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| Kobe Steel to form direct reduced iron venture in China |
| Plans to set up coal-based direct reduction plant with Shijiazhuang Iron & Steel |
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May 20, 2005
TOKYO, May 20, 2005 - Kobe Steel, Ltd. signed yesterday a letter of intent
with Shijiazhuang Iron & Steel Company Limited (also called Shigang)
with the aim to establish a joint venture company that will produce direct
reduced iron using a coal-based process in Hebei Province, China. Japanese
trading firms Mitsui & Co., Ltd. and Sojitz Corporation also are planning
to participate in the venture.
Under the letter of intent, the four companies will conduct a detailed feasibility
study to set up the joint venture business. They plan to sign a final agreement
later this year and begin plant operations in spring 2008. This will be
the world's first commercial FASTMELT(R) Plant, which makes molten
pig iron.
The joint venture will use the FASTMELT(R) Process (FASTMET(R)/CDM), which
was developed by Kobe Steel and subsidiary Midrex Technologies, Inc. Steaming
coal is used as the reductant to produce direct reduced iron (DRI). A coal-based
DRI melter (CDM) melts the DRI and the slag is separated from the hot metal,
resulting in pig iron of the same quality as that made in blast furnaces.
Most of the pig iron made by the joint venture will be supplied to Shigang.
Plans call for the FASTMET/CDM plant to replace an aging mini blast furnace
at Shigang.
As the FASTMET/CDM Process does not use coke or sintered iron ore, operating
costs are reduced by roughly 30 percent in comparison to conventional mini
blast furnaces. Shigang's blast furnaces are located within the city
of Shijiazhuang, and the adoption of the FASTMET/CDM Process, which emits
less air pollution, is expected to lessen the environmental burden.
In China where 272.5 million tons of crude steel were produced in 2004,
it is estimated that over 100 million tons of pig iron were made by mini
blast furnaces of less than 1,000 cubic meters. To rein in the overheating
economy and curb air pollution, the Chinese government is undertaking measures
to control overinvestment. It is setting out a policy that bans the construction
of new mini blast furnaces of 1,000 cubic meters or under. Among small to
medium-sized steelmakers, demand is anticipated to grow for new ironmaking
processes that do not require the use of coke, such as the FASTMELT Process.
In addition, direct reduction ironmaking has been designated as an encouraged
industry under the Foreign Investment Guide Catalogue and will enjoy preferential
treatment in joint venture approval, taxes and other measures.
Viewed as a model plant, the joint venture with Shigang will serve to further
promote the marketing of the energy-efficient, coal-based FASTMET/CDM Process.
Details of the Letter of Intent
| * |
Partners: Shigang & Kobe - Supply
of plant, technology and operating services
Mitsui - Product marketing
Sojitz - Plant supply support |
| * |
Equity share: Shigang 2/3, Japanese
partners 1/3 |
| * |
Production capacity of FASTMET/CDM plant:
500,000 tons per year |
| * |
The pig iron will be supplied to Shigang,
but the Japanese partners will receive a minor portion for outside
sale |
Outline of Shigang
| Name |
Shijiazhuang Iron & Steel
Company Limited |
| Location |
Shijiazhuang, Hebei Province (300
km southwest of Beijing) |
| Established |
1957 |
| Capital |
1.52 billion yuan (US$184 million,
in 2003) |
| Sales |
3.99 billion yuan (US$482 million,
in 2003) |
| Employees |
8,300 (in 2002) |
| Main products |
Structural steel bar for machinery
and automotive use |
| Equipment |
4 mini blast furnaces, 2 converters,
2 electric arc furnaces, 4 bar mills |
| Crude steel production |
2 million tons |
|
FASTMET/CDM Process
The FASTMET/CDM Process uses steaming coal as the reductant to produce direct
reduced iron. Agglomerates made of pulverized coal and iron ore fines are
fed to a rotary hearth furnace and heated to a high temperature. At 1,350
C, the agglomerates are rapidly reduced in 10 minutes, leaving high-quality
direct reduced iron (DRI). The DRI is melted in a coal-based DRI melter
and the slag is removed, leaving molten pig iron. As long as there is a
supply of iron ore and coal, plant location is not greatly restricted.
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