Dissect the steel PK behind the conflicts between Russia and Ukraine

Original title: [Hot Spot Observation] Analysis of the steel PK behind the conflict between Russia and Ukraine! Russia's production capacity for hot briquette iron and direct reduced iron will double over the next five years

Since 2012, Russia's crude steel production has always been 2 to 3 times that of Ukraine, with a cumulative production of 715 million tons of crude steel in ten years, which is nearly three times that of Ukraine's 246 million tons; and the trend of the data in the table shows that Russia's crude steel production is relatively stable, proving that Russia's development is more stable. Since November 2013, the Ukrainian government has announced the suspension of preparations for the signing of the Associated Country Agreement with the European Union, and since 2014 and 2015, there have been occasional conflicts between the Ukrainian government and the civilian armed forces in eastern Ukraine. The precarious state of the domestic environment has also greatly affected Ukraine's crude steel production.

Crude steel production in 2021 was 11.511 million tonnes less than in 2012, equivalent to 53.8% of crude steel production in 2021. It can be seen that the development of The steel industry in Ukraine is receding, although it has slowed down in 2021, but compared with the crude steel production in 2012, the gap is still obvious.

In summary, the difference in strength between Ukraine and Russia is very large. The progress of the conflict also confirms this, after russia's attack, Ukraine has been defeated, and there is no force to fight back! But for Russia and Ukraine, a conflict is bound to consume a lot of national strength: on the one hand, Ukraine is the place where the main conflict occurs and will directly undertake the impact from the conflict; on the other hand, Russia will face sanctions from the United States, Japan and NATO countries, and will also consume the country's human, material and financial resources. Therefore, the economies of the two countries will also be greatly adversely affected!

The conflict in Russia and Ukraine is still escalating, as the infrastructure and buildings destroyed by the conflict will also take on a state of rubble. And all this rubble will be replaced by a new round of reconstruction in the future. At present, due to the conflict between the two countries, several steel mills in Ukraine, including the pipeline manufacturing group Interpipe and the Azovstal and Ilyich steel mills in Mariupol, have stopped production and transportation; considering russia as a major energy and resource power and Russia and Ukraine as a major exporter of agricultural products, the escalation of the situation in Russia and Ukraine has led to further upward pressure on global commodity prices such as oil and natural gas. These are the negative effects of the conflict between the two countries, but the negative future reconstruction of Ukraine may also stimulate the development of the country's steel industry and expand the demand for steel!

According to the current planned project, Russian hot briquette iron (HBI) and direct reduced iron (DRI) production capacity will more than double in the next five years to more than 17 million tons / year, which means that the demand for direct reduction grade pellets used to produce HBI/DRI in the country will also double.

Russian mining and steel company Xavier will consider starting HBI production within its next strategic cycle, and the company is currently completing its five-year plan for 2019-2023. Xavier said it would release the company's strategic plan for the future of 2023 in June. Russian mining and metallurgical company Metalloinvest expects its HBI/DRI capacity to reach 8 million tons/year this year, including 4.8 million tons/year HBI and 3.2 million tons/year DRI, in addition to the company's plans to add two new furnaces from 2024 to mid-2025, adding another 4.16 million tons/year in its HBI production.

NLMK intends to build a 2.5 million tons/year HBI plant by 2027. The steel mill for 2.5 million tons/year DRI and 1.8 million tons/year electric arc furnace (EAF) in Ecoloant, a subsidiary of Russian Union Metallurgical Company (OMK), a producer of steel pipes and railway wheels, recently broke ground in Viksa, Nizhny Novgorod Region, and the DRI-EAF plant is expected to be completed and operational in 2025.

It is estimated that if all these projects are completed, by 2027, Russian HBI/DRI production capacity will reach 17.1 million-17.2 million tons/year, more than double the current production capacity. And that doesn't include Xavier's potential increase in capacity, as details about the company's number and timeline of projects are lacking.

Building more HBI capacity will require a corresponding increase in demand for direct reduction pellets. But it's unclear whether Russia will seek self-sufficiency for direct reduction-grade pellets, or whether domestic iron ore concentrate quality and quantity issues will make Russia dependent on imports.

In its 2021 report, Xavier said the company's only pellet production enterprise, Karelsky Okatysh in Karelia, in northwestern Russia, produces high-quality iron ore pellets with an iron grade of up to 67 percent. In 2021, Okatysh produced 11.6 million tonnes of pellets, of which 37% (4.25 million tonnes) were sold to third parties, and the rest was supplied to the Chelepovets steel mill, Cheval's flagship steel mill. For reasons of commercial sensitivity, Xavier did not specify how many direct reduction pellets were produced, nor did he even disclose the share of 67% of grade pellets in Okatysh's total pellet production.

Metalloinvest is the only company in Russia to mass-produce direct reduction pellets, and in 2021 the company will supply 200,000 tons of direct reduction pellets to the market. The company said that for the production of direct reduction grade pellets, in addition to the high-speed rail content, it is also important to reduce the silica content as much as possible. To date, the best direct reduction grade pellet chemistry produced by Metalloinvest is 68% Fe and 1.4% SiO2.

Quality aside, the supply of iron ore and pellets must also increase to support plans by Russian companies to expand HBI production. Based on the 1.32 tons and 1.5 tons of pellets required to produce 1 ton of DRI and 1 ton of HPI respectively, the total number of pellets required to supply future HBI/DRI production is 2475 tons/year, which is more than 120% of The production of Russian pellets in 2021.

Although Metalloinvest did not disclose its direct reduction grade pellet production, its 3.28 million tons of DRI and 4.47 million tons of HBI production last year meant that the company had to produce 11 million tons of direct reduction class pellets as raw materials.

Aesco has announced the expansion of its Stoilensky mining and concentrator operations in Belgorod Oblast with the goal of increasing iron ore mining from 43 million tons/year in 2020-2021 to 67 million tons/year, thereby increasing its iron ore concentrate and pellet production capacity to 30 million tons/year and 17 million tons/year, respectively. The new pellets will have an iron content of more than 70 percent, while Stoilensky currently produces blast furnace pellets with an iron content of 65 percent.

In 2021, Russellsteel produced 11 million tons of commercial-grade iron concentrate and 7.7 million tons of pellets, almost all of which were consumed by the company's new Lipetsk steel mill.

It is unclear whether Xavier's production of iron concentrate will ensure its self-sufficiency in producing the raw materials needed for direct reduction grade pellets; currently, about three-quarters (13.8 million tons) of the company's processed iron ore is shipped to the Cherepovets steel mill, which plans to increase steel production by 1 million tons/year in the coming years, which means that more iron ore is needed for blast furnace production.

Xavier plans to vigorously develop the Yakovlevsky iron ore business, also located in Belgorod. In 2022, Yakovlevsky Iron Ore is expected to deliver 3.9 million tonnes of direct shipment iron ore, more than 70% more than the 2.4 million tonnes of direct shipment iron ore mined in 2021. It is estimated that even if production remains stable at Cheville's other two iron ore companies, Karelsky Okatysh and Olcon, Yakovlevsky's production growth alone will boost Xavier's total iron ore production by 8.5 percent this year.

Ecolant's pellets for the DRI project are procured from the domestic market in an estimated 3.5 million tonnes per year.

Source: World Metal Herald, Steel Today

Note: The copyright belongs to the original author, if there is any infringement, please contact to delete; the content of the article is the author's personal opinion and does not represent the views and positions of this newspaper. Please indicate the source of the reprint; if the content of the article is biased, please correct it; if the source is incorrect, please contact us.