Pulverized coal injection (PCI) - update May 20132 presented at SBB Conference Singapore

1. PCI Coal (2012 presentation)
1
How market conditions affect PCI
coal selection and usage
Ross Stainlay – M Resources
rstainlay@mresources.com.au

2. Agenda
• Set the Scene (and terminology !)
• Technology and Replacement Ratio
• Trade and Consumption
• Pricing and VIU
• Concluding Remarks
2

3. 3
Source: ANZ
Iron Ore Consumption Intensity –
Future Production Levels to Rise

4. Blast Furnace Dominates
Other – 32%
Blast
furnace
68% Global
(China 90%)
Liquid steel – by origin
• The blast furnace
remains the primary
source of liquid steel
• “Other” is EAF,
induction furnace,
COREX and others
• [>95 % of virgin iron
units derived from BF]
4
Coking / PCI coal cost can amount to ~ half the
operating costs for a modern BF

5. BF Hot Metal Production (Mtpa)
1,600
1,400
1,200
1,000
800
600
400
200
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2021
Asia
Oceania
Africa
S America
N America
CIS
Other Europe
EU-28
5
Forecast
Source – compilation

6. Main European Met Coal Importing Countries
Jul 2005-Dec 2011
(Blast Furnace – Hot Metal Mt pm)
7
6
5
4
3
2
1
0
Aug-05
Dec-05
Apr-06
Aug-06
Dec-06
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Millions
Total EU (8 countries) Source - WSA
UK, France Germany, Turkey,
Sweden/Finland, Belgium,
Netherlands, Spain
6

7. Main South American Met Coal Importing
Countries Jul2005-Dec 2011
(Blast Furnace – Hot Metal Mt pm)
0
0.5
1
1.5
2
2.5
3
3.5
4
Aug-05
Dec-05
Apr-06
Aug-06
Dec-06
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Millions
Brazil
Argentina
7
Source - WSA

8. Main Asian Met Coal Importing Countries
Jul 2005-Dec 2011
(Blast Furnace – Hot Metal Mt pm)
0
2
4
6
8
10
12
14
16
Aug-05
Dec-05
Apr-06
Aug-06
Dec-06
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Millions
Taiwan
South
Korea
India
Japan
8
Source - WSA

9. Agenda
• Set the Scene
• Technology and Replacement Ratio
• Trade and Consumption
• Pricing and VIU
• Concluding Remarks
9

10. THE BLAST FURNACE
The blast furnace is designed to reduce iron
oxide to liquid iron, whilst maintaining hot
metal quality and temperature.
All this at the minimum possible cost.
Coke performs the following roles in the BF:
Chemical
- Reductant
FeO + C Fe + CO
Fe2O3 + CO 2FeO + CO2
- Carbon dissolved in hot metal (5%
approx)
Thermal
- 2C + O2 2CO
Physical or Structural
- Support burden
- Gas and liquid permeability 10

11. Advantages of PCI
• PCI into the blast furnaces offers the following
advantages for blast furnace operation:
– Coal is less expensive than coke, resulting in lower fuel costs.
– Coal injection in conjunction with other parameters may
improve productivity.
– A wide range of coal types can be injected.
– Coal injection rates are higher than oil or natural gas, thus lower
coke rates are achieved.
– Coal supplies are more stable due to extensive reserves.
– Coal injection systems are less costly than new coke plants.
– Coal grinding and injection systems are non-polluting, and may
offer a CO2 reduction opportunity
11

12. PCI Rates and Records
94
100
90
80
70
60
50
40
kg/thm across all BFs
1995 1996 1997 1998 1999 2000
PCI records over time
– Dunkirk 143 kg/thm (1984)
– Thyssen 200 kg/thm (1992)
– Kobe 224 kg/thm (1998)
– Baosteel 260 kg/thm (1998?)
– NKK 266 kg/thm (1998)
– Current sustainable best
practice appears to be around
200 kg/t PCI along with 285
kg/t coke. With one
important exception ….
12
Source: CRU International

13. Typical relation – Coke Rate & PCI
rate
450
430
410
390
370
350
330
310
290
270
250
50 100 150 200 250
Coke rate ( kg/t hm)
PCI rate (kg/t hm) Courtesy: CoalTech
13

14. TM
CO gas & tar
Breeze
Dry coke at BF
1 tonne dry, useful coke
requires ~ 1.5 tonne of
coking coal – as shipped
(24% VM coking coal - 10 % TM)
14
Coking Coal and Coke
1 tonne of coking coal – as
shipped.

