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Iron ore industry must look forward

Iron ore beneficiation in South Africa may be in a trough, with ageing plants and high costs, but there is a glimmer of hope: by 2020, there is potential for doubling the steel demand in Sub Saharan Africa. The steel industry should embrace alternative iron-making technology, the Iron Ore Beneficiation Africa conference heard.

Iron ore beneficiation in South Africa is facing tough challenges, but these can be tackled if the industry embraces the latest international trends and also potentially though the use of alternative iron-making technologies.

Internationally there has been a significant increase in steel capacity over the past years. This has resulted in the lowering of the world cost curve for steel on an annual basis. The [450 million tonnes of] surplus capacity in world steel is anticipated to result in many plant closures as indicated by recent announcements and defaults. In South Africa ageing plants characterise the industry, with most of the steel mills dating back to the 1950s and 1960s. There is no large modern steel mill facility, with the exception of the ArcelorMittal South Africa (Amsa) plant in Saldanha Bay. That mill was built in the late 1990s.

"But even [the Saldanha steel mill] has had some tough times if you look at Amsa's financial results," said Dave Cousins, industry champion in the Industrial Development Corporation's Mining and Beneficiation strategic business unit.

Cousins was painting a "not so rosy" picture of the iron ore beneficiation industry in South Africa (and world steel industry) at the inaugural Iron Ore Beneficiation Africa conference on Monday, 17 March. The conference, which takes place over two days on 17 to 18 March at the Indaba Hotel and Conference Centre in Johannesburg, is being held to "examine the key factors for improving the processing of magnetite and high impurity iron ore deposits and offer insight into the recent beneficiation projects and latest technological developments", according to conference organisers Informa.

There was also a legacy of environmental liabilities. "The steel industry certainly has a bad reputation in South Africa with various communities taking on the steel plants [concerning environmental issues]," said Cousins.

On the economic front, steel mills were not running at "adequate capacities" and ageing facilities that had not kept up with the world's best practice. They were neither efficient nor good cash generators. This resulted in most of the South African steel plants not keeping pace with technology improvements and had deferred equipment upgrades. "A major change is required to turn around the fortunes of the iron ore beneficiation industry in South Africa," Cousins said.

The choice of steel-making technology determines the key cost components and most steel in the country was made with blast furnace technology. "Coking coal in conventional blast furnace steel-making is your primary cost driver, and South Africa does not have adequate coking coal." The quality of South African coking coal requires blending with imported coking coal and electric arc furnace steel production required high cost scrap steel. The benefits of the new legislation are still to be seen.

The other major challenge was logistics: in South Africa, there was little difference between rail and road transport costs. "Internationally, you would expect rail to be a third of road transport, so our producers are on the back foot," he explained. Logistic costs were a more significant cost for South African steel producers than iron ore in crude steel beneficiation.

On the world cost curve, South Africa's two steel-making "big guys", Amsa's Saldanha and Vanderbiljpark plants, were not on the right end of the cost curve and their position had deteriorated, according to Cousins. It was not only these plants that were facing severe cost pressures related to logistics, energy, coking coal and gas; the other plants in South Africans faced similar issues.

Cousins said the steel industry was getting a smaller and smaller share of the spoils in the iron ore value chain and the proposed introduction of a carbon tax would "hurt" an already fragile industry. The challenges faced by the steel mills could be demonstrated by the performance of Evraz Highveld Steel & Vanadium, said Cousins. Quoting a Business Day article published on 14 March, with the headline "Evraz stock sheds a third of its value", Cousins said the JSE-listed Evraz Highveld Steel & Vanadium share plummeted nearly 33% on the day, a day after it reported an operating loss of R293-million in the year to 31 December 2013, compared to a loss of R854-million in financial 2012.

"In addition to being the second-largest steel producer in South Africa, with capacity of 900 000 tonnes a year, Evraz, with China and Russia, is a big contributor to global vanadium feedstock production. On Wednesday, Evraz again said there were matters 'that may cast significant doubt' about it remaining a going concern," it was reported.

Major factors contributed to the tough times facing South African steel mills. "Certainly the world cost curve coming down, domestic curve going up [is one of these factors] and this is reflected in imports increasing and exports decreasing," Cousins said.

Opportunities available

Despite this gloomy picture, there were opportunities available and there was a glimmer of hope. "We believe by 2020 there is potential for a significant increase in steel demand and we believe South Africa stands in good stead to compete with imported steel in the sub Saharan Africa."

Cousins said South African steel plants should embrace the trends in alternative iron-making technology. The emergence of nascent technology that was capable of processing previously overlooked low cost raw materials such as magnetite iron ore and haematite fines that did not require the use of expensive coking coal should be embraced. "Use of process energy to reduce reliance on [expensive] electricity. Also, harvesting waste process off gases rich in hydrocarbons can be utilised as a cheap and efficient energy source. Technologies that were able to use low quality coal as an alternative reductant for iron making make economic sense."

Though the steel industry was considered a mature industry, in recent years there had been a plethora of technology advancements and accompanying process efficiency gains. "The focus of the new technology is solely on enabling the steelmaker to reduce its operating cost and to increase its yields and overall efficiency, together with process reliability," said Cousins, adding that in a relatively small market the mega blast furnace steel mill may not be inappropriate.

 

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