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TECK COAL IN THE CHINESE STEEL MAKING INDUSTRY: WHERE SHOULD WE FIT?
by
Richard TremblayB. Sc Engineering, Queen’s University, 1989
.
PROJECT SUBMITTED IN PARTIAL FULFILLMENT OFTHE REQUIREMENTS FOR THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
In the Teck MBA Program of the Faculty
ofBusiness Administration
© Richard Tremblay 2011
SIMON FRASER UNIVERSITY
Term (Spring) 2011
All rights reserved. However, in accordance with the Copyright Act of Canada, this work may be reproduced, without authorization, under the conditions for Fair Dealing.
Therefore, limited reproduction of this work for the purposes of private study, research, criticism, review and news reporting is likely to be in accordance with the law,
particularly if cited appropriately.
Approval
Name: Richard Tremblay
Degree: Executive Master of Business Administration
Title of Project: Teck Coal in the Chinese Steel Making Industry: Where Should We Fit?
Supervisory Committee:
____________________________________________
Dr. Lindsay MeredithSenior SupervisorProfessor
____________________________________________
Dr. Ian McCarthySecond ReaderProfessor and Canada Research Chair in Technology and Operations Management
Date Approved: ____________________________________________
ii
Abstract
This paper will discuss China’s emergence on the seaborne metallurgical coal market as a
major importer of hard coking coal. It will discuss how Teck Coal as the second largest supplier
in the seaborne market should participate in this rapidly growing market.
China’s growth has fuelled demand for commodities around the world and as such, it is
important for any commodity supplier to have an understanding and presence in this market.
Teck Coal only began selling noticeable volumes of coal to China in 2009 and continues to learn
how the market behaves and who the key players are in this market. Teck Coal’s strengths and
weaknesses are discussed and are in turn used to identify potential opportunities for the company
to explore.
Dedication
This paper is dedicated to my wife Sue and kids (Jessica, Hadyn and Brenah) who
supported and allowed me the time necessary to go back to school and complete the MBA
courses over the last six-years. Thanks for your support.
iii
Acknowledgements
I would like to thank Real Foley, Kevin Man, Sarah Liu, Corey Caville, Tayfun Zehir,
and Xiuyan Zhang for all their assistance and guidance pulling this paper together. I would also
like to thank Robert Bell for taking on the task of being my internal Teck project sponsor and
Lindsay Meredith for being my SFU advisor.
iv
Table of Contents
Approval...........................................................................................................................................iiAbstract............................................................................................................................................ iiiDedication........................................................................................................................................ ivAcknowledgements...........................................................................................................................vTable of Contents.............................................................................................................................viList of Figures................................................................................................................................viiiList of Tables................................................................................................................................... ixGlossary............................................................................................................................................x
Introduction.....................................................................................................................................11.1 China........................................................................................................................................11.2 Metallurgical Coal Market.......................................................................................................5
1.2.1 Chinese Coal Producers..............................................................................................61.2.2 Seaborne Metallurgical Coal Producers.....................................................................8
2: Chinese Steel Industry..............................................................................................................152.1 Blast Furnace Technology.....................................................................................................15
3: Teck Coal Market Analysis.....................................................................................................193.1 Strengths................................................................................................................................203.2 Weaknesses............................................................................................................................203.3 Opportunities.........................................................................................................................213.4 Threats...................................................................................................................................223.5 Teck Coal Expansion Plans...................................................................................................24
4: The Five Forces Discussion......................................................................................................264.1 Threat of Entry.......................................................................................................................264.2 Threat of Substitution............................................................................................................274.3 Bargaining Power of Suppliers..............................................................................................284.4 Bargaining Power of Buyers..................................................................................................284.5 Rivalry Among Current Competitors....................................................................................28
5: Other Market Factors..............................................................................................................305.1 Market Complimentary..........................................................................................................305.2 Complimentary Products.......................................................................................................305.3 Cannibalization......................................................................................................................305.4 Indirect Substitution...............................................................................................................31
v
6: Opportunity Analysis...............................................................................................................326.1 Increase Market Share...........................................................................................................326.2 Develop Coals in the Top Tier Valuation..............................................................................336.3 Maintain Market Share..........................................................................................................346.4 Develop More Markets for Complimentary Products (Semisoft, PCI and Thermal)............34
7: Conclusion.................................................................................................................................36Appendix – Alternate Steel Production Methods...........................................................................37
Reference List................................................................................................................................39Works Cited....................................................................................................................................39Interviews........................................................................................................................................39Websites Reviewed.........................................................................................................................39
vi
List of Figures
Figure 1: Apparent vs. Actual Steel Consumption...........................................................................2
Figure 2: Chinese City Population vs. Steel Consumption...............................................................3
Figure 3 : Chinese Coking Coal Consumption.................................................................................4
Figure 4: China Provinces.................................................................................................................8
Figure 5: BHP Billiton Structure......................................................................................................9
Figure 6: BHP Bowen Basin Mine Location..................................................................................10
Figure 7: Teck Coal Operations Locations.....................................................................................11
Figure 8: Rio Tinto Coal Operations Reserves and Resources.......................................................12
Figure 9: Anglo American Operations Location............................................................................13
Figure 10: Teck Coal Sales by Region...........................................................................................19
Figure 11: Hard Coking Coal Deposits...........................................................................................23
Figure 12: Teck Coal Expansion Plans...........................................................................................25
List of Tables
Table 1: Top 10 Export Met Coal Producers....................................................................................5
Table 2: Chinese Metallurgical Coal Imports by Country...............................................................6
Table 3: Teck Coal Products and Qualities.....................................................................................11
Table 4: Seaborne Metallurgical Coal Product and Quailities........................................................14
Table 5: Blast Furnace Quality Requirements by Size...................................................................16
Table 6: Teck Coal Sales by Product into China............................................................................20
Table 7: Mongolian Raw Coal Production.....................................................................................26
vii
Glossary
Rank
CSR
CRI
Ash
VM
Fluidity
Coke
PCI Coal
SSCC
Thermal Coal
Measurement of the geological age of a coal. Typically low rank coals are used
as a heat generating fuel while higher rank coals are older and have undergone
more coalification so lower volatile matter. (Reflection of Vitrinite)
Stands for Coke Strength Reactivity which is a measure of the quality of the
coke produced from the coal.
Stands for coke reactivity index which is a measure of how reactive the coke is
with CO2.
Non-organic material that is embedded in the coal. Mineral matter typically
oxides.
Stands for Volatile Matter. The organic material within the coal that when
heated burns off into gas leaving behind coke.
A Physical measurement of a coal’s viscous properties when heated to the plastic
state.