15. BF Input & Output – Typical JSM
BF : 5150 cu m – 15.0 m dia - 4.1 Mtpa hm (11000 +tpd) - productivity 2.4
COKE:
370 kg/t
11-12 % ash
60-65 CSR
PCI (1 to 3 coals) :
130 kg/t
9 % ash
0.85 RR
3% O2
1100 deg Blast T
ORE / SINTER / FLUXES
1580 kg/t
70 % sinter
1 tonne hot metal
+ Slag : 300kg/t
COKE BATTERIES
- 125 ovens
- 1.5 Mt coke pa
- CMC – ½ CDQ
Other: TRT – bell less top
– HM P 0.12 % -
Coking coal -
(8-12 coals)
- 520 kg
15

16. General Flowsheet – PCI System
Fine Coal
Storage
Raw Coal
Stove Off Gas
Fuel Gas
Injection
Vessels
Pulverizer
M
M
M
M
M
Distributor
Nitrogen
Blast Furnace
Air
Courtesy of BMH
16

17. PCI Distribution System
17

18. Coal Mills
18
Courtesy: BMH

19. 19
Replacement ratio & milling
Low Vol
coals
High Vol
coals
100% *
140%
* Relative mill throughput
110
90
70
50
30
1
0.9
0.8
0.7
0.6
72 76 80 84 88 92
HGI
Carbon %daf
Courtesy: CoalTech

20. Lance and Tuyere Assembly
20
Courtesy: CoalTech

21. PCI Coal Entering the BF
A single injection lance is most common, options
include double lance, oxygen annulus, pre-heating
of coal
21 Source: Kuttner

22. Pulverized Coal Injection into Blast
Furnaces
Coke
PCI
Coal
Coke Ovens Blast Furnace Coal Grinding and
Injection System
Courtesy of BMH 22

23. PCI Plant – Brazil
Injection capacities
at 200 kg coal/thm
üBF 2. 37 t/h
üBF 3. 79 t/h
Mill Capacity:
ü2 x 60 t/h
23

24. Components - % as received basis
(high vol coal)

25. High volatile v. low volatile coal
Fixed Carbon
Volatile Matter
Ash
Inherent Moisture
Free Moisture
FC
FC
FC
FC
FC
VM
VM
VM
VM
A
IM
A
A
A
FM FC
IM
FC
FC
FC
FC
VM
VM
VM
VM
VM
High vol PCI / SSCC Lo vol PCI coal
A
A
A
A
IM
FM
IM
AR
AD
DRY
DAF
“COKE”

26. 26
General coal types
60
daf
50
% Matter 40
30
Volatile 20
10
0
72 76 80 84 88 92 Carbon %daf
Courtesy: CoalTech
Thermal
Fuel Ratio ~ 2
Coking
Thermal
?

