Hot Briquetted Iron (HBI) – Market Dynamics

Looming scrap shortage

    60‐80 million tonnes shortfall by 2020 (based on steel production of 1.8‐2.0 million tonnes)
    Scrap‐based EAF > 50% US production, growing globally (206 million tonnes scrap increase 2010‐20)
    Integrated plants now use 20‐30% scrap

Scrap issues

    More residuals gangue & radioactive materials
    Less steel in automobiles & white goods

HBI Price drivers

    Scrap prices
    Supply/demand balance (can vary regionally)
    Raw material costs
    Raw material costs
    Freight rates

Scrap & Hot Briquetted Iron


Scrap

    Collected from diverse source
    Limited collection season
    Waste product (inclusions)
    Dissimilar, diverse chemistry

Scrap


HBI

    Manufactured from natural iron ore
    Year-round production
    Original product (trace residuals)
    Known, consistent chemistry

HBI

HBI Life Cycle

Merchant HBI Sources

Merchant HBI Trade Routes

2011 DRI HBI Shipments - by Tonnage

2011 DRI HBI Shipments - by Country

Scrap Prices - USA - 2010 to March 2012

Scrap Prices - EU - 2010 to March 2012

Scrap Prices - Asia - 2010 to March 2012

Venezuelan HBI Prices - 2010 to March 2012

HBI and Scrap Prices - Export 2010

SGX Forward Iron Ore Curve

US Natural Gas Price

Freight Market - Baltic Dry Index

SSY Dry Bulk Commentary

    BDI sinks to its lowest point since August 1986
    Timecharter averages for Panamax, Supramax and Handysize vessels collapse to 3‐year lows in early February 2012
    Capesize 4 TC average finds its lowest point since February 2011
    Coal and iron ore export data for January confirm Capesize cargo drop
    Improvement in Supramax rates from Indonesia to India in early February in contrast to TC average, which remain slow

Data source: Gibson Shipbrokers, August report

Parting Thoughts

    Likely scrap shortage (60‐80 million t/y by 2020)

      Price surges
      Protectionist actions

    Scrap quality issues (residuals, inclusions, and radioactive materials)
    Use of HBI in BF and BOF will increase
    China EAF sector will develop once infrastructure demands are met (beyond 2020)
    DRI/HBI production expected to double by 2020 (much will be captive to steel mills)
    HBI for the US market questionable (Venezuela)

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