• 2 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 2 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 2 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 2 days Schlumberger Warns Of Moderating Investment In North America
  • 2 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 2 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 2 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 2 days New Video Game Targets Oil Infrastructure
  • 2 days Shell Restarts Bonny Light Exports
  • 2 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 3 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 3 days British Utility Companies Brace For Major Reforms
  • 3 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 3 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 3 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 3 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 3 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 3 days Rosneft Signs $400M Deal With Kurdistan
  • 3 days Kinder Morgan Warns About Trans Mountain Delays
  • 4 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 4 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 4 days Russia, Saudis Team Up To Boost Fracking Tech
  • 4 days Conflicting News Spurs Doubt On Aramco IPO
  • 4 days Exxon Starts Production At New Refinery In Texas
  • 4 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 5 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 5 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 5 days China To Take 5% Of Rosneft’s Output In New Deal
  • 5 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 5 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 5 days VW Fails To Secure Critical Commodity For EVs
  • 5 days Enbridge Pipeline Expansion Finally Approved
  • 5 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 5 days OPEC Oil Deal Compliance Falls To 86%
  • 6 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 6 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 6 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 6 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 6 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 6 days Aramco Says No Plans To Shelve IPO
Alt Text

The U.S. LNG Boom Could Be About To Stall

United States LNG has seen…

Alt Text

2 Red Flags For The World’s Top Shale Play

Changing legislation and taxation for…

Stuart Burns

Stuart Burns

Stuart is a writer for MetalMiner who operate the largest metals-related media site in the US according to third party ranking sites. With a preemptive…

More Info

Steelmakers Take Advantage of Cheap Natural Gas Prices in the US

Steelmakers Take Advantage of Cheap Natural Gas Prices in the US

As many will tell you, there have been and will continue to be winners and losers in the metals industry from the lower gas prices that shale gas has created.

Even within industries, some will see opportunities where others do not. So it is for the steel industry – and in particular, the split between EAF and integrated steel mills. Nucor Corporation leads the pack for EAF steel producers, having almost singlehandedly re-invented the EAF industry since the late 1960s and becoming the largest US steel producer and the country’s largest recycler in the process.

And therein lies the opportunity, not just for Nucor Steel, but Steel Dynamics and others employing the mini-mill model.

According to an FT article, in several countries, including Iran, Saudi Arabia and Mexico, but not presently in the US, natural gas and iron ore are used to make a product called direct reduced iron (DRI), which is then added to scrap to make steel.

Using DRI, which avoids the need for coking coal, can be significantly cheaper than conventional steelmaking, depending on the price of gas. It is not a simple calculation, as DRI uses a little more electricity to melt a ton of finished steel than using 100% scrap, but the economics appear firmly in favor of producing direct reduced iron at current and anticipated natural gas prices in the US, as Nucor’s recent investment validates.

The firm is close to completing a new DRI plant on the site of an earlier one in Louisiana, according to the FT. Ironically, the previous facility was dismantled in 2003 and shipped to Trinidad, because rising US gas prices made it uneconomic.

Related Article: Angola and Brazil Work Together on LNG Production

John Ferriola, the company’s chief executive, is quoted as saying the replacement will be “a game-changer to Nucor’s cost structure for high-quality iron.” But Nucor’s not alone.

Indeed, so attractive is the opportunity that shale gas and natural gas prices bring to direct reduced iron (DRI) and steelmaking – which we began outlining in the first part of this article – that Nucor will not be alone.

Voestalpine of Austria has already announced plans to invest about $740 million in a new DRI plant on the coast of Texas. It will produce 2 million tons of product per year, half of which is to be shipped to Austria to be made into steel there.

However, not all steel producers will benefit from low prices of natural gas to the same extent.

Integrated steel producers such as US Steel have benefitted from lower energy costs.

US Steel has increased the use of natural gas over coal in its blast furnaces and is said to be looking at a possible joint venture with Ohio-based Republic Steel to produce DRI, hoping it will improve the cost structure for the firm’s tubular products operations in Ohio. But for the group as a whole, shale gas isn’t the game-changer it could be for the mini mills.

Related Article: Has the Shale Gas Boom Already Ended?

Tubular steel products producers everywhere are hoping shale gas will continue to drive 8-percent-per-year growth in demand as the tracking industry continues to consume oil country tubular goods (OCTG) on an ever-increasing scale.

While the OCTG sector only accounts for about 5 percent of the total steel market, it has been a profitable sector, in spite of rising imports from Asian producers (particularly South Korea now that Chinese imports have been tempered by anti-dumping duties since 2010).

Indeed, over-investment in new tubular steel product production capacity may reach bubble proportions if all of the announced $7 billion of investment in the sector, mentioned in another FT article, actually takes place.

But for firms like Nucor Corp., the benefits of natural gas and direct reduced iron production are clear: increased demand for goods, the incentive for manufacturers to relocate back to the US, and a reduction in raw material cost inputs.

There should be a few smiles on faces down in North Carolina.

By. Stuart Burns




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News