27. Coke Replacement Ratio Formulae
27
Courtesy: CoalTech

28. Properties of selected PCI coals
AUS 1 AUS 2 AUS 4 AUS 5 CAN 1 AUS 6 AUS 7 FUTURE AUS HV
Property Basis AUS 3 AUS 8 1
TM % ar 9.0 8.0 9.0 9.0 9.0 8.0 8.0 10 11.0 10.0 10.5
IM % ad 2.0 1.5 1.2 1.5 1.1 1.0 1.5 1 2.0 1.5 3.5
Ash % ad 10 10.5 9.0 7.5 8.5 8.5 10.0 9.5 9 8.5 6
VM % ad 9.5 12.2 12.5 12.7 13.0 14.0 14.5 19.5 19.5 15.0 35.4
VM % daf 10.8 13.9 13.9 14.0 14.4 15.5 16.4 21.8 21.9 16.7 41.0
FC % ad 78.5 75.8 77.8 78.3 77.4 76.5 74.0 70.0 69.5 79.2 53.4
TS % ad 0.65 0.7 0.50 0.50 0.45 0.5 0.65 0.5 0.51 0.6 0.35
Phos % ad 0.070 0.090 0.080 0.070 0.080 0.050 0.050 0.03 0.085 0.080 0.002
CV (kcal/kg) % ad 7450 7500 7750 7910 7775 7765 7550 7500 7620 7650 7375
CV (kcal/kg) % daf 8466 8523 8630 8692 8601 8580 8531 8400 8562 8500 8150
HGI 68 78 80 77 84 65 85 85 90 85 50
Carbon % daf 91.7 90.9 90.5 91.0 90.7 91.1 89.5 88.0 89.1 88 82.7
28

29. Low Vol PCI Coal High Vol PCI Coal
Hot Blast:
Equal or
Slightly Higher
Hot Blast:
Equal or
Slightly Lower
O2 Rate:
Equal or
Lower
O2 Rate:
Equal or
Higher
Low VM Coal High VM Coal
Permeability:
Equal or
Slightly Lower
Permeability:
Equal or
Slightly Higher
Gas Reduction:
Lower
Gas Reduction:
Higher
RAFT: Higher RAFT: Lower
Combustion
Efficiency: Lower
Combustion
Efficiency: Higher
Fuel Ratio: Lower
Coke Ratio: Lower
Fuel Ratio: Higher
Coke Ratio: Higher
Top Gas Vol.: Lower
Calorific Value: Lower
Top Gas Vol.: Higher
Calorific Value: Higher
Dust : Equal or
Slightly Higher
Dust : Equal or
Slightly Lower
Impact of PCI Coal Type on BF
Operation
29

30. The PCI advantage (4 Mtpa HM)
High Vol PCI
Coking Coal* 543 kg/tHM @ $U193/t
Yields 388 kg/tHM Coke
* 70:30 HCC : SSCC
PCI 150 kg/tHM
RR 0.75 & $US135/t
Coal Cost = US$125 /tHM
= US$ 501 million pa
Savings US$ 24 million pa
No PCI
Coking Coal * 700 kg/tHM @ $US188/t
Yields 500 kg/tHM Coke
* 80:20 HCC : SSCC
Notes: All coal prices fob basis – coke blend of HCC & SSCC coals
Excludes value of by-products, coke oven gas and coke breeze
Basis HCC $205, SSCC $147 /t fob. Values rounded. Fuel rate 500 kg/t
Coal Cost = US$131 /tHM
= US$525 million pa
Low Vol PCI
Coking Coal* 511 kg/tHM @ $US193/t
Yields 365 kg/tHM Coke
* 70:30 HCC : SSCC
30
PCI 150 kg/tHM
RR 0.90 & $US153/t
Coal Cost = US$ 122 /tHM
= US$ 487 million pa
Savings US$ 38 million pa

31. Agenda
• Set the Scene
• Technology and Replacement Ratio
• Trade and Consumption
• Pricing and VIU
• Concluding Remarks
31

32. QLD LV PCI coal exports
30
25
20
15
10
5
0
Mt
Production Year
Middlemount
Vermont
Isaac Plains
Baralaba
Carborough
Poitrel
Millennium
Capricorn
Curragh
Yarrabee
Foxleigh
Coppa/Moor
SWC
Jellinbah
Source M Resources

33. PCI Coal Demand Predictions
33
140
120
100
80
60
40
20
0
Mt
PCI
Growth in demand arises from :
- New blast furnaces coming on line
- Installation of PCI to existing furnaces
- Increased rates of injection

34. LV PCI – Seaborne Traded
50
45
40
35
30
25
20
15
10
5
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Mt pa
ROW
Australia
* = all other
Met coal
405 *
Mt
Source M Resources
ROW countries include:
Canada, Russia /
CIS, China
215
* Mt
Forecast
34