The product that remains in the coke oven once the coal is heated and the
volatile matter is burnt off. Essentially pure carbon and ash.
Stands for Pulverised Coal Injection coal. Coal that is blown into the bottom of
the blast furnace through tuyeres as a heat source.
Stands for semi-soft coking coal. Metallurgical coal that has a lower CSR.
Typically used more as a filler in the coke blends.
Coal that has no coking properties. It is used as a heat source for power
generation.
.
viii
ix
Introduction
1.1 China
The move of the Chinese population from rural areas into urban areas has been the
growth impetus that has created a greatly increased demand for good quality hard coking
coal. The Chinese government has managed the infrastructure growth through a
methodical five-year planning process in which they highlight the infrastructure
investment plan for the next five years. The recent, twelfth such plan, envisions over
85,000 km of new highways and over 40,000 km of high-speed rail networks linking the
most of the major cities in China. This type of investment in infrastructure is very steel
intensive. Railways require rail and rail bridges while highway construction will
necessitate significant bridge construction and median and shoulder guardrails. The
highway construction will as well increase personal mobility of the Chinese population
and therefore increase automobile demand/ownership. Statistics compiled by the
University of Sheffield and CEIC in 2002 indicate there are thirty six cars for every one
thousand people in China compared to four hundred and eighty one for every one
thousand people in the U.S. and four hundred and sixty four for every thousand in
Europe. China is and will be a significant sales region for automobile manufactures like
Audi, GMC, and Mazda all of whom have plants in China. All this infrastructure
investment and increased demand in the automobile market has translated into significant
growth in steel production within China. Figure #1 shows the crude steel production by
year and associated growth occurring in the sector to fuel the urbanization plans.
1
Figure 1: Apparent vs. Actual Steel Consumption
An interesting point of note is that, as the differential between the production of steel and
apparent consumption shrinks China could very easily become a net importer of steel
again, which could have impacts on the world steel markets. This increased steel
production has in turn created a significant increase in hard coking coal requirements.
Figure #2 shows the current steel consumption by city. It is clear from the graph that the
future steel consumption growth by city will increase by more than 25 % over the next
ten years. Another important point to note from this figure is the fact that the inland
cities are yet to experience the growth and modernization that the coastal cities have
experienced.
0
100
200
300
400
500
600
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
ProductionApparent consumption
Mt
Net exporter
Net importer
China accounts for 46% of the world’s steel apparent consumption in 2009
China turned from a steel importer to an exporter since 2006
2
Figure 2: Chinese City Population vs. Steel Consumption
China in 2004 was actually an exporter of metallurgical coal and steel making coke.
However, in recent times and with the increased internal consumption China has become
a net importer of metallurgical coal and Figure #3 from Teck Coal’s Beijing Office shows
how imports have increased over time and are expected to increase in the future.
2009-2020
2009 405kg per capita
Source: CRU, Teck Beijing
2020 forecast => 565kg per capita
3
0
100
200
300
400
500
600
700
2005 2010 2015
Imported coking coal
Domestic coking coal
Mt
Figure 3 : Chinese Coking Coal Consumption
China does have its own metallurgical coalmines but they cannot meet the demand from
the steel mills. Combine this with the fact that many of the steel mills have moved to
larger blast furnaces that require a high-grade hard coking coal to operate efficiently.
The Chinese steel mills need high CSR, high coke yield and low sulphur hard coking
coals. These high quality hard coking coals are in limited supply within China, which is
why the more progressive Chinese steel mills have turned to the seaborne metallurgical
coal market to meet their ever-expanding needs. Teck Coal has the high quality hard
coking coal that the Chinese steel mills require. This paper will examine the
4
fundamentals behind the Chinese demand for high quality hard coking coal and
recommend how Teck Coal should participate in this market.
1.2 Metallurgical Coal Market
The top ten metallurgical coal exporters account for 55 % of the total market. The
remaining 45 % of the market is comprised of over 111 different producers. Table #1 shows the
percentage market share by producer.
Table 1: Top 10 Export Met Coal Producers
Top 10 Export Met Coal Producers - Equity Basis 2010 Top 10 Export Metallurgical Coal Producers 2010 Kt % Share Cum%BHP Billiton Limited 29 12% 12%Mitsubishi Corporation 23 9% 21%Teck Resources Limited 21 9% 30%Anglo American plc 14 6% 35%Xstrata plc 11 4% 40%Evraz Group S.A. 10 4% 44%Rio Tinto Group 7 3% 47%Mechel OAO 7 3% 50%Wesfarmers Limited 7 3% 52%Peabody Energy Corporation 6 2% 55%Source: AME; Company Reports
Of these top ten producers, eight export on the seaborne market while the remaining two
either sell to the domestic market or export by land to neighbouring countries. In terms of the
Chinese imports Table #2 shows the imports by country and associated corresponding producers.
5
Table 2: Chinese Metallurgical Coal Imports by Country
1.2.1 Chinese Coal Producers
China itself has a large metallurgical coal industry. In 2010, there were over 1,000 mines
in China. The Chinese government has been actively forcing consolidation and closure of the
small unsafe operations that have plagued with serious safety issues. The top five producers in
China are as follows:
6
1.2.1.1 Shanxi Coking Coal Group (SCCG): Located in Shanxi province and owned by the
provincial government they operate 106 mines with a capacity of 87 million tonnes of
clean coal. Seventy five percent of their production is hard coking coal with the
remainder being Thermal and PCI coal. Plans for 2011 are to expand production by 40
% mostly on the thermal side. Their production is sold within China to large steel mills
and power plants. They produce a high quality hard coking coal that is rated by steel
mills as a Tier 1 coal that is irreplaceable in their blend. They face significant
production challenges as their mines go deeper and the low sulphur seams are depleted.
1.2.1.2 Kailuan Mining Group: Located in Heibei Province they operate fifteen mines and
seven wash plants with clean coal production capacity of eighteen million tonnes of
clean coal. In 2009, they produced ten million tonnes of clean coal of which 60 % was
hard coking coal. They produce semisoft coking coal (SSCC) and thermal coal as well
which is sold domestically in China..
1.2.1.3 Pingdingshan Mining Group: Located in Henan Province they operate thirty-three
mines and eight wash plants with a production capacity of ten million tonnes. In 2009
they produced eight million tonnes of clean coal of which 50 % was hard coking coal.
The remaining 50 % was semisoft and thermal coal.
1.2.1.4 Longmei Mining Group: Located in Heilongjiang Province they operate 42 mines
with a washed clean coal capacity of thirty-two million tonnes. In 2009 they produced
sixteen million tonnes of which just under five million tonnes was hard coking coal.
