2.
Overview of Steel Industry
2.1 Basic of Steel Industry
Steelmaking is the process of producing steel from iron ore and scrap. In steelmaking, impurities such as
nitrogen, silicon, phosphorus, sulfur and excess carbon (most important impurity) are removed from the
sourced iron, and alloying elements such as manganese, nickell, chromium, carbon and vanadium are
added to produce different grades of steel. Limiting dissolved gases such as nitrogen and oxygen and
entrained impurities (termed "inclusions") in the steel is also important to ensure the quality of the products
cast from the liquid steel.
Steelmaking has existed for millennia, but it was not commercialized on a massive scale until the late 19th
century. An ancient process of steelmaking was the crucible process. In the 1850s and 1860s, the
Bessemer process and the Siemens-Martin process turned steelmaking into a heavy industry. Today there
are two major commercial processes for making steel, namely basic oxygen steelmaking, which has liquid
pig-iron from the blast furnace and scrap steel as the main feed materials, and electric arc furnace (EAF)
steelmaking, which uses scrap steel or direct reduced iron (DRI) as the main feed materials. Oxygen
steelmaking is fuelled predominantly by the exothermic nature of the reactions inside the vessel; in
contrast, in EAF steelmaking, electrical energy is used to melt the solid scrap and/or DRI materials. In
recent times, EAF steelmaking technology has evolved closer to oxygen steelmaking as more chemical
energy is introduced into the process.
● The Mini - Mill Steelmaking Process
The mini-mill process uses recycled steel (otherwise known as scrap steel) to produce finished steel.
The core component of mini-mill steelmaking is the electric arc furnace (EAF). EAFs were initially used in
steelmaking in the early 20th Century, with the first commercial facility established in the U.S. in 1907.
These furnaces were widely used in World War II to alloy steel. However, it wasn’t until the 1960s when the
adoption of EAFs started to more significantly penetrate the steelmaking industry, particularly in Europe.
While a more detailed comparison between the mini-mill steelmaking process and the integrated
steelmaking process is in a subsequent section of this report, the primary difference is the mini-mill process
is a more streamlined and flexible production process; mini-mills essentially recycle steel to make finished
steel, and the BOF process produces new/virgin steel. The primary trade-offs of having a
streamlined/flexible production process historically via the mini-mill method vs. the integrated method have
been relative limitations on both steel quality and steel product types from the mini-mill method vs. the
integrated method.
The driving forces behind the growth in EAF-based steel making were:
1) Increased availability of low-cost recycled steel (i.e., steel scrap), which at that time began to enter the
market in larger quantities as the industrial revolution in the early 1900s subsequently resulted in increased
availability of scrap steel in the mid-1900s (the lifecycle of steel from the time of initial production to the
time of scrap is typically 15-20 years).
2) Compared to integrated steel mills, mini-mills were smaller and less capital-intensive facilities capable
of operating in a cost-efficient way even at low production rates and of operating intermittently, while
integrated steel mills required a minimum level of continuous production.
3) Availability of low-cost electricity.
Historically, mini-mills were limited to producing only lower-end products due to the quality and purity of
available scrap. But through continued EAF process improvement and impurity management, the mini-mill
process became capable of producing higher value products, with today’s mini-mills capable of producing
over 80% of all types of steel products.Furthermore, technological advances within the steelmaking
process have significantly increased productivity over time, with original production rates of 10-30
tons/hour, increasing to over 100 tons/hour by 2001, and to over 200 tons/hour currently. As such, the
typical output of a mini-mill facility has increased from mills that typically produced 250ktpy to operations
capable of producing over 3.5mtpy today.
2.2 Global outlook of steel industry
Supply
Crude steel production has increased to 1.8bmt in 2018, vs. only 189mmt in 1950, with global
crude steel production increasing at a 4.3% CAGR since 2000 (1.8bmt in 2018, vs. 830mmt in 2000).
At the country level, China has been by far the single-largest source of growth in global steel
production since 2000, with China accounting for over 80% of the incremental growth in total steel
production during this time period. China steel production grew at nearly a 12% CAGR from 2000 to
2018, reaching 928mmt in 2018 (51% of global production), vs. 129mmt in 2000 (only 15% of total
global production in 2000).
India has been the second-largest contributor to steel production growth, with India crude steel output
increasing to 107mmt in 2018, vs. only 27mmt in 2000 (~8% CAGR). Today, India accounts for 6% of
global production versus 3% in 2000.
Other noteworthy production increases from 2000 to 2018 include Iran and Turkey, with Turkey output
increasing to 38mmt by 2018, a 5.6% CAGR since 2000, while Iran output increased to 25mmt by
2018, nearly an 8% CAGR since 2000.
Conversely, production in more mature economies has stagnated. Production in Japan and the U.S.,
currently the third- and fourth-largest producing countries, has trended lower in recent years, with
Japan’s share of global crude steel production declining to 6% from 13% in 2000, while the U.S. share
dropped to 5% by 2018, vs. 12% in 2000. Similarly, the European Union’s share of global production
declined to 10% by 2018, vs. 23% in 2000.
Demand
The apparent demand for finished steel products has grown to ~1.7 billion tonnes per year in
2018 from 762 million tonnes per year in 2000, or a 4.5% CAGR, as shown in Exhibit 36. This growth
can mainly be attributed to strong steel use in China and other developing countries, and has primarily
been driven by urbanization, middle-class growth, and industrialization.
Not surprisingly, China is by far the largest consumer of steel today, accounting for approximately
817mmtpy of apparent steel consumption, or ~48% of total global apparent steel consumption.
Apparent consumption in China has grown at an 11% CAGR since 2000, when 125mmtpy was
consumed. But average growth in consumption has slowed to 5% since 2010, versus nearly 18%
pre2010, in part attributable to the rule of large numbers, and in part to the slowdown in China
industrial and economic activity.
In comparison, the second-largest steel-consuming country is the U.S., which consumed ~102mmt in
2018, or ~6% of global apparent consumption. As is typical in a mature/developed economy,
apparent steel consumption in the U.S. has been on a steady decline, down by an average of 0.9%
per year since 2000, when 120mmt of steel were consumed, with the U.S. accounting for 16% of total
global apparent consumption at that time.
Elsewhere, India's apparent steel consumption of 99mmtpy places India closely behind the U.S. (likely
to surpass the U.S. in 2019), with India's apparent steel consumption increasing by over 7% per year
on average since 2000.
