The Russian iron ore and steel producing company Metalloinvest Holding (Metalloinvest) has continued to strengthen its position in the Russian and world markets for hot briquetted iron (HBI).
With a production capacity of 41 million mt of iron ore in 2007, Metalloinvest is the largest iron ore producer in the CIS and also the fourth largest iron ore producer in the world. In addition, with its two HBI plants installed at Lebedinsky GOK, Metalloinvest is Russia's and Europe's largest HBI producer, accounting for eight percent of the world's total HBI production.
In 2007, Metalloinvest produced 1.021 million mt of HBI at LGOK. Meanwhile, for the whole of the current year the company is planning to produce 2.4 million mt of HBI at LGOK. This more-than-double increase in LGOK's HBI production will be possible due to the installation of the new HBI plant at LGOK, supplied by a consortium of US-based Midrex Technologies, experts in the direct reduction process and HBI production, and Austrian engineering and plantbuilding company Siemens VAI. Generally speaking, Midrex has provided the main equipment for LGOK's second HBI plant, while Siemens VAI has supplied the automation systems. As a result of the cooperation between Midrex, Siemens VAI and LGOK, the world's largest HBI module with an annual capacity of 1.4 million mt of HBI with Fe content not less than 89 percent started up production operations in late October 2007.
The HBI market is one of the most dynamically developing markets in the world. For instance, while in 2000 the world production of HBI and metallized pellets, excluding production for intra-group consumption, was nine million mt, world output of these materials went up to 16 million mt in 2007, while the output is expected to rise to 41 million mt in 2015.
Meanwhile, the demand for HBI is also growing worldwide. In 2005 world demand for HBI stood at a level of around 12 million mt, in 2007 it increased to around 16 million mt, and by 2015 it is expected to reach around 36 million mt.
This demand for HBI is driven by the growth in EAF production, reduced scrap collection, the increase in the share of light-weight scrap with a high percentage of impurities, and also by the reduction in worldwide availability of high quality coal.
In the light of the above reasons, Metalloinvest is moving to occupy the leading position in the world's HBI supplies and the leading position in the Russian HBI market.
According to Metalloinvest's forecast, up to 2016 Russia will display the fastest growing rate in EAF steelmaking. This will result in growing demand for HBI and DRI within the country. Although demand for HBI is almost nonexistent in Russia at the moment, only coming from special steel producers, due to the reduction of scrap collection against the background of increased EAF steelmaking, demand for HBI in Russia is expected to boom in the years to come. With this forecast in mind, Metalloinvest is implementing a long-term strategy, a ten-year-long investment program directed at the acquisition of global leadership in the HBI market. In the current year alone, Metalloinvest will commence the construction of the third HBI module at LGOK and, during next year, construction works at another new HBI module, to be located at Metalloinvest's MGOK facility, will be commenced. Following the implementation of these two and other projects, Metalloinvest plans to reach a 22 percent share of the world's total HBI production by 2015, when the world output for HBI is expected to be around 40 million mt.
To satisfy its own needs in iron ore pellets, commercial production of which has decreased during the last year due to the increase in HBI production, Metalloinvest is planning to invest more than $10 billion in increasing iron ore concentrate output by 50 percent to 60 million mt per year by 2015 and also in pellet production capacity expansion.
Although Metalloinvest is currently supplying most of its HBI for export to Ukraine, Europe, South Korea, US and Turkey, the company is very positive about the future demand for HBI coming from the Russian domestic market. As scrap supplies to the domestic market get tighter and tighter, Russian domestic steelmakers will eventually turn to search for alternative raw materials to scrap - i.e. to HBI and to its only Russian supplier, Metalloinvest.