Charge material issues examined by ferrous foundrymen.

Foundrymen gained insight on how their operations will be affected by the market forces controlling steel scrap and other foundry melt materials.

In order for technical, purchasing and management personnel to gain insight into the market factors that affect the price, quality and availability of raw materials essential for iron casting production, the AFS Ferrous Charge Materials Committee (8-G) held its first Ferrous Foundry Melting Materials Conference on October 13-14, 1997. More than 120 metalcasters gathered in Rosemont, Illinois to hear presentations by 13 speakers on supply, availability, pricing trends and technological developments in the area of ferrous charge materials and fuels.

Traditional Scrap and Metallic Charge Materials

* Iron units are the largest ingredient in ferrous castings, both by volume and cost.

Recent trends in price and supply of important bulk ferrous commodities suggest that conventional practices must be reviewed and that new habits deserve consideration. The volume of steel produced from scrap in electric arc furnaces (EAFs) is increasing almost exponentially, and competition for limited ferrous resources, notably prompt and low residual steel scrap, is greater than ever.

The report on ferrous charge metallics covered:

* quality concerns of traditional scrap associated with residual elements, coatings and radioactivity;

* pricing and availability of traditional iron units;

* alternative iron units for foundry consumption.

* A close watch on chemistry can help prevent big problems.

Waupaca Foundry's (Waupaca, Wisconsin) Bill Powell led the quality discussion by sharing Waupaca's experience with residual levels in gray and ductile irons at its foundries.

Over the past 10 years, Powell noted that the threat of increasing levels of deleterious residual elements from high-strength, low-alloy steels has not been seen at Waupaca. He attributes this success to the close watch of Waupaca's technical staff at each of its foundries. Charge metallics and casting chemistries are frequently analyzed. Information is exchanged among foundries, studied for deviation from historical analysis and appropriately acted upon. He said the foundries have avoided harmful levels of residuals through selective steel scrap purchasing and balancing slight increases in these residual levels with other low residual iron units.

* High quality iron units are a by-product of dezincing galvanized scrap.

Fred Dudek, Argonne National Laboratory, Argonne, Illinois, discussed a major coating challenge for steel scrap consumers. The demand and production of zinc-coated steel sheet has doubled over the last decade. Since 1987, automakers have increased the use of galvanized sheet from 2.8 million tons to 6.1 million tons. The net effect of this increase has been a rise in the zinc plating and coatings on steel scrap returned to the melting arena.

This increase, said Dudek, has created more environmental problems than metallurgical problems to date, and spurred an intense interest in recovering the zinc before remelting the steel. Since the majority of the zinc used in coating steel strip produced in the U.S. is imported, the projected savings to the U.S. economy is enormous. An estimated $100 million decrease in the foreign trade deficit could be found by recovering the zinc on steel sheet and returning it to the steel producing industry.

Argonne has been working with Metal Recovery Technologies, Inc., East Chicago, Indiana, in operating a pilot plant for the recovery of zinc from coated steel. To date, Dudek said the cost of dezincing steel in hot caustic has been unfavorable for the construction of a major commercial installation. As the net cost of zinc increases (LME zinc price of $1600/MT in September 1997), however, the prospect of a zinc recovery plant becomes more attractive. Second, the by-product of such a plant is steel scrap of low residual content that is free from nuisance contaminants. This iron unit is the highest value in the scrap stream, sought after by both EAFs and ductile iron foundries.

* Scrap shortages are more perceived than real.

Stephen Wulff of the David J. Joseph Co., Cincinnati, informed foundrymen about the pricing and availability of traditional scrap units. He said that the U.S. steel scrap market continues to be dominated by steel mills - consuming 70% of the nearly 70 million ton market. Foundries, meanwhile, account for 17% of consumption, with the balance going to the export market. This demand by steel producers has increased dramatically over the past 20 years as the percentage of EAF-melted steel has risen from below 20% capacity in 1977 to more than 44% in 1997.

Additionally, as more steel is produced via the continuous casting process, there is a commensurate reduction in the generation of "home scrap." The net effect, he said, is that steel producers must purchase more iron units. The ratio of scrap purchased to steel produced has increased from 20% in 1970 to nearly 50% in 1996.

Wulff stated that since the generation of scrap in the U.S. has remained fairly constant, the increased iron unit supply has come from ferrous scrap imports and alternative iron units such as pig iron, hot briquetted iron (HBI) and direct reduced iron (DRI).