35. Agenda
• Set the Scene
• Technology and Replacement Ratio
• Trade and Consumption
• Pricing and VIU
• Concluding Remarks
35

36. Model outcomes – Replacement
Ratios – F-TeCon data
1
0.9
replaced)
0.8
coke t 0.7
kg/(RR 0.6
0.5
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z AABB CC Coal brand
36

37. 180
160
140
120
100
80
60
40
20
0
Model outcomes – Replacement
Ratios – F-TeCon data
0.95
0.9
0.85
0.8
0.75
0.7
0.65
0.6
0.55
0.5
Assumed: LV PCI ~$153 /t RR 0.90
A C E G I K M O Q S U W Y AA CC
Calculated price based on VIU - $/t fob
RR (kg/t coke replaced)
Coal brand
37

38. Coal and Coke Pricing 2012 Q2
$350
$300
$250
$200
$150
$100
Coke
Hard Coking Coal
LV PCI
LV PCI – hi ash
Thermal coal
38

39. Coal Pricing 2012 Q2
$220
$200
$180
$160
$140
$120
$100
Hard Coking Coal
LV PCI
LV PCI – hi ash
Thermal coal
39

40. Ratio - LV PCI price to HCC price
(%)
90
85
80
75
70
65
60
55
50
f
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2021
Source – CRU Feb 12 40

41. $15
$10
$5
$0
-$5
-$10
-$15
-$20
-$25
Platts PCI spot price – last 6 months –
all US$/t FOB
$180
$170
$160
$150
$140
$130
$120
$110
$100
Low Vol PCI – standard
Low Vol PCI – high ash
Delta
41

42. Yield ash relation from coal
washability data – examples
100
90
80
70
60
50
40
30
20
10
-
- 5 10 15 20
Yield - Mass % (cumulative )
Ash % (cumulative)

43. Coal in the Blast Furnace
Coking coal - blend
of up to 15 coals
470 kg/thm
350 kg/thm
By Products
Coke Ovens
PCI coal
(1 to 3 coals)
150 kg/thm
Coal Mill
Blast Air
Coke
150 kg/thm
SLAG CONTRIBUTION:
Sinter + breeze
Say 1500 kg @ 16%
“minerals” = 225 kg
Coke 350 kg @12% ash
(minerals) = 42 kg
PCI 150 kg
a) 8.5% ash > 13Kg
b) 12 % ash > 18 kg
BUT b) Need to increase
rate to compensate say
Sinter 155 kg/t > 18.6 kg
Coke
PCI
Slag
contrib’n
A 1% abs incr. in PCI ash = 0.3 % increase in combined [coke + PCI] ash = +3-5 kg
coke = $1-1.50 costs + … heat loss – productivity impacts etc

44. Prices - historical and ONE
forecast
44

45. Recent price forecasts
Source: Macquarie Bank & UBS Apr/ May 2012
300
250
200
150
100
50
2010 2011 2012 2013 2014 2015 2016 2017
USD/t fob
m_HCC
m_LV PCI
m_SSCC
m_Thermal
u_HCC
u_LVPCI
u_SSCC
u_Thermal
f Low VM PCI - $125 - $175
in near term?

46. Agenda
• Set the Scene
• Technology and Replacement Ratio
• Trade and Consumption
• Pricing and VIU
• Concluding Remarks
46

47. The Future
• Demand for traded PCI coal is a function of:
– BF hot metal production (coastal plants)
– PCI rate (kg/t)
– Number of BF fitted with injection
– Also depends on price competitiveness relative to alternative fuels
(thermal coal, oil and gas)
• Immediate outlook is for continuing strong demand with
measured production increases from existing mines along with
new capacity
• When BFHM production is reduced – buyers have more options.
Locking in a ratio of PCI coal to HCC is simplistic
47

48. THANK YOU
48
TRADING
Coking coal
PCI
Thermal
CONSULTING
Coal quality
Utilisation and
blending
Value-in-use
Specification
development
Resource
evaluation
Brisbane - Australia
www.mresources.com.au
Acknowledgments: CRU, Macquarie
Bank