The remaining 11 million tonnes was a combination of semisoft and thermal coal.
7
1.2.1.5 Huaibei Mining Group: Located in Anhui Province they operate seventeen coalmines
and eight wash plants with a capacity of twenty million tonnes. In 2009 they produced
eight million tonnes of clean coal of which 60 % was hard coking coal. They also
produce semisoft and thermal coal.
Figure 4: China Provinces
1.2.2 Seaborne Metallurgical Coal Producers
Five companies that represent over 85 % of the market dominate the seaborne high quality hard
coking coal. These companies are BHP Billiton, Teck, Anglo American, Rio Tinto, and Xstrata.
A brief description of each company’s hard coking coal business is as follows:
Xinjiang
Tibet
Qinghai
Sichuan
Yunnan
Inner Mongolia
Henan
Shanxi
GuangxiGuandong
Fujian
Zhejiang
Jiangsu
Shandong
Hebei
Beijing
Laioning
Jilin
Heilongjiang (HLJ)
GuizhouHunan
Hubei
Jiangxi
Anhui
ShaanxiGansu
Ningxia
8
1.2.2.1 BHP Billiton: The organizational structure of the BHP Billiton Metallurgical Coal is
as shown in figure #3
Figure 5: BHP Billiton Org Structure
They have ten hard coking coal and semisoft coking coal producing operations. In addition they
operate two PCI producing operations most of which are located in the Bowen Basin in Australia.
See figure #2. Their key flagship operations are Peak Downs and Saraji. Most customers
categorize these coals as top tier coals that are irreplaceable in their coke oven blends. They are
differentiated by their rank of 1.4 %for Peak Downs (PD) and 1.5 % for Saraji (SJ) that are
noticeably higher than most other HCC’s on the market today. During the author’s visit to China
customers visited commented how they value the Saraji and Peak Downs coal above all others.
Teck Coal currently has no comparable coals in its product inventory but is actively working with
customers to highlight other benefits that can be obtained from its coals and how Teck Coal
9
products can be utilized in their coke oven blends like a top tier coal. BHP’s other HCC
operations are Goonyella, Riverside, Illawarra, Gregory, and Norwich Park. They also have two
semi soft coal producing operations Poitrel and Blackwater. The two PCI coal-producing
operations are South Walker Creek and Poitrel.
Figure 6: BHP Bowen Basin Mine Location
10
1.2.2.2 Teck: Teck is the #2 Seaborne Metallurgical coal supplier in the world. Teck
has six operations all of which are located in Canada. Five of which are in the
Elk Valley, British Columbia and one is located in Alberta. See Figure #7.
Teck produces essentially three main products categorized by volatile matter.
Table 3 shows the various products and associated qualities. The clean coal is
railed West 1,100 Km to the coast for loading onto vessels through three deep-
sea ports. The mines have combined reserves of over 600 million metric tonnes
of clean coal and an additional 1.4 billion tonnes of resources.
Figure 7: Teck Coal Operations Locations
Table 3: Teck Coal Products and Qualities
Product Moisture Ash VM RankElkview 9.00% 9.50% 21 % - 22 % 1.28 – 1.33
PACIFICOCEAN
Calgary
EdmontonCNR
PrinceGeorge
CNR
CNR
CPR
Quintette
U.S.A.
British Columbia Alberta
CN
R
CardinalRiver
WestshoreNeptune
Elk Valley
Ridley CNR
Sask
PrinceRupert`
Sparwood
Elkford
CP
R
FordingRiver
Coal Mountain
Elkview
LineCreek
Greenhills
3
43
CPRVancouver
Distance to ports:1150 km
11
Standard 9.00% 9.50% 22 % - 24 % 1.17 - 1.27Premium 9.00% 8.80% 24 % - 26 % 1.08 - 1.17
Eagle 9.00% 8.60% 26 % - 28 % 1.03 - 1.10
1.2.2.3 Rio Tinto: Rio Tinto has two operations Hail Creek and Kestrel located in the
Bowen Basin in Australia that produce hard coking coal. They have another
hand full of operations that produce semi soft coking coals but no hard coking
coal.
Figure 8: Rio Tinto Coal Operations Reserves and Resources
12
1.2.2.4 Anglo American: Anglo produces metallurgical coking coal from a number of
different operations around the world. Their main production of hard coking
coal comes from the Moranbah North, German Creek (Capcoal) and Dawson
Operations all located in the Bowen Basin in Australia. They have another two
operations in Australia (Drayton and Foxleigh) that produce semi soft and PCI
type coals. See Figure #4 for location of Anglo American metallurgical coal
operations.
Figure 9: Anglo American Operations Location
1.2.2.5 Xstrata: Xstrata’s metallurgical coal operations are located in the Queensland
province in Australia. Their main production comes from the Oaky Creek Operation
(~11 million tonnes) while the Colinsville Coal and Newlands Coal Operations also
produce minor amounts of metallurgical coal.
Table #4 represents the qualities of the various hard coking coal products that are supplied into
the Seaborne metallurgical market.
13
Table 4: Seaborne Metallurgical Coal Product and Quailities
Producer MineMet coal brand
TM (%) ar
Ash (%)
VM (%)
S (%)
P (%)
CSN
Refl (%)
Fluidity ddpm
Rio Tinto Hail Creek Hail Creek 10 8.5 20.5 0.35 0.07 8 1.32 400
Rio Tinto Hail CreekHail Creek Higher Ash 10 10 20.5 0.35 0.08 7.5 1.3 200
Rio Tinto Kestrel Kestrel 8 6.5 34 0.65 0.03 8.5 0.94 10,000Anglo Dawson Dawson C 10.5 8 26 0.45 0.04 8 1.04 900Anglo Dawson Dawson D 10.5 8.5 24.3 0.55 0.04 7.5 1.15 400
Anglo Dawson Dawson HV 10.5 8.5 29.2 0.450.00
9 8 0.95 3,200
Anglo DawsonDawson Soft Coking 11 8.5 29 0.48 0.04 5.5 0.9 75
Anglo Dawson Moura C 10.5 7.8 26 0.5 0.02 7.5 1.04 850
Anglo Dawson Moura Soft 10.5 8.8 28 0.550.02
6 4 0.8 50
AngloGerman Creek German Creek 11 9 19.8 0.6 0.06 7.5 1.52 200
AngloMoranbah North
Hard Coking Coal 10 8.5 25.6 0.52 0.04 8.5 1.11 2,200
Xstrata CollinsvilleCollinsville Coking 8 9 26 0.7 0.03 7 1.11 2,000
Xstrata NewlandsCollinsville Hard 8 9 26 0.7 0.03 7 1.11 2,000
XstrataOaky Creek Oaky Creek 10 9 26 0.7 0.06 9 1.15 6,000
Note: % S is the amount of sulphur in the coal, % P is the amount of phosphorous in the coal.
