Miller on Raw Materials: Are more DRI investments coming to the US?

Before 2004, scrap prices averaged well below $200 per gross ton (gt). It was not until 2004 that prime scrap prices cracked the $200/gt level. And did they ever, with the Factory Bundle Index closing the year at $440/gt. 

At this point, the steel trade had to look at DRI as another charge material on the same level as pig iron and prime grade scrap.

DRI starts to gain traction

During the 1990s there were various efforts to introduce new virgin iron-based products to ease the pressure on scrap that would be needed for the proliferation of EAF mills producing hot-rolled coil (HRC).

Products like Iron Carbide, Mesabi Nuggets and others dominated the industry news and meetings. There were several new entrants to the fray who were trying to open DRI facilities, but they didn’t have the money.

Finally, Birmingham Steel broke ground in Louisiana building a DRI plant to provide their Memphis, Tenn., melt shop with 300,000 short tons per year (tpy).

As the plant began to produce DRI, scrap prices fell $50/gt and pig iron from Brazil and Russia cratered to under $100 per metric ton (mt) CFR New Orleans in late 2001. 

In addition, natural gas (NatGas) prices also shot up. Needless to say, the DRI plant could not compete and finally ceased operation. Eventually, the plant assets were acquired by Nucor, as was Birmingham Steel.

The plant equipment was relocated to Trinidad where NatGas was much less expensive. The Charlotte, N.C.-based steelmaker used the equipment to build a state-of-the-art DRI production facility, which today produces high-quality DRI, and is used by Nucor’s US-based steel mills. 

Since then, there have been three major projects completed in the US; a Nucor DRI plant in St. James Parish, La.; Cleveland-Cliffs’ hot-briquetted iron (HBI) plant in Toledo, Ohio,; and Voestalpine’s HBI plant in Portland, Texas, now owned by Arcelor Mittal.

What now?

But since 2020, there have only been empty statements about new DRI investments by American companies. Has the US steel industry turned its back on DRI?

After all the talk about decarbonization and the need for virgin iron units to supplement the finite supply of low residual scrap, there has been scant progress on development of new DRI/HBI facilities. Why?

Part of the reason could be that only the EAF mills producing HRC are really in need of Ore-Based-Metallics (OBM). Most of the long product mills do not need DRI or pig iron to dilute the residual alloys in their scrap charges. 

Frankly, it’s a tremendously large and risky investment to build a plant to produce DRI. It also presents logistical challenges for the supplies of raw materials to operate it.

Another aspect of DRI/HBI is it has a low Fe yield compared to most grades of scrap. On average, DRI/HBI has an Fe yield of 88-92%, while #1 Busheling and shredded scrap yield 97% and 94%, respectively. It’s easier to buy pig iron from Brazil or the CIS, which have a higher Fe(95%) and comparable residuals, rather than make the investment of building a DRI/HBI plant.

There has been improvement in technologies that reduce the alloys in shredded scrap. This has lessened, to some degree, the reliance on DRI/HBI and pig iron.

Imports?

As far as importing DRI/HBI, there are few good options. A regular trade flow into the US does not exist. US mills only import HBI (a briquetted form of DRI) when the pig iron market experiences a wild upswing, like what happened when Russian imports were sanctioned in 2022.

In addition to this, unlike pig iron, there is not a domestic distribution network to feed HBI to mills that may not want to import a full 30,000 mt cargo. It should be noted that DRI, in its pellet form, is considered a hazardous maritime cargo and cannot be safely exposed to the elements.

And to top it all off, imported DRI/HBI now carries a tariff.   

Where do we go from here?

What is the status of previously announced projects?

A previously announced government-backed conversion of the Cleveland-Cliffs integrated steel mill in Middletown, Ohio, into an EAF producer with a DRI module supporting it, has been sidelined since the Trump administration took office. 

In the same vein, SSAB has pulled out of negotiations with the US Department of Energy for the installation of a DRI plant to support a new “green steel” mill in Mississippi.

U.S. Steel has completed a pilot project to upgrade the production of both blast furnace and DRI-grade pellets. 

As far as its “partnership” with Nippon Steel, the Japanese steelmaker has committed to invest ~$11 billion in USS’ operations as part of the National Security Agreement it signed when it made the deal.

Part of that will go to constructing DRI operations at USS’ EAF mini-mill, presumably the Big River Steel operations in Arkansas, according to a slide presentation made after the deal was finalized.

Another U.S. Steel project to sell their Granite City, Ill., works to SunCoke Energy, who would convert the mill to produce basic pig iron had been planned.

The timeline on this project is a bit cloudy on this following the Nippon deal. If it does take place, the plant could produce 2,000,000 tpy of low phos pig iron for use internally and probably merchant as well. Why then, would any steelmaker or investment firm want to invest in a DRI/HBI production facility? 

Even so, Hyundai Corp., along with POSCO, has announced the construction late next year of a $5.8-billion EAF steel mill in Louisiana. It will incorporate a DRI module, which could use hydrogen as a reductant.

There is concern about potential reduction of support by the Trump administration for hydrogen technology, but Hyundai remains committed to this alternative. They will import 3.5 million tons of DRI-grade iron ore pellets to feed the plant. Right now, this iron ore would also be subjected to a tariff. It is likely all the DRI will be used internally.  The completion date is forecasted to be 2029. 

The Nippon Steel deal with U.S. Steel includes the promise to build at $4-billion greenfield steel plant. It is uncertain if this plant will include DRI technology.

The commitment to decarbonize the integrated mills in North America and Europe has taken a pause despite the fact several major mills are already in the process of the conversion.

Those who have not invested in this conversion are reconsidering since the Trump administration does not consider this to be a priority. In Europe, there is concern about the cost of energy. These situations may also be a contributing factor in the hesitancy of committing to investments in DRI/HBI production.  

SMU reached out to two industry trade groups for comments but did not hear back by time of publication.