Diapositiva 1

1
Mexican Steel 2006 Consolidation Growth January
23-25, 2006 The Sheraton Ambassador Hotel and
Towers Monterrey, NL Mexico Panel II - Raw
Materials Transportation - Will They Support
Market Expansion?
DRI/HBI Overview
Alberto Hassan
Hot Briquetted Iron Association (HBIA)
2
Introduction
3
Objective of the Association

• To promote HBI and assist steelmakers in its
  effective usage

4
What is Hot Briquetted Iron (HBI)?

• DRI, Directly Reduced Iron or Iron Oxide reduced
  to metallic iron without melting and which has
  been compacted under hot conditions at or above
  650C (1200F) to a minimum density of 5.0g/cc
• Weight from 0.5 to 1.5 kg, 1 to 3 ½ lb
• Size
• L90 to 130 mm, 3 ½ to 5 in
• W80 to 100 mm, 3 to 4 in
• T20 to 50 mm, ¾ to 1 ½ in

5
Members
Traders
Associates
Producers
6
Members
Producers

• Comsigua
• Lebedinsky Mining Dressing Plant
• MATESI
• Orinoco Iron
• OPCO
• Venprecar
• Vikram Ispat

Capacity ? 9 Million MT
7
Members
Associates

• CVG Ferrominera Orinoco
• MAN Ferrostaal Aktiengesellschaft
• HYL Technology
• Kobe Steel Ltd.
• Köppern
• LKAB
• Midrex Technologies Inc.
• Outokumpu Technology
• Ship Management Transport
• Siemens-VAI

8
Members
Traders

• The David J. Joseph Company
• Sims Hugo Neu Corporation
• Sojitz Corporation of America
• CME Commodities Minerals Enterprise Ltd.
• BHP-Billiton Marketing Asia Pte Ltd.
• Tube City IMS
• Stemcor

9
Committees
Technical
Transport
Promotion
www.hbia.org
10
Raw Materials Transportation Will They Support
Market Expansion? DRI/HBI Overview
11
How Big is the Expansion?
Apparent Consumption of Steel Products
960?
1,170
210 22
Millions MT
Source WSD, IISI, HBIA
12
How Big is the Expansion?
Source HBIA
13
How Big is the Expansion?
Crude Steel Production
1,060?
1,290
230 22
Millions MT
Source WSD, IISI, HBIA
14
How Big is the Expansion?
Pig Iron Production
evolu
730?
890
160 22
Millions MT
Source WSD, HBIA
15
How Big is the Expansion?
Scrap SSS Requirement
127 20
643?
770
SSS
Scrap
Millions MT
Source WSD, HBIA
16
Growth in DRI/HBI Output
27.4
54.6
27.2 99
Orinoco Iron (2.2) MATESI (1.50)
BHP (2.2) GOK (0.90) Cliffs (0.5)
LISCO II (0.65)
COMSIGUA (1.00)
ESSAR STEEL IV (1.00)
Source Midrex
17
Growth in Shipments
6.4
11.1
4.7 74
HBI
DRI
Source Midrex
18
World DRI/HBI Producers
2004
Million Metric Tons per Year
Source Midrex HBI
Consider only producers gt 0.5 Mt/yr
19
World HBI Producers
Units Millions Metric Tons
Russia Lebedinsky GOK 1.05
India Essar Steel 2.3 Vikram Ispat(2) 0.9 Total 3
.2
Trinidad Tobago Mittal (Cal/ISG)(3) 0.5
Libya Lisco 0.65
Malaysia Amsteel 0.7
Venezuela Comsigua 1.4 Matesi 1.5 Opco
1.0 Orinoco Iron 2.2 Venprecar 0.9 OrDI(1)
0.4 Total 7.4
Total Asia 3.9
Total S. America 7.9
Australia BHP(4) 2.5
Total Capacity World 16.00 Merchant 13.25 Availa
ble Merchant 9.85
1/ Idled 2/ Hybrid HBI/DRI 50/50 3/
Uncertain 4/ Closed
20
Requirements for DRI/HBI Facilities
Host Country

• Natural Gas
• Iron Ore
• Fines, Lumps Pellets
• Power
• Water
• Infrastructure
• Gas Pipelines, Ports, Rail Lines, Roads
• Qualified Labor Force

Long term Contracts _at_ Advantageous Prices
Honored
21
VenezuelaLocation advantages

• Iron Ore
• Total Reserves 14,657 million tons
• (4,184 proved 1,762 probable 8,711 possible)
• Natural Gas
• Proven Reserves (Anaco)
• 35.4 million m3
• Water / Ports
• Orinoco river Caroni river
• Hydroelectric energy
• Capacity 13,467 MW

22
VenezuelaRaw Material Prices

• Iron Ore (CVRD Prices 80-100)
• Fines US 0.65 /mtu (US31.5 39.5/t)
• Lumps US 0.7958 /mtu (US42.5 53.5/t)
• Pellets US 0.13043 /mtu (US66.5 83.0/t)
• Producers impacted (Up to 72)
• Gas

1/ Product, transport, and distribution costs
23
HBI Venezuelan Producers
2005e
Production 5,0 Mt
Export 3,9 Mt
IBH
IBH
Source IVES
24
New DRI/HBI Expected Capacity
1/ The plant will initially produce HBI for export
25
New DRI/HBI Expected Capacity
Total 28 Millions MT
26
New DRI/HBI Plants
Units Millions Metric Tons
Total 28 Millions MT
27
New DRI/HBI Plants
Units Million Metric Tons
6.8
21.2 plus
Total 28 Millions MT
28
Metallic Prices
US/MT
Source CRU Monitor
29
Metallic Prices
US/MT
Source CRU Monitor AMM
30
Metallic Prices
US/MT
Source CRU Monitor AMM
31
Metallic PricesMonthly Variation
US/MT
Source CRU Monitor AMM
32
Conclusions

• Approx. 28 MMT of new capacity planned
• (10 MMT under execution)
• Growth areas Trinidad, Middle East, Russia,
  India (Newcomers-Brazil?)
• New facilities will be located where advantageous
  gas contracts can be secured
• Not economical to operate gas based processes in
  North America Plants being relocated
• Mexican DRI facilities threatened by gas prices
• Steelmakers securing own metallic supply building
  and acquiring captive DRI/HBI facilities

Cont..
33
Conclusions

• Trend-Hot discharged DRI plants with direct feed
  to EAFS
• DRI/HBI producers cost on the increase (Gas
  Iron Ore)
• Prices of Metallics remain volatile in the near
  term
• Will be an adequate supply of DRI/HBI as long as
  prices are adequate
• Era of Cheap raw materials is over.

34
Thank you for your attention
HBI-The Premium Grade Raw Material for Steelmakers
35
Henry-Hub Natural Gas
USMBTU
Source oilenergy.com
36
VenezuelaRaw Material Prices

• Gas (LTC / STC)
• Producers impacted (Up to 40)

1/ Product, transport, and distribution costs