Reflectance is equivalent to rank and inversely proportional to VM. CSN is the free swelling
index (FSI) of the coal.
14
2: Chinese Steel Industry
As the Chinese steel industry has continued to grow and produce more year over year the
Chinese government has taken steps to force consolidation of the industry. The top ten steel
companies now account for over 60 % of the steel produced in China. With a more consolidated
industry, better economies of scale are achieved and in turn, productivities will improve. This
consolidation also provides the government the added benefit of making it easier to regulate the
industry to become more efficient. Larger companies are also better able to adopt and implement
new technologies and ensure efficient processes are in place. The steel industry is a very energy
intensive industry so as power, supply becomes tighter and tighter the government has at times
limited industrial power usage for inefficient consumers. Therefore having an energy efficient
process is critical to avoid being limited by reduced power allocation.
2.1 Blast Furnace Technology
The Chinese steel mills have also taken a very progressive approach to embracing new
technology. Specifically in the last few years, the trend has been to build larger and larger blast
furnaces culminating in the 5800 cubic meter unit at the Sha Steel works in Zhang Jia Gang.
With the move to larger and larger blast furnaces, the need for higher quality hard coking coal is
an imperative. There are four main functions that the coke needs to be able to fulfil in the blast
furnace. They are:
Provide heat for the chemical reaction.
Support the burden of the layers of iron ore and coke.
Provide and maintain gas distribution so the iron ore can be chemically reduced
in the upper shaft and especially in the cohesive zone and liquid zones.
React with carbon dioxide but remain strong enough at elevated temperatures to
provide the vertical permeability for liquid hot metal in the hearth of the
furnace.
Contribute carbon to bond with the iron to form crude steel
15
The larger the blast furnace diameter gets the more critical the coke’s ability needs to
be to fulfil the above four items. Higher coke strength after reactivity (CSR) and coke
stability are critical quality parameters to ensure. Table #2 shows how the larger blast
furnaces require higher coke qualities and in turn higher hard coking coal qualities.
Table 5: Blast Furnace Quality Requirements by Size
500m3 1000m3
2000m3 3000m3
4000m3
5000m3
Ash (%) ≤13.5 ≤13.0 ≤13.0 ≤12.5 ≤12.0 ≤12.0
S (%) ≤0.8 ≤0.7 ≤0.7 ≤0.65 ≤0.6 ≤0.6
M40 (%) ≥76 ≥78 ≥82 ≥84 ≥85 ≥86
M10 (%) ≤8.5 ≤8.0 ≤7.5 ≤7.0 ≤6.5 ≤6.0
Size (mm)
25~40 25~70
25~475 25~75 25~75
30~75
CRI (%) ≤30 ≤28 ≤26 ≤25 ≤25 ≤25
CSR (%) ≥55 ≥58 ≥60 ≥63 ≥65 ≥66
The M40 and M10 values are European equivalent of the ASTM Stability (Coke Cold
Strength) and Hardness (Resistance to Abrasion) respectively.of the final coke product.
Having the right size distribution and strength of coke for the blast furnace is critical to
ensure efficient operation. High quality hard coking coals are the only coals that can
produce a coke strong enough to support the larger interlaid beds of iron ore and coke in
these larger blast furnaces. Factors of the coke that can affect the coke reactivity to
carbon dioxide are:
Composition of the Ash: Higher alkaline content (sodium and potassium) can
lead to increased reaction rates with carbon dioxide.
Coke Porosity: The higher porosity coke has more exposed surface areas and as
such has a higher reactivity. Typically, low rank high volatile (HV) matter
coals have a higher porosity then higher rank HV and MV coals.
Coke Structure: The ratio of inerts and macerals in the coal determines the wall
thickness of the coke. Typically, the thinner walled cokes have higher porosity.
16
A recent survey of large blast furnace operators conducted in Japan, Brazil and the USA
identified the following as the ideal Coke Quality requirements.
Size: Typical 30mm x 90mm, with no more than 5% > 90mm and no more than
5% < 30mm, and a min of 55% > 50mm (this last one is to assure a mean size
>50mm). USA operators prefer 55-60 mm average size.
Coke Reactivity (CRI) and Coke Strength after Reduction (CSR) : A
minimum CSR of 62 but prefer greater then 65 (or 65-69). Too high a CSR
(>70) can be problematic as it leads to low reactivity coke which accumulates
above the hearth of the furnace (“deadman”) and does not provide useful
reduction The CRI is max 25, but most operators really prefer 20-23 (again less
than 17-18 can be a problem (see above)
Physical Strength – ASTM Stability greater then 62, but really prefer greater
than 65. Micum 40 > 84 (Hardness >68)
Chemistry / All Other: Most other items are a matter of economics and/or site
specific.
o Ash <12% (USA Operators prefer Coke Ash <8.5%)
o Sulfur < 0.8%
o Phos (in coke) < 0.035% (USA Operators prefer 0.018% Phos in Coke)
o Alkalie (%Na2O + %K2O in coke ash) < 3.5%
o ASG (Apparent Specific Gravity : >0.90%
o Porosity : 50 – 54%
o Bulk Density : 28 – 32 pcf
o VM <1.00%
(*) (Results of surveys conducted in Japan, Brazil, and the USA. Participants included, CSN,
NSC, Usiminas, several US Steel makers including, US Steel, AMS, AK Steel, Algoma, Dofasco,
Inland, Stelco, WCI, Weirton)
17
The smaller mills (400 cubic meters in size) are small enough that they do not need the
high CSR coals. Most blast furnace operators agree that the coke should not react at the
lower temperatures that exist in the upper portion of the blast furnace to avoid carbon
loss.
18
3: Teck Coal Market Analysis
Being the number two seaborne metallurgical coal supplier in the world Teck Coal
currently sells coal to most major steel mills around the world. Figure 10 shows the sales
distribution for Teck Coal for the last five years. Teck Coal only began selling larger volumes of
coal to China in 2009 and maintained roughly the same volume in 2010.
2006 2007 2008 2009 20100%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
48%53%52%50%44%
15%15%
1%1%1%
21%20%
28%32%35%
9%8%
11%10%11%
7%4%8%8%8%
Sales Allocation (Met)
South AmericaNorth AmericaEuropeChinaAsia ex. China
Figure 10: Teck Coal Sales by Region
This reallocated volume for the most part came from the European market, as this region
was hardest hit by the world economic downturn at the end of 2008. Europe has also has been
the slowest steel making region to recover. Teck Coal’s marketing philosophy has always been
to form strategic relationships with large stable steel producers. This philosophy has carried over
into the Chinese market and the objective has been to sell coal to the larger steel manufacturing
companies in China. The 2010 Teck Coal sales breakdown is shown in Table #6.
