BHP's New Direct Reduced Iron project - reported by ACTED

Chris Brown, General Manager Strategic Development BHP Iron Ore

CIP presentation Wednesday 21 February 1996 (recorded by Chemlink Pty Ltd.

After thirty years of mining iron ore in the Pilbara, a new phase of value adding was beginning in WA. Chris Brown, General Manager Strategic Development BHP Iron Ore was speaking to the 10th CIP breakfast seminar to an audience of over 80 professionals.

The technology required for the direct reduction of iron ore to produce hot briquetted iron (HBI) has been known for many years but is only now becoming commercially viable for the Pilbara.

Chris outlined the contributing factors to BHP's decision to invest $1.5bn at Port Hedland.

Market growth

Direct reduced iron (DRI) can be used in electric arc furnaces or mini-mills, used for recycling steel, are growing at around 4 per cent per year. DRI serves to allow higher grades of steel to be produced using scrap steel extending the profitability of electric arc furnaces and minimills.

Raw materials

Iron ore

Fine ore is co-produced with lump ore. While most DRI processes can use fine ore, blast furnaces preferentially use lump ore, creating a world surplus of fine ore depressing its price and created a surplus. Though fine ores may be pelletised, this is costly. BHP instead is creating an additional market for its fine ore with a HBI process that therefore enables additional production of the more saleable lump ore.

Chris commented that BHP considered alternative applications for fine ore, including pelletising and sinter plants before adopting the HBI process

Gas

Gas prices have fallen due to WA market deregulation. (The HBI process can use gas containing inert gases normally requiring purification prior to sale and export. Purification cost savings, and of course the avoided cost of its transport in cryogenic vessels, provides for competitive gas.)

State Government

The WA Government was attributed with two influences - stipulating obligations to invest and add value, and promoting the deregulation of the gas market that reduced energy costs.

Infrastructure

BHP Iron Ore's increasing infrastructure in the Pilbara has reduced the cost of investment.

Technology

DRI can be produced using coal (rotary or fluidised bed) or gas as the energy source. Gas-based DRI can be produced by a fluidised bed (Finmet, Iron Carbide and Circored) or in a shaft furnace (HYL and MIDREX). In considering alternatives, BHP adopted gas-based fluid bed process developed in Venezuela as the FINMET process. For BHP the FINMET technology developed (by FIOR Venezuela and Voest-Alpine Industrieanlagenbau of Austria) represents a proven process, able to use the fine ore without prior pelletising and gas as the energy source.

BHP Funding

BHP is capable of internal financing the project reducing its cost. This, plus a strong iron ore and steel market presence, reduced market risks.

Investment details.

	The project includes an 1.2 km 4.5 metre round tunnel/conveyor system capable of carrying 10 000 tonne per hour of ore beneath Port Hedland Harbour and a 7.5km overland conveyor to the Boodarie HBI plant site and HBI in opposite directions.
	The HBI Plant and associated facilities will process some 5mtpa of ore to produce 2.5mtpa of HBI. The HBI plant is 100 metres high on a site occupying an area of the Perth CBD.
	The highest possible Australian content is aimed at through competitive purchasing. Some sophisticated components, such as gas turbine generators, will be imported.
	Up to 1200 personnel will be employed during construction with around 225 required for plant operation. Plant maintenance, at six weekly intervals, will require a further 250 maintenance personnel.
	Having commenced tunnel construction in September 1995, HBI production is planned to commence in December 1997 with a projected 30 year life.
	Some details of technology efficiency were provided. The process would use about 12.8 gigajoules of gas per tonne of HBI plus 225 Kwh of power (say 5Gjs - a total of 14.3Gjs/tonne).
	Interesting insights into BHP's policy on safety were provided. For example successful tenderers are required to maintain a project specific safety management plan. This will require provision for training, hazard identification and elimination, drug and alcohol testing, and compliance audits.

A vote of thanks by Alan Lees representing the Institution of Chemical Engineers concluded this professionally presented seminar.

See also Iron and DRI

Update Update for 20 November 1996.
From the West Australian newspaper "Two-year delay for $1bn HBI expansion". BHP announced today that it would defer the A$1bn stage 2 phase that would expand production from 2.5 million tonnes to 3.75 million tonnes or 5 million tonnes per year of HBI. BHP said construction would not start before stage one was commissioned and probably not until a year after that. Meaning it would not operate before 2001.

Update for September 1997
BHP announced a construction cost blowout of around 50 per cent increasing cost of stage 1 to A$2.2bn. Poor contracts with subcontactors was cited.

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