Posted on 26 Jan 2022
Because Russia has not yet introduced a nationwide CO2 market -- the incentive for taking a sharper turn toward decarbonization -- and has almost run out of affordable iron ore deposits, Russian steelmakers will keep investing in blast furnaces, some of the newest in the world, industry analysts say.
Investments in blast furnaces (BFs) will not be curtailed for the next five-plus years, depending on mills' exposure to export markets where a CO2 tax will soon be in place, Renaissance Capital's Boris Sinitsyn said.
In 2021 alone, MMK ordered a 3.7 million mt/year BF, Metalloinvest completed revamps of two of the four BFs at Ural Steel, while Severstal's Cherepovets (CherMK) ramped up newly built 3 million mt/year BF No. 3, and proceeded with renovating No. 5.
The combined cost of the projects exceeds $1.2 billion.
As a result of its ongoing renewal, the country's BF fleet is too young to expect its decline anytime soon, said Sergey Nedelin of Metals and Mining Intelligence. A modern BF's life span is 20-25 years, and many of Russia's major blast furnaces are only three to eight years old.
Instead, steel majors will concentrate efforts on modulating the consumption of coke, the main source of CO2 within the BF-BOF route. Through higher-quality inputs and the latest technologies, mills can reduce consumption to below 370 kg/mt to address greenhouse gas emissions, he said.
MMK's BF No. 11, which is under construction, will be equipped with syngas injection to enable a 576,000 mt/year cut in CO2 emissions; once online in 2025, the furnace will use 316 kg of coke per ton of pig iron versus 373 kg/ton without syngas.
Five years is the average age of BFs at CherMK, as the lifecycle-restarting reconstructions of two of the five furnaces took place in 2017-18. BF No. 4 was revamped in 2005-2006. In 2020, the mill blown in rebuilt No. 3 and is now upgrading No. 5. Its BFs consume an average of 341.9 kg of coke per ton of pig iron.
The five BFs of NLMK-owned Novolipetsk steelworks also boast one the lowest coke usage, eating through 370 kg/mt. Their average age is eight years, with BF No. 4 being the youngest (upcycled a year ago) and No. 3 the oldest with the highest coke uptake, while the other furnaces need only 304-317 kg of coke to make a ton of pig iron.
The two BFs at Nizhniy Tagil, part of Evraz, were modernized in 2018 and 2020, making Russia's newest BF park at three years old.
In contrast, Evraz's other mill, ZapSib, operates some of the oldest BFs in the country -- reconstructed in 2005-2007 and 1998. Evraz does not disclose its coke intensity, saying it declined over 2010-2021 thanks to productivity-boosting initiatives.
All mills surveyed by Platts were carrying out projects aimed specifically at lower coke ratios.
Severstal estimated the Russian industry needs Rb10 trillion ($130 billion) to convert to direct reduced iron (DRI)-based steelmaking, while maintaining the same 70 million mt/year steel output. Also, to make it carbon neutral, the country has to install 110 GW of clean power generation; today its overall generation is slightly above 200 GW.
"For the DRI-EAF scheme to be green, all electricity for the process must be obtained from renewable energy," Nedelin said. "And the consumption of electricity when making steel of DRI is higher than that of scrap smelting -- 650 kWh per metric ton against 450 kWh/mt."
In Russia, large-scale investment decisions toward that shift are still rare. In 2021, NLMK was the most proactive, announcing a $3.4 billion project producing by 2027 up to 2.5 million mt/year of hot briquetted iron (HBI) -- a key input for CO2-neutral steelmaking technology.
The robust BF fleet is not the only reason Russian steelmakers are sticking with their current course.
"The leap to DRI requires a solid iron ore base," Sinitsyn said. "Possession of an iron-rich deposit takes on extra significance in this transition. The companies with captive supply of above-average-grade iron ore will be better off with DRI/HBI technology. Their investments in it will be justifiable and profitable."
Sergey Frolov, a vice president at Industrial Metallurgical Holding, said: "In Russia, there are very few, if any, deposits left that are up for grabs and extractable via open-pit mining. Reserves available for sale require the construction of underground mines, meaning 50% to 2x larger capex than for open-pit developments, and their opex will be 20%-30% higher too."
The Belgorod region accounts for 27% of Russia's iron ore production, according to Russian Geological Research Institute. It is home to major mining complexes (Metalloinvest-owned Lebedinsky and NLMK's Stoilensky) and is the most prolific iron ore area, holding 45.5% of the country's iron ore resources, but many Belgorod greenfields are not developable via open pits, which makes investments in them problematic.
To receive 1 mt of finished steel, both BF-BOF and HBI/DRI-EAF-routes consume the same 3.5 mt of iron ore processed into 1.3 mt of concentrate or 1.3 mt of pellets, Nedelin estimated.
Iron ore requirements are the same for both routes. The difference is in the use of solid waste. The BF-BOF route allows for the reuse of scale, dust and sludge at the sintering stage of production. The new technology eliminates this as it makes sintering redundant, Nedelin highlighted another shortcoming of the technology touted as the steel industry's remedy for CO2.
Source:Platts
