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Steel: How does your company make it? - Views on News from Equitymaster
 
 
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  • Dec 15, 2006

    Steel: How does your company make it?

    Today, steel production is an index of national prosperity and the basis of mass production depends on the end user industries growth such as automobiles, construction, etc. Being, a fundamental input in a varied range of products and industries, makes it essential for steel manufacturers to adopt state-of-the-art techniques in the steel making process. The globalisation of steel industry has ushered in an era of cost competitiveness. Considering the increasing competition and costs of manufacturing, players need to resort to cost effective and energy efficient technology. Ever since a new process of making steel, popularly known as the EAF (Electric Arc Furnace) method, has got popularized, opinions are divided on which is a better method, the traditional one or the EAF. In this article lets us understand how steel is manufactured using these two processes and the advantages or disadvantages of one over another.

    In a nutshell...
    As mentioned earlier, there are two common ways of making steel- the BOF (Basic Oxygen Furnace) or the traditional process and the electric arc furnace/minimill process. The traditional process of making steel involves refining or reducing iron ore into a purer state and then putting it into a form that can be rolled into various shapes. On the other hand the recently developed EAF, uses scrap or overused steel to manufacture steel.

    Blast furnace - The traditional method!
    Currently, 63% of global steel is produced in Basic Oxygen Furnaces (BOF). The Blast furnace iron making process basically consists of the conversion of iron oxide to iron in liquid form. Carbon (in the form of coke) is used as a reductant for reduction of iron oxide and acts as a source of energy for the reductant reaction to take place. Carbon, the primary source to fulfill both these requirements constitutes a major portion of cost of BOF production.

    The process:

    • Coke is a grade of coal that is used to melt and reduce iron ore. When coking coal is heated in absence of air, a series of physical and chemical changes take place with the evolution of gases and vapours, and the solid residue left behind is called coke. Once cooled, the coke is moved directly to an iron-melting furnace or into storage for future use.

    • During iron making, iron ore, coke, heated air and limestone or other fluxes are fed into a blast furnace. The heated air causes the coke combustion, which provides the heat and carbon sources for iron production. Limestone or other fluxes may be added to react with and remove the acidic impurities, called slag, from the molten iron.

      Certain wastes like iron ore fines, pollution control dust, coke breeze, water treatment plant sludge, and flux can also be added to the furnace. This addition helps reduce solid waste by combusting waste products and capturing trace iron present in the mixture. However, the wastes are not used at all steel production facilities.

    • Molten iron from the blast furnace is sent to a basic oxide furnace, which is used for the final refinement of the iron into steel. The basic oxide furnace is fed with fluxes to remove any final impurities. The basic oxygen furnace (LD convertor) is a pear shaped vessel lined inside with refractory bricks.

    Electric arc furnace/ minimill process
    World over, 34% of steel is produced in Electric Arc Furnaces (EAF). An EAF mini-mill is a molten steel producing process that feeds scrap steel into an electric arc furnace to re-process the material into finished steel for new applications. The main source of scrap steel is from cars, but washing machines, fridges, bicycles and steel from demolished buildings can also be recycled using the EAF. The advantages of steel making in the electric arc furnace are: almost all possible grades of steel can be melted, good efficiency, melting process can be programmed and automated etc.

    The difference...
    Blast furnace route is very good for volume production. But the process requires high capital cost and substantial investments in infrastructure. If scrap steel is readily available, EAF method is more cost effective than the traditional blast furnace method of making steel, and it conserves precious raw materials like iron ore, coke and fluxes. Iron from other sources can also be used as feed for the EAF. The rapid growth in electric furnace steel is due to a number of factors, including relatively low investment costs, improved technology, which has reduced production costs. Electric arc furnace however has its own shortcomings. As it uses scrap steel, the EAF route can only be used to produce steel grades with low purity requirements.

    The EAF steel making process constitutes 33% of global steel production. Over the past decade, the average annual growth in global EAF steel making has been 5% per year and is expected to increase. In China, about 15% of steel is produced via EAF process. On the other hand, in the United States, production via the EAF route has grown to more than 50% of total steel production. China, the impact of its scale of production is felt invariably the world over, has generally been restricted to BOF steel making process. Electrical supplies have hampered China’s development of EAF steel making process. Still China is the world's second-largest global importer of scrap steel after only Turkey.

    The world is witnessing technology up-gradation in regards to input materials and technology for steel making and pig iron production. The process use depends on steel grade required and the quality of inputs availability. Good quality iron ores are depleting all over the world and also good quality coking coal needed for reduction of iron ores in blast furnace is also becoming scarce Considering existing natural reserves of iron ore and increasing demand of steel and costs of manufacturing steel, resorting to EAF process would be beneficial from a long-term perspective. However, for a developing country like India where scrap is still not generated on that massive a scale as its developed counterparts, the BOF method seems less fraught with risk. Moreover, the rich iron ore reserves give it an inherent advantage over other lesser-enriched countries. Little wonder, Tata Steel, India’s second largest steel producer boasts of being the lowest cost producer of steel in the world.

     

     

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