CHAYI'ER IV ENERGY CONSERVATION IN THE INDIAN IRON AND...
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CHAYI'ER IV ENERGY CONSERVATION IN THE INDIAN IRON AND STEEL INDUSTRY
Transcript of CHAYI'ER IV ENERGY CONSERVATION IN THE INDIAN IRON AND...
CHAYI'ER IV
ENERGY CONSERVATION IN THE INDIAN IRON AND
STEEL INDUSTRY
CHAPfER IV
ENERGY CONSERVATION IN THE INDIAN IRON AND
STEEL INDUSTRY
4.1 INTRODUCTION
The Indian iron and steel industry has been studied as an aggregate macro
economic sector in the previous chapter. The issues of energy substitution and energy
saving technical change in the steel industry have been addressed by an econometric
approach. The substitutability of energy as a factor ofproduction vis-a-vis other inputs
like capital, labour has been the essence of energy conservation. In this chapter, the
same issue has been dealt at a micro-level, with reference to specific technological
routes. Emerging technological routes of steel making as well as the existing ones have
been studied and compared in the light of their energy-saving potential and
substitutability of energy by other factors.
Alternative technologies of steel manufacturing have different patterns of energy
use and hence different cost implications. Energy conservation in terms of the physical
quantity of use cannot be the end in itself. The trade-off between energy and other factor
costs in the longrun is one of the ultimate criteria for the nation's choice of technique.
Minimisation of the economy's resource cost in a broader socio-economic sense, is the
basis of the choice of technological routes of steel production. A process-wise analysis
of alternative steel-manufacturing routes has been carried out to estimate and compare
the energy conservation potential of steel making in India at the plant level.
This chapter starts with an overview of the technological perspectives of the
Indian steel industry. Technical changes which have taken place in the production
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process over the last few decades and the emerging technologies have been discussed
subsequently. The selected technological models under study along with their energy
balances and operational details have been furnished thereafter. The long run marginal
costs per unit of final output have been worked out for each model option by linear cost
minimisation exercises. Further calculations of capital servicing charge have been
carried out to attain the final costs for comparison across options. The ultimate
conclusions depend upon the thus obtained optimal cost figures along with the physical
energy usage in the respective processes.
4.2 THE INDIAN·IRON AND STEEL INDUSTRY: PERSPECTIVES ON TECHNOLOGY
The Indian steel industry has gone a long way in the process of development in
the twentieth century. First installed in 1907 in Jamshedpur, it has gradually grown as
a basic infrastructural sector, later under state leadership. The second five year plan
(1956-61) adopted the strategy of import substitution and industrialisation and the public
sector steel plants came up as a result. The technology in these plants has been that of
integrated iron and steel manufacturing. Other than the integrated iron and steel plants
at Bhillai, Bokaro, Rourkela, Durgapur and Burnpur under the Steel Authority of India
Limited (SAIL), there are special steel plant at Salem, alloy steel plant at Durgapur and
the Vishakhapatnam Steel Plant as a separate public company. Some of the performance
indicators of the Indian steel sector are reported in table 4.1.
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Thble-4.1: Steel Production in India, 1992-93
1. 2. 3 . 4.
Item
Crude Steel production Finished Steel Production Output of Secondary Producers Domestic Consumption of finished steel
5. Net Import 6. Annual growth rate of crude
steel 7. Annual growth rate for finished
steel 8. Per capita consumption of
crude steel 9. Product-mix (flat to non-flat)
Unit
'000 'tonnes '000 tonnes '000 tonnes '000 tonnes
'000 tonnes %
%
Kg. per ::apita
Quantity
17156 16241
3377 15450
192 7.27
6.50
23.9
45:55 10. Availability of re-rollable
scrap (projected for 2001-02) '000 tonnes 1253
Sources: ( 1) Statistics of Iron and Steel in India, SAIL, New Delhi, 1994.