Despite the fact that U.S. steel production in September 1997 was the highest it had been since 1981, steel scrap prices showed a downward trend in the late summer months of 1997. This was more due to greater availability of alternative iron units than an excessive supply of steel scrap.

Further, Wulff stated a shift has occurred in the geographic disparity between generating locations and consuming locations of steel scrap. The majority of new EAF steel production is being located increasingly farther from the large scrap-generating areas of the upper Midwest and Northeast U.S. Shipping constraints caused by governmental regulation (Jones Act), massive rail mergers (the U.S. may soon have only two major carriers) and a shortage of over-the-road drivers for track shipments has led to perceived regional shortages. In Wulff's words, "If there is good news here, it is that the regulations affect everyone more or less equally-everybody's costs go up."

Wulff concluded that scrap shortages are more "perceived" than "real" and will be more short-lived than sustained.

* Virgin iron units such as DRI and HBI can help the scrap crunch.

John Kopfle, Midrex Direct Reduction Corp., Charlotte, North Carolina, discussed alternate iron units in the form of DRI and HBI. As the availability of these iron units increases, some pressure is taken off the steel scrap market.

Kopfle stated that this reduction in pressure won't be felt immediately. Planned capacity increases are coming online over the next 2-5 years; however, most of this capacity is not merchant material. The iron carbide plant being operated for Nucor Steel has fallen short of both production quantity as well as quality level. The dynamics surrounding iron units for steel and foundry melting are difficult to quantify.

Kopfle did find a unique way to summarize Midrex's opinion: "Although U.S. steel production will not increase significantly in the foreseeable future, the electric furnace share will rise sharply to 50% by 2005. This growth will be driven largely by the installation of near-net shape casting minimills for producing flat products.

"Like baby birds, these mills are hungry for feed, and demand for premium metallic charge materials will rise as well. This demand will have a major effect on the supply and prices of charge materials for foundries. Since the supply of scrap from sources such as the manufacture and scrapping of automobiles is not increasing to the same extent, a scrap 'crunch' may result," he said.

"A larger supply of virgin iron such as DRI and HBI is an excellent way to ameliorate this problem. This material can be produced domestically or offshore and imported. Pig iron produced from blast furnaces or other ironmaking facilities such as COREX plants will also play an important role in supplying charge materials for mini mills."

* Demand for pig iron remains strong in combating higher residual elements appearing in steel scrap.

In a presentation on global sourcing of pig iron for the North American market, Tim Hogan, National Material Trading, Elk Grove Village, Illinois, traced the history of pig casting in North America, including its demise and near meteoric rise in demand and consumption of imported pig iron over the past several years [ILLUSTRATION FOR FIGURE 1 OMITTED].

During the early 1990s, pig iron imports to the U.S. totaled 350,000-500,000 tons per year. In 1993, it jumped to 1.2 million tons and reached an estimated 2.7 million tons last year. Future predictions are as high as 4 million tons by 2000.

Little of this increased pig iron has gone into the charge makeup at foundries, he said. Foundries have seen some increase, but the overwhelming bulk of this imported tonnage has fed the growing EAF market producing high quality, low-residual continuously cast steel. Products such as tire cord, tire bead and fine-drawn wire demand ultra low residuals.

As the selling price for slitter, #1 bundles and bushing rise to near $170/GT, pig iron becomes an attractive charge material for these products. Since the scrap market is supply and demand driven, Hogan said the selling price for all iron units reacts to the forces surrounding them. Imported basic pig iron prices have increased 23% and domestic pig has risen 18% over the past four years. Despite this rise in price, demand remains strong due to the lack of coatings, consistent low residual level, excellent density and high metallic yield properties of pig iron.

The announced expansions in pig iron production capacity are concentrated in areas not geographically attractive to North America. About 50% of all imported pig comes from Russia and the Ukraine and will likely continue. Another 33% is produced in Brazil, with the balance distributed among several producing countries. There has even been merchant pig made available from North American blast furnaces that are now pigging excessive hot metal instead of "beaching" the iron or throttling back the blast furnaces.

Ferroalloys and Carbon Additives

* Keep informed of the market for ferroalloys and carbon additives and act accordingly.