19
Table 6: Teck Coal Sales by Product into China for 2010
mt %CHEVBL 73,416 3.0%EKVLCH-ABLD 827,314
33.5%
EKVSTDBL 230,872 9.4%
FCGPREM 964,05939.1%
FRPREM 297,83312.1%
STDBL 74,529 3.0%
TOTAL2,468,0
23100%
3.1 Strengths
Teck provides the opportunity for diversification from the Australian suppliers.
The recent floods experienced in Australia the last few years and subsequent
supply disruption has highlighted to all major steel mills the need to have a
diversified supplier base for hard coking coal. This point is probably the
greatest item that Teck can offer to the Chinese steel mills.
Teck is able to offer a full suite of products. (Hard coking coal, Semisoft, PCI
and Thermal)
Teck ships out of large ports and can load cape size vessels (120,000 mt) that
provide cost advantages for shipping.
Operations are located in politically stable jurisdictions. (Canada)
Teck can provide technical support to steel mills from the Beijing Office and
Technical Expertise to assist steel mill operators in optimizing use of Teck Coal
products in their respective blends.
3.2 Weaknesses
Teck has higher shipping costs compared to competitors due to its distance from
China. Typical shipping time from Australia to China is 14 days while shipping
20
from Canada to China takes 16.5 days. This fact makes logistical planning more
complicated and small shipments less attractive due to higher freight costs.
Therefore, the best way to offset this is by shipping with only large vessels that
provide better economies of scale. As well, sales contracts are written such that
Teck Coal provides shipping or the contract is written such that it is cost neutral
for the customer.
Teck currently possess only one coal that is almost valued as a tier one level coal.
The Elkview product with its high rank is able to achieve the same valuation as
the Saraji and Peak Downs coals from BHP. These coals are able to demand
roughly a $4.00 per tonne premium over other hard coking coals because of this
valuation and carrying capacity performance in the respective blends. Teck
Coal’s other products (Premium and Standard) are sold at a discount to these top
tier coals. The Elkview product does have a limited supply and as such, if
another coal could be raised to a level that would generate a similar valuation it
would provide a larger product base for customers to choose from and be a more
realistic alternative to the BHP coals.
Labour disruptions. There has recently been labour action taken at two of Teck
Coal’s Operations. For Teck to be able to market itself as a stable alternative to
the Australian suppliers unforeseen labour disruptions and in turn missed sales
commitments cannot occur. If Teck’s reputation is viewed as unstable in the
market then customers will look elsewhere for a stable supply alternative to
Australia.
3.3 Opportunities
Introduce coal to new customers and develop a larger customer base in China
that is familiar with Teck Coal’s products. There are so many small mills in
China that the untapped potential is enormous. The challenge to access these
steel mills is their ability to purchase large quantities of raw materials and tie up
large amounts of cash in inventory. For Teck being able to group sales lots into
one shipment or provide a favourable contract are some of the ways to access this
portion of the market. As previously mentioned aligning with reputable trading
companies is another way to move product into these small mills.
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Work with steel mills and create another coal that is viewed and valued by them
as irreplaceable in their blends. This first starts with understanding the individual
steel mill coke oven blends and then being able to rework and develop a new
blend utilising a Teck Coal product like Premium and generate better overall
value for the steel mill. To accomplish this would require working together with
the steel mill operators to develop a joint test program to optimize their existing
base blends using Teck Coal products. A substantial investment of personnel
time and adequate resources would be required to make this a success. The
biggest challenge would be to identify steel mills that would be open to
participating/undertaking this process.
Increase understanding and capabilities of Teck’s products. Remove the
comparison of products as similar to a “Fat” coal. Currently the mid-vol coal
that Teck Coal produces is valued lower by Chinese steel mills as the VM
content and Rank are comparable to Chinese “Fat” coal. However the Chinese
“Fat” coal produces a coke of much lower quality compared to the mid vol
product that Teck Coal produces. This significant difference is not understood
and is therefore not valued in the market place.
3.4 Threats
The Seaborne market goes into an oversupply position due to new mines coming
online and suppliers beginning to dump coal into the Chinese market. There are
a number of new Greenfield operations scheduled to come on line over the next
five years. The issue with most of the new projects is that there is no existing
infrastructure in place so in addition to the new mine construction there also
needs to be a complete new transportation supply chain (railroad and port) built.
Current estimates indicate that these new operations combined with Brownfield
expansions will add over 80 million tonnes into the seaborne market by 2018.
The location of these new Greenfield projects is shown in Figure #11.
22
Figure 11: Hard Coking Coal Deposits
The Chinese economic growth slows down dramatically and demand for hard
coking coal falls significantly. The Chinese government monitors economic
conditions closely and has shown it is prepared to put measures in place to slow
down the rate of economic growth and prevent overheating of the Chinese
economy. Examples of this in the past have been export taxes, bank reserves,
and real estate ownership limitations just to name a few. If an economic crisis
were to occur in China, annual growth would plummet and the market would
swing into an oversupply situation, especially for metallurgical coal that is
directly connected to the growth and urbanisation of China. The growth of
demand in India or any other developing country could not consume the excess
coal available in the market and as such any supplier expansion projects could no
longer be viable. In addition, the China coalmines would probably begin
exporting and make the oversupply position even worse.
Bowen Basin
Western Canada Appal
achia
Moatize (Mozambique)
Tavan Tolgoi (Mongolia)
Maruwai (Indonesia)
Elga (Russia)
Shanxi (China)
Bowen Basin
Source: McCloskey
2007 137mt
2008 134mt
2009 134mt
AUSTRALIAMet Coal Exports
OperatingDeposits
LEGEND
2007 29mt
2008 39mt
2009 34mt
USAMet Coal Exports
2007 27mt
2008 27mt
2009 22mt
CANADAMet Coal Exports
23
Teck Coal’s top brand coals perform poorly for new customers in the coke ovens
and blast furnaces. As the steel industry is a very close-knit group, poor
performance of Teck’s coal at a mill could damage the reputation of the coal in
the market. Once a products reputation is damaged, it becomes extremely
difficult to develop new clients as well as maintain pricing. The Western
Canadian Coals are noticeably different in terms of how to utilise them in the
coke blends and the corresponding coke in the blast furnace. Steel mills need to
be aware of these differences and learn how to use the coals properly in their
blends to get the maximum performance and value out of the coals. This is why
Teck Coal has set up an office in Beijing, China, which has a technical manager
in that office to provide support and guidance to the Chinese steel mills.
