Historical Operating Cost Comparison for North American Iron and Steelmaking Routes
Historical iron and steelmaking operating costs were calculated for the last ten years for American steelmakers using published raw materials prices and Hatch’s operating cost models. Over the last few years, North America has seen the gradual closing of a number of integrated facilities or blast furnaces and additional electric arc furnace (EAF) steelmaking capacity brought on-line. Two Southern USA direct reduced iron (DRI) facilities have been built to take advantage of low cost natural gas.
This operating cost analysis shows that the driving force behind closure of North American blast furnaces goes beyond operating costs. On a simple operating cost basis, the integrated plants have generally been low-cost over the last ten years (at least until the end of liquid steel). Other factors contributing to the gradual shift from integrated to EAF steel production include corporate overheads and major sustaining capital required for integrated plants.
Over most of the last ten years, there has been an advantage for those steelmakers with captive, low-cost iron ore supplies. In depressed steel markets and pricing, the advantage of owning low-cost iron ore assets is greatly diminished.
In the Great Lakes region, DRI production to undercut the delivered price of import pig iron or HBI would have been a good project over the last ten years and is still currently a good project. The project would have been even better with access to low-cost or at-cost iron ore versus buying market priced ore. Production of DRI to displace scrap is a risky venture, especially when considering market priced iron ore.