrate produced from iron ore powder by using large quantities of natural gas. Recent hikes in natural gas prices and a weak market for DRI has hindered production worldwide. Production has essentially zeroed out with the closure of the BHP Billiton Finment plant in Australia. In Mexico, the fourth largest DRI producing nation in the world, some plants were shuttered, and in the United States and Canada, DRI plants were shut down because their production costs exceeded the market price.

The price of natural gas late last year was over seven times higher per Btu compared to the mid-90’s. However, DRI production actually grew when compared to the previous years. The total DRI world output in 2005 was 5.9 million tons, a 2% growth over 2004. Capacity increase was mainly due to low capital investments in brownfield expansions, mostly in India, the number one ranked DRI producer in the world.

The recent boom in commodity prices is spilling over to the DRI sector where a strong surge in DRI prices is driving the construction of new plants in Russia, South America, Malaysia, and the Middle East, where natural gas is cheap. DRI production in 2006 will be higher then it was in 2005, when some of the projects being tracked by Industrial Info become operational. Most notably, Saudi Iron & Steel’s (Al Jubayl, Saudi Arabia) 1.75 million-ton per annum DRI plant under construction in Al Jubayl, Saudi Arabia by Voest Alpine (Linz, Austria), and a DRI unit at the Keonjhar Steel Complex (Keonjhar, India), owned by Tata Sponge (Keonjhar, India). The increased DRI capacity beyond 2006 will come from greenfield projects such as Al-Tuwairqi Group’s (Damad, Saudi Arabia) $130 million DRI plant under construction in Bin Qasim (Pakistan) as part of a multi-phase steel complex (Pakistan) with Midrex (Charlotte, North Carolina) as the technology provider.

With billion of dollars ear marked for development of steel complexes worldwide, steel manufacturers are once again weighing options for securing, sourcing, and producing the iron or steel scrap they need. Many are investing in DRI plants. See related article U.S. Steel Industry’s Future Project Spending Increases to More Than $5 Billion

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