The most likely factor from the points above that Teck Coal will be faced with is the
increasing supply and access into the market. Mongolia is extremely well positioned to supply
the Chinese market so as investment continues to ramp up more and more coal will be available
for the Chinese steel mills to choose from. For Teck being able to differentiate its products based
on quality will be a critical point for maintaining its presence in the market. On the other hand
Teck Coal is least likely to face dealing with reputational damage in the market. The support and
experience of the current marketing team is quite high and as such are able to clearly
communicate with customers and prevent engaging in practices and or agreements that could
damage Teck’s reputation in the market.
3.5 Teck Coal Expansion Plans
Teck Coal has publicly stated it intends to increase production to over 30 million tonnes
by 2014. This increased production will be achieved through expansion at the existing operations
as well as re-starting the Quintette Operation, which is located in North East British Columbia.
Figure #12 shows production levels by operation over the next five years. The Quintette
operation will produce 3.5 million tonnes of a medium quality hard coking coal that will not
compete at the top of the market but will definitely fulfil market needs for metallurgical coal. To
achieve this expansion at existing operations a significant investment into the mobile fleet and
process plant infrastructure is required. As production, levels increase the railing and port
logistics will become more and more of a bottleneck. Teck has been actively working on the port
and rail connections by entering into long-term agreements with the railroads and developing
expansion plans for the Neptune Port facility of which Teck is part owner. Teck Coal has also
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begun using the Ridley Terminal in Northern British Columbia for shipments from the Cheviot
Operation. Ridley Terminals would also be the main shipping port for the Quintette Operation
production.
Figure 12: Teck Coal Expansion Plans
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4: The Five Forces Discussion
The five forces as described by Porter (1980) have become the standard for evaluating
market and the competitive forces that are at play in market. The seaborne metallurgical market
analysis is as follows:
4.1 Threat of Entry
The large metallurgical coal deposits in the world are well known and depicted in Figure
#5 above. Of the undeveloped deposits, the Moatize property in Mozambique is the closest to
coming into production. Vale, who is the largest iron ore supplier in the world is the owner of the
Moatize property. To date Vale has not been a competitor in the Seaborne metallurgical coal
market but with Moatize coming on line all that would change. Being able to leverage iron ore
with coal during contract negotiations with customers would give Vale an incredibly strong
position in the market. Moatize is scheduled to start up in 2010 and place over 1 million tonnes
into the market. It then ramps up to 11 million tonnes by 2014. Given its location on the East
side of Africa, it is ideally situated to supply the steel mills in India. Although not directly
influencing Teck Coal markets any Australian coal displaced out of the Indian market would
become a direct competitor against Teck Coal’s products.
With regard to China, China’s neighbour Mongolia has perhaps the best ability to supply
the Chinese demand for metallurgical coal. Table #7 shows the current and forecasted resource
development that is currently ongoing in Mongolia.
Table 7: Mongolian Raw Coal Production
2010 2011Est 2012Est 2013Est 2014Est 2015Est
HCC 8 11 14 17 19 22
WCC 5 9 12 16 22 28
Thermal 7 10 12 14 16 18
Total coal 20 29 37 47 56 67
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WCC refers to weak coking coal or semi soft coking coal (SSCC).
The Tavan Tolgoi deposit is the largest project planned to supply the Chinese market.
However, the ownership of the property is still yet to be stabilised with Vale, Xstrata and
Peabody Resources vying for majority shareholder of the property. There is still substantial
infrastructure investment required before the property can be brought into production. As well
there are regulatory challenges from a government perspective, poor availability of skilled labour,
and still to be resolved quality issues. Even in China, there is limited transportation infrastructure
in place to bring the coal to the large costal steel mills. Therefore, the Seaborne market is
actually better able to supply the steel mills then the Mongolian deposit.
Consolidation has also been a factor that needs to be monitored. The recent takeover of
Western Canadian Coal by Walter Resource has created the fourth largest metallurgical coal
supplier behind Anglo American and ahead of Xstrata. This new company is of a size that it will
benefit from economies of scale and be able to compete in all regions of the Seaborne market. A
second takeover of note is the purchase by Alpha Resources of Massey Energy, which created the
sixth largest metallurgical supplier. With the market forecast to remain in an undersupply
position the consolidation of smaller mines into larger market players will most likely continue
and potentially even increase.
4.2 Threat of Substitution
To date there have been no new processes developed to produce steel. Technological
advances have been made that would reduce the amount of coking coal required. However even
in these new processes high quality hard coking coal is still the basis and carbon source for the
steel. The Electric Arc furnace (EAF) is probably the highest potential substitution steel
manufacturing process. But this process is very energy intensive and relies on a continuous
supply scrap material. High power requirements are not a favourable input requirement for a
process in China as the current power generation and distribution systems are barely growing fast
enough to meet current demand. As well China is in such a growth phase scrap steel material
trade is not a developed market in China.
There are a number of other processes like direct reduction, Midrex, Fastmat, Corex,
HLSmelt, etc. (See Appendix A) that have been developed to replace the blast furnace but all
require some form of hard coking coal and all are still less efficient then the blast furnace.
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4.3 Bargaining Power of Suppliers
As there is currently a scarcity of hard coking coal in the world, suppliers have significant
bargaining power. To the point that recently suppliers adopted quarterly pricing which provides a
more reflective pricing model for prevailing conditions in the market. Quarterly pricing allows
full value to be achieved as market supply tightens but also causes prices to decline as supply
increases. However, in near terms supply is forecast to remain tight and as such favour suppliers.
Historically contract pricing had been determined for a year and was not altered through the
whole year no matter what economic events occur in the world or the seaborne markets. Recently
there have been attempts by BHP to move to monthly pricing. To date there has been little
acceptance of this model and unless BHP offers customers more discounts this model will most
likely not be adopted. In addition, no other suppliers have tried to adopt this monthly pricing
model.
4.4 Bargaining Power of Buyers
The current high demand for hard coking coal in China presents very little opportunity
for buyers to exert any power in the market. The higher quality coals are able to demand
maximum price in the market. Lower rank high volatile coals are also readily available in China
so pricing is reflective of the increased supply. The only real bargaining opportunities exist in the
lower quality semisoft coals where there is more supply and competition.