The ferroalloy market has not been without its challenges. Worldwide, as the production of ferroalloys and related materials concentrates ever more closely at sites with the lowest energy costs (and into fewer hands), the "corner grocery" character of these markets is being superceded by one of high volume and flexible prices, but limited offering. External factors are often at work and radical price excursions comparable to those in commodity markets are becoming commonplace.

* Foundrymen have several choices of ferrosilicon sources.

Ken Copi, Exolon-ESK, Savannah, Georgia, addressed current ferrosilicon (FeSi) sources and noted that foundrymen have several choices. The major sources include 50% and 75% lump FeSi, silicon carbide (SIC) and silicomanganese (SiMn).

Other minor sources include silicon metal dross, silvery pig iron, silicochrome, and foundry, basic, or SLP pig irons. Lump FeSi offers low melting points for quick solution, ease of handling in bulk, good density and moderate to high concentration of silicon (Si). FeSi does, however, provide a source of undesirable aluminum. SiC alleviates the aluminum contamination problem and offers the advantage of providing carbon (C), which is nearly always desirable in cast iron melting. Two of the disadvantages of SiC, meanwhile, are its low density and the presence of 6-8% inert elements.

The minor Si sources are used sparingly for a variety of reasons. Although the delivered price of Si dross is obviously low, so is its recovery. Silvery pig iron offers a predictable recovery percentage, but supply is limited and the cost per pound of contained Si can be prohibitive. Due to these factors, 43% of the FeSi supply in the U.S. is 75% FeSi.

* Long-term FeSi price increases will be modest as the U.S. becomes more dependent on offshore sources.

Jorn DeLinde, CRU International, Exton, Pennsylvania, presented ferroalloy pricing and production statistics. The nominal price of imported FeSi has increased 72% since 1990. Based on market fundamentals, DeLinde predicts modest long-term pricing gains. Raw steel production has a pronounced effect on FeSi demand. The demand for FeSi and steel production has increased about 35% in the last 10 years in the Western world. Since the single largest cost in producing FeSi is electrical power (29% of operating cost), worldwide producers have concentrated plants in areas with favorably priced electrical power.

Today, Norway leads the way with 27% of all production, followed by the U.S. (16%) and Brazil (14%). Migration of future FeSi production to Asia, South America and Eastern Europe is imminent.

The conversion of several domestic FeSi furnaces to Si metal production has shifted some U.S.-producing plants into greater exports of Si units. The consequence is that the U.S. market has become more dependent on imported FeSi [ILLUSTRATION FOR FIGURE 2 OMITTED].

* Future recarburizer availability is not anticipated to be a problem, however, cost will continue to rise.

Bob O'Grady, Miller and Co., Rosemont, Illinois, discussed the dynamics surrounding the graphite and calcined petroleum coke market.

He pointed out that C is the most important alloying constituent in iron and steel and is largely responsible for the mechanical properties of both metals. Unfortunately, the recarburization market represents only 7% of the calcined petroleum coke sales. The use of calcined petroleum coke in reducing bauxite to aluminum is the largest market, accounting for 69% of sales. It is this market that dictates availability and price of carbon raisers. Other markets that consume greater quantities than the recarburizing market are the electrode and paint pigment industries.

His five-year outlook for the recarburizing market indicated that calcined petroleum coke demand will continue to increase, calciner capacity utilization rates will remain high, and green coke used for calcining will be available, but at higher cost.

Energy Issues

* Recent concern about the state of cupola melting is exaggerated.

Noting that 51% of cast iron production is made via cupola melting, Edgar Hopkins, ABC Coke, said that the capacity of merchant coke producers is 2.9 million tons, with 1.4 million tons used for foundry coke. While excess capacity is being converted to furnace coke, he said that capacity could be available for foundry coke if demand and economics justified the action. He sees little change in the coke market over the next five years.

* Deregulation of electricity could bring opportunity for the prepared.

In addition to speaking about energy savings procedures such as using furnace covers, infrared mold coating driers, electric ladle preheating and external refining, John Svoboda, Process Metallurgy International, Inc., Arlington Heights, Illinois, discussed the oncoming deregulation of electricity.

If the foundry is knowledgable, he said "deregulation will make it possible to take advantage of one-stop shopping and obtaining lower rates." He noted that deregulation's impact will depend on location, state consumer-protection laws and the ability to evaluate offers. He challenged foundries to start doing their homework, develop a negotiating plan, decide what is important to their operation, and secure legal and technical support.