New Steel Making Recipes

This is a straight copy from the wall street journal. Its interesting to see that the steel industry is actually somewhat dynamic and interesting...

Steelmakers Develop
New Iron Recipes

By EVAN RAMSTAD
August 29, 2008; Page B1

POHANG, South Korea -- Faced with environmental demands and rising costs, some steel companies are reformulating the centuries-old recipe for making the iron used to fabricate steel.

Companies in Europe, Australia and North America have developed processes that skip a high-polluting step in iron's creation, and they are finding steelmakers in Asia and Africa that are willing to gamble on the innovation. But South Korea's Posco, the world's third-largest steelmaker, has moved even further from the traditional iron-making blast furnace.

Steel is usually made by refining iron in three steps. First, iron ore and coal are heated into materials -- sinter and coke, respectively -- that can bind easily. Then, they're thrown together in a hot furnace where they combine to become pig iron. Finally, the pig iron is melted further and mixed with other materials into a liquid form of steel, which is then cast in forms or rolls.

Reuters/Newscom

Posco's steel plant in Pohang, South Korea, uses a technology called Finex.

Posco, though, has built a furnace that can prepare cheaper types of coal and iron ore to be converted into pig iron without putting them through the highly polluting ovens used in traditional fabrication. It spent more than $2 billion on research to create the process, called Finex, which it co-developed with the predecessor company of Siemens-VAI, now a unit of Siemens AG of Germany.

The Siemens unit previously built the Corex iron-making furnace at plants owned by ArcelorMittal's Saldanha Steel in South Africa, Jindal Vijayanagar Steel Ltd. in India and Baosteel Group Corp. in China. The Corex process eliminated the need for separate coke and sinter processing, and Baosteel, China's largest steelmaker, is now building its second Corex furnace, which is set to start production in 2010.

Posco and Siemens-VAI had planned to build a small demonstration plant using the Corex process, but they decided to take an additional step. While the Corex process can use cheap fine coal, the Finex process uses both fine coal and fine iron ore, making it more cost effective.

Pursuing the new approach was "the second biggest risk Posco has taken," says Posco's president, Chung Joon-yang, adding that the biggest was the decision to start the company in the late 1960s, when South Korea was still an agrarian backwater.

Steelmakers have experimented with new processes at the iron-making stage for years, chiefly tinkering with the ratio of ingredients in hopes of reducing the use of coke. Most alternatives never made it to market because they consumed too much energy. "If you manage to make it without spending much more energy than the usual process, then you win everything," says Jerome Lambert, technology and environmental manager in the Beijing office of the International Iron and Steel Institute.

The iron created in the Finex furnace can be used in any type of steel, including the high-grade kind used in cars, executives say. Posco says it uses the same inspection and quality-control processes for Finex pig iron that it uses at other blast furnaces. In both cases, the iron must have the same composition, and it is evaluated at both the iron-making and steel-making stages.

Posco's Finex plant, which began operating in May 2007, performed below production targets and above energy-consumption projections for months, in part because of mechanical problems. "In the beginning we were trying lots of things," says Lee Chang-hyung, a Posco engineer. "Until September, we couldn't reach our daily [production] target. After that, we got it stabilized."

Posco's plant now produces 1.5 million tons of iron a year, or about 6% of the company's steel-making needs. Its operating cost, which doesn't include fixed expenses, is 90% of the cost at its 10 traditional iron-making furnaces, when measured on a comparable output basis. With plans to expand to India and Vietnam, the company has at least six more furnaces on the drawing boards, and executives say they are likely to use the Finex design for them.

Over the past year, cost pressures have grown for steelmakers as they have been forced to accept huge price increases for coking coal and iron ore.

The gap in per-ton prices between coking coal and the cheaper fine coal used in Posco's new furnace has surged from $15 to $50 this year. Recently, Posco also agreed to pay a key supplier 96% more for lump iron ore, the kind used in traditional blast furnaces. By contrast, the price for the iron ore used in its new furnace has risen only 79% from a lower base.

Posco began working with Siemens-VAI on the Finex concept in 1993. Back then, Posco executives were focusing on the long-term prospect of competition from countries like China, whose economies were rising in South Korea's wake. They realized that the labor and other cost advantages Posco had as it was growing in the 1970s and 1980s wouldn't last.

"We could go two ways. One was to look for totally new businesses. The second one was to go for new technology," Mr. Chung says. "We decided to look at alternative processes."

Even as the economic case for new iron-making techniques is growing, Christian Boehm, a marketing manager at Siemens-VAI, says he is spending more time talking about reduced pollution and other environmental effects with prospective customers.

"Every producer is asked about pollution by the people in their community," he says. "New laws are always coming. China is getting even tougher than Europe on emissions."