4.5 Rivalry Among Current Competitors
Probably the single biggest item experienced among current competitors is price
competition. Historically the common strategy employed by competitors was to offer price
discounts to guarantee sales volumes. Recently as the market has tightened price competition has
no longer been a common strategy. Instead, competitors have tried to differentiate their product
from others based on qualities. BHP has led the way with push towards bench marking or
indexing qualities of the various coal brands and therefore value of the coal. As the supplier of
the “highest quality coals” it is not surprising that they are trying to do this but all other market
players will not be interested as it would diminish the value of their products. Customers
however might be interested as it would be a method of ensuring they are paying appropriate
value for coals. From a Teck Coal perspective there would be great concern that our coals would
be undervalued compared to Australian and U.S. coals as the typical coal qualities are different
but the coke qualities and behaviour in the blast furnace are comparable. The only way Teck Coal
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could offset this problem if it were ever to come into place would be to flood the market with test
work to show and educate as many people as possible on the performance of the coal.
Fortunately, to date they have been unsuccessful with having the market adopt this type of
benchmarking.
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5: Other Market Factors
Teck Coal must consider a number of other factors to ensure they can effectively
operate/sell in the Chinese market. A demand estimation model ( Teck Coal, 2011) highlights a
number of key factors that should be considered. These factors are:
5.1 Market Complimentary
A number of manufactured goods uses steel, so tracking of those goods can be a good
leading indicator of steel demand. In China automobile sales, construction rebar prices, appliance
sales are just a few of the manufactured goods that need to be tracked and monitored to gauge
potential changes in steel demand.
5.2 Complimentary Products
Iron ore is the key complimentary raw material along with coal required to produce steel
with a blast furnace. Therefore monitoring the iron ore market and ensuring there are no forecast
supply disruptions or changes in purchasing volumes can be a good indicator of reduced or
increasing steel mill production. This information is important to ensure proper demand is being
estimated and proper valuation for the coal.
5.3 Cannibalization
There is limited potential for Teck Coal to cause cannibalization of its products. As they
work to introduce other products into the market and work with the steel mill operators to
demonstrate the value of the Teck products it is imperative that a sales book plan is in place to
ensure that too much interest in one product is not generated. That is why developing a second
product in the Tier one irreplaceable category provides greater market flexibility.
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5.4 Indirect Substitution
To date there are limited successful substitutes for steel which have mostly been in
specialized applications. However as steel prices increase it can drive substitution in the finished
product sector. For example as steel prices, rise plastics for automobile manufactures become
economic. Therefore monitoring of raw material substitutions in the manufacturing of finished
products is an important area to keep abreast of for gauging demand for steel. As China is really
an emerging market there are less likely to be lots of substitution on the finished product side as
that typically requires a mature market understanding.
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6: Opportunity Analysis
China’s growth has become the single largest factor fuelling the demand for commodities
around the world. In terms of the Seaborne metallurgical market, it has only recently become a
net importer. For Teck Coal, China presents potential opportunities and from the SWOT and
Five Forces analysis in Section 3 and 4 these opportunities will be discussed.
6.1 Increase Market Share
Teck Coal can proceed and increase market share by pushing tonnage during discussion
with customers. There are a number of risks associated with doing this in that they need to ensure
customers are valuing the coal and the business relationship, which is not always the case in
China. There also then needs to be decisions made about which existing customers will be cut off
from Teck Coal. In doing this, the value of the new customers in China needs to be significantly
better than the existing customer who was cut off. The Chinese market is still developing from
an import perspective. Customers tend to behave in an opportunistic manner so contracts are
more of an indication of intent versus being a binding commitment. Therefore, before Teck Coal
increases its participation and exposure to the Chinese market it needs to perform an independent
evaluation of the potential new customers and ensure they have a history of stable behaviour in
the market. A major hurdle that Teck Coal would need to overcome if it were to attempt to
increase its presence in the market by selling to more customers is the steel companies get smaller
and smaller and have different levels of capacity. The smaller the companies get the greater the
potential risk and increased logistical challenges. One way around this would be to sell or work
through a trading company like Sinomet that would look after buying large cape size shipments
and then parcelling it up into smaller lots for sale to smaller steel companies. Current margins
could easily support a distributor that provided access to smaller mills. In addition, if Teck Coal
were to push more and more products into the market then the potential of product
cannibalization increases.
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6.2 Develop Coals in the Top Tier Valuation
The ability to do this would probably have the single biggest impact for Teck Coal in
China. Developing another coal that steel mills in China view as irreplaceable and are willing to
pay a premium for would separate Teck Coal from the majority of the hard coking coal producers
servicing the Chinese market. The method of achieving this is to find a steel mill willing to
invest the time and work at fine-tuning there blends. They would need to be open to developing a
test program and be open to allow a Teck Coal technical manager to work with their operations
group and potentially educate them on how best to utilise the coal. Of the Teck Coal products
listed in Table #3 the Premium product would be the coal to target as being the one to elevate into
the Tier One category to be as valued as the Saraji and Peak Down coals. Premium coal has a
rank that fits nicely in most steel mills blends and presents multiple substitution options for the
steel maker. The combined lower ash and VM levels allow the premium coal to replace an
greater portion of high rank or low rank coals. It really depends on the individual mills blends
and where they are looking for increased flexibility or even replacement options. It ultimately
comes down to finding how the steel mills blend could be better optimized by using the Premium
product. This optimization can be achieved in a number of different ways like allowing more
readily available lower value coals to be used, or eliminating a high cost limited supply coal from
the blend, or produce better quality coke therefore lowering blast furnace coke consumption rates,
just to name a few. Selecting the customer should be based on technical capacity and desire to
find another option to the coals in their respective blends. The enticement for a customer to
participate in a test program is that a testing discount could be offered on pricing to encourage the
participation. Once a successful test program has been achieved, it could be leveraged with other
steel mills to at a minimum test the coal as a Tier One coal replacement. From an internal Teck
Coal perspective the Premium product coal quality would need to be protected and the use of
filler seams kept at a constant predetermined level to ensure there is minimal variation in the
coking coal properties. Also blending practices at the port would need to be “locked down” to
ensure no deviation from the agreed upon technical blending process. This coal would then not
have any discount and would be able to achieve top pricing in the market. As stated previously in
the “Weakness” section a $4.00 per MTCC premium is paid for the top tier coals. If Teck Coal
were to sell one million tonnes of Premium product into the Chinese market that would generate
an additional $ 4 million tonnes of sales revenue, which would ultimately flow directly through to
the bottom line as profit.
