Steel Mills

Nucor Louisiana DRI Plant Exceeding Expectations

Written by John Packard

A large portion of the recent Nucor 1st Quarter earnings conference call with analysts was devoted to the progress of the company’s DRI (direct reduced iron) project which is called Nucor Louisiana. First Quarter 2014 was the first full quarter that the equipment was up and running.  Nucor Louisiana is home to the largest single DRI furnace in the world at 2.5 million tons per year.

Management gushed about the 455,000 tons of DRI produced by Nucor Louisiana during the quarter. According to Nucor’s CEO John Ferriola, the facility was able to attain peak operating rates above 90 percent during the quarter. More importantly, the company reported metallization rates of 96 percent (Fe) and carbon content exceeding 4 percent. The high Fe target rates were achieved after in one week. To put that into perspective, the Trinidad plant took five weeks to reach the same targeted Fe metallization rate. It took LA 11 weeks to reach their nameplate targeted production rate while Trinidad took 26 weeks to reach theirs.

Mr. Ferriola told the analysts on the call that the performance of the equipment “exceeded expectations” and is a major step forward in the company’s long term raw material strategy.

Why is the product important for Nucor? The high quality iron units are needed for Nucor to expand their market share in higher value flat rolled sheet, SBQ bar and plate markets.

During the question and answer period with analysts, Mr. Ferriola pointed out that their mills were already using a 30 percent to 40 percent charge of DRI into their furnaces which was resulting in energy savings, extended life to the furnace lining and their electrode consumption has been reduced. Without identifying the mill he reported one mill had taken the charge up to 50 percent with no issues.

Nucor reported they were now focusing on reducing the yield loss which was running approximately 3 percent  higher than what they have been able to achieve at their Trinidad facility. When asked what kind of yield loss would he like to see in a DRI plant Mr. Ferriola said, “I would say that somewhere in the neighborhood of 2% to 3% is probably a good goal. Now, of course, when I talk to our team in Trinidad and Louisiana, I will be saying I made a mistake on the call and what I’m really looking to achieve is 1.5% to 1%.”

The Nucor CEO was asked if the company  was ready to commit to the second DRI furnace in Louisiana. He responded no, and then explained that they wanting to get the first furnace “up and running and stabilized” before they consider all the factors in order to make a decision as to when it would be appropriate to move forward.

During the conference call Mr. Ferriola reported that their iron ore supply comes from one source in Brazil, one in Canada and one in Sweden. Iron ore pricing to Nucor is based on a three month contract. Their source of supply is “…not subject to any weather issues. We don’t need to buy an icebreaker.”

Nucor had $20 million in start-up losses associated with the new DRI facility. Most of the losses were related to conversion costs (taking iron ore to DRI).

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