Posted on 16 Jul 2021
Direct reduced iron production could treble in the next 30 years, likely leading to a shortage of raw materials within the next decade, since DRI is dependent on very high-quality iron ore feed, according to McKinsey.
Hydrogen-based DRI is expected to be a major decarbonisation lever for steelmakers, particularly in Europe. The high-quality feed required can however be produced only at a limited number of mines. Supply will likely be insufficient even if steelmakers both fully utilise existing mines and open new mines capable of producing the necessary inputs, the management consultancy points out.
“Given the potential deficit of high-quality raw materials, growth in the DRI industry will have to be accompanied by a change in the manufacturing process,” McKinsey says in a note seen by Kallanish. “Increasingly, DRI will need to be made with lower-quality iron ore, which will then need to be upgraded – most likely using a smelting process – to make it more suitable for use in basic oxygen furnaces.”
This has important implications for steelmakers’ wider plant configurations. Electric arc furnace mini-mills must have long-term supply contracts to produce DRI suitable for the process. Plants looking to use DRI in BOFs will have to choose between securing high-quality raw materials and adding a smelting process. “As a result, any sharp rise in DRI growth will likely drive a bifurcation in the market,” McKinsey observes.
“To plan appropriately, market participants must base their business cases on the DRI of tomorrow, as opposed to the industry of today. In doing so, they will help ensure that the steel industry will be a leader, rather than a laggard, in the decarbonisation of the heavy industry,” the consultancy concludes.
Source:Kallanish