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6.3 Maintain Market Share
Possibly the most straight forward thing that Teck Coal could do would be to try and
maintain a similar market share to their overall position in the Seaborne market. For example, if
Teck represents 9 % of the Seaborne metallurgical market then Teck should strive to have a
minimum of 9 % share of the import Chinese market. For Teck to be able to increase its market
share in China it would need to reduce its market share in another market. As seen in Figure 10
Teck reduced its sales into Europe and moved them into China. A further reduction in any of the
markets would reduce the amount of diversification Teck Coal currently enjoys with its sales
book. If however, at any time the financial situation deteriorates in any market region then
moving coal sales into China would be the best strategic option. In regards to the expansion
tonnes like Quintette, the Chinese market may present special opportunities to meet a specific
demand or niche in the market. If through the previously described coke oven blend optimization
a higher value could be develpped for the coal then increasing market share in China would make
obvious sense. Otherwise balancing the expansion tonnes across all markets would be the logical
approach to keep the diversification of the sales book.
6.4 Develop More Markets for Complimentary Products (Semisoft, PCI and Thermal)
Instead of pushing to develop more customers and increase the metallurgical coal sales
into China, Teck Coal could pursue increasing sales in the complimentary products such as
semisoft, PCI and thermal coal. The margin on these products is significantly less than the hard
coking coal so efforts in this market segment must not take away from the hard coking coal
market. The semisoft and PCI coals are a much more competitive market due to the increase in
supply. Price competition is very prevalent in this segment so increased participation by Teck
Coal should be for purpose and only done if again it doesn’t displace hard coking coal logistic
capacity. Teck Coal currently sells regular thermal coal into China but has the opportunity to sell
more by-product material like pond coal or spiral middling’s. During a recent visit to China there
was an expression of interest from one customer regarding purchasing pond coal. Pond Coal is
actually the fine refuse material from the process plant and it currently generates no value for
Teck Coal. The key issue that needs to be resolved is that the logistic capacity on the railroad and
the ports cannot result in hard coking coal movement being displaced by these lower margin
products.
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35
7: Conclusion
The Chinese market is the driving force behind commodity markets around the world.
The market for metallurgical coal has experienced recent and significant increases in demand due
to the growth of the Chinese markets. Teck Coal as the number two supplier in the Seaborne
market has maintained a presence in the Chinese market for the last three years and needs to
continue doing so. The analysis and discussion above have identified a number of different
opportunities that Teck Coal could pursue as a marketing strategy for the Chinese market. In the
end the best approach for Teck Coal is as follows:
Maintain market share similar to share of the seaborne market and maintain that
share as the Chinese market grows. Effort should continue to try and increase the
customer base to provide options for coal sales to provide insurance for
maintaining market share in the event a specific steel mill experiences some sort
of unplanned disruption.
Develop an additional product most likely the Premium product into a highly
valued coal that customers view as irreplaceable because of the versatility
provided by the coal and because of this versatility are willing to pay top value
pricing.
Increase participation in complimentary markets like semisoft, PCI and Thermal
markets provided it doesn’t reduce the capacity of the hard coking coal sales by
impacting the logistics. Although this is a lower margin market there is still a
fair amount of potential upside to generate additional revenue for the company.
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Appendix – Alternate Steel Production Methods
Corex process: commercialized by the European steel maker Voest Alpine, employs an
iron melter/coal gasifier vessel with a pre-reduction shaft to produce a liquid product that
is very similar to blast furnace hot metal. Coal, oxygen, and pre-reduced iron are fed into
the melter/gasifier to melt the iron and produce a highly reducing CO-H2 gas mixture
which is then fed through a pre-reduction shaft furnace, where lump/agglomerated ore is
reduced to over 90 percent for feeding into the melter/gasifier. Voest Alpine and Posco
of South Korea jointly continued to develop the original commercialized process, leading
to several important modifications including the limited direct reduction and smelting of
ore fines. The Corex process requires a relatively high fuel rate as compared with a blast
furnace and requires a high capital cost investment compared with the traditional Blast
Furnace route. However, so far the Corex method is the only smelting process to be
operated on a commercial scale.
IFCON process: developed by the South African steel maker ISCOR, is capable of
producing steel directly from coal and iron ore. In this method, coal and ore are added
continuously to a channel type induction furnace containing a slag-metal bath. Electrical
energy is supplied by the induction furnace for heating and stirring the bath. Oxygen is
added for post combustion of hydrogen and carbon monoxide released from the iron
reduction reaction and the coal.
FASTMET: method is based on the utilization of a rotary hearth furnace to convert steel
mill wastes and iron oxide fines to a highly metallized Direct Reduced Iron (DRI). the
Carbon contained in the wastes or added as coal, charcoal, or coke is again used as the
reductant. The iron-bearing materials, carbon (reductant), and a binder are mixed and
either pelletized or briquetted. The pellets are first dried at 160-180º C, then fed to the
Rotay Hearth Furnace.
The FASTMELT method uses the same principles as the FASTMET process above
but employs a melter to produce hot metal. The hot direct reduced metal is released
from the rotary hearth furnace mentioned above and melted in an electric furnace or
coal-fired melter. Midrex Technologies and Kobe Steel now manufacture FASTMELT.
37
38
Reference List
Works Cited
Michael E. Porter, Competitive Strategy, Techniques for Analyzing Industries and Competitors, 1980 by The Free Press, 1230 Avenue of the Americas, New York, NY, 10020
Lindsay Meredith, A diagrammatical template for business market demand estimation, Indus-trial Marketing Management 35 (2006).
Lindsay Meredith, Scanning for market threats, Journal of Business and Industrial Marketing 22/4 (2007) 211 – 219.
Oliver Melton, Understanding China’s Five Year Plan: Planned economy or coordinated chaos? GaveKal Dragonomics, China Insight Economics, Nov. 2010
Interviews
Phone interview with Mr. Real Foley, VP of Marketing Teck Coal, March 14, 2011
Phone Interview with Mr. Tayfun Zehir, General Manager Marketing, March 22, 2011
Websites Reviewed
1. www.bhp.com
Macquarie Australia Conference, Presentation: Prerequisites for Metallurgical Coal Growth, Hu-bie van Dalsen, President Metallurgical Coal, May 2010.
2. www.angloamerican.com
Download: 2009/2010 Fact Book Metallurgical Coal PDF
3. www.teck.com
CIBC Whistler Institutional Investor Conference, Presentation, Ron Vance, SVP Corporate De-velopment, January 2011.
4. www.riotinto.com
UBS Iron Ore and Coal Seminar, Presentation: Rio Tinto Coal Australia, Bill Champion, Man-aging Director, November 2010.
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5. www.xstrata.com
6. www.vale.com
2010 Vale Day NY, Presentation: The journey to sustainable value creation, Roger Agnelli, Chief Executive Officer, Oct 2010
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