(2) Sengupta R. P., The Indian Steel Industry, Parts I & II, ICRA, 1994 & 1995.
India's share in the crude steel production of the world stands at a mere 2.30 percent
(1991). Domestic consumption of crude steel is 21.70 million tonnes i.e., 2.73 percent
of the world total, giving a per capita consumption of 25.6 kg. In 1991, India's export
of steel (finished and semi-finished taken together) was 0.40 million tonnes, giving a 0.3
percent share in the world total, while her import was 1.0 million tonnes i.e., 1.2 percent
of the world total (Sengupta 1994). However, the projected domestic demand and export
by 2000-01 are estimated at a level as high as 25.82 million tonnes and 5.2 million
tonnes respectively implying an aggregate demand of 31.0 million tonnes (Sengupta,
1994). To what extent will that be possible to achieve would depend on the technical
efficiency of brownfield plants as well as green field options and their economic viability.
The steel manufacturing process varies in terms of the scale of operation, material
and energy-usage and type of fuel across Indian steel plants. The Indian steel industry
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has traditionally been dominated by integrated iron and steel plants. The main plants in
the country have been within the capacity range of 1.6 to 4.0 million tonnes (mt) per
annum, operating under the conventional Blast-Furnace-Basic Oxygen Furnace (BF-BOF)
route. The secondary steel sector, on the other hand, operated at small scales with
mostly scrap-based electric arc furnace and also used less efficient and out-dated
equipments, resulting in lower efficiency in the use of energy and materials. The
integrated plants also used outmoded techniques of steel-making, viz., the open-heanh
furnace, and consumed more energy than most of the modern steel plants. In steel
casting too, lower energy-efficiency was experienced in Indian steel industry because of
the adoption of ingot casting instead of the modern methods of continuous casting or thin
slab casting. The Indian steel sector thus remained technologically backward till late.
The respective proportions of different steel making processes in India's total steel
production in 1991-92 were 43.7 percent for basic oxygen furnace, 28. 3 percent for open
hearth furnace and 28 percent for electric arc furnace. Only 14.3 percent of total cast
steel was manufactured via continuous casting.
Technological changes started to come up in the Indian steel industry only after
the oil price hike in 1973 and later in 1979. The hike in oil prices heralded a new
energy price regime, including those of fossil fuels like coal. Energy-saving technical
change became necessary for industries as well as other energy-consuming sectors of the
economy. The massive energy-using steel industry too had to upgrade the technology
in order to reduce its energy consumption. As a lagged effect of the oil shocks of the
seventies and eighties, the steel industry along with others, adopted energy conservation
measures. Energy saving in iron-making by improving the coke rate and material yield
was introduced. In steel making also, the Basic Oxygen Furnace (BOF) has replaced the
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open hearth and twin hearth furnaces. Continuous casting in place of ingot casting has
further improved the use of energy in the process.
Apart from the changes within the integrated plants, there has been an overall
change in the technology composition of the sector. Since 1980s, steel melting in
modern Electric Arc Furnaces (EAF), followed by continuous casting has come up as an
important technology all over the world. While the integrated plants are mostly in old
conditions, face threats of high fixed costs and have limited flexibility in technical
upgradation, the EAF technology offers process control, flexibility and lower capital
servicing charge. Although the EAF technology is practiced mainly as a scrap-based
route in the western world, it also has the provision for being Integrated with Direct
Reduction of Iron (DRI) backward at the iron-making stage. The scrap-based-EAF or
DR-EAF routes have thus become globally attractive for the last two decades.
Lower cost of capital servicing or fixed cost, higher flexibility in the choice of
scale and energy economy have been the driving forces behind the initiation of technical
changes ,in the international steel scenario. The other reasons include the environmental
concern of the 1990s and the threat from new products as substitutes of steel. The
integrated steel plants cause more pollution, mostly from the coke oven plant and sinter
plant which give rise to a lot of emission of total suspended particles and other hazardous
elements. Moreover, special grades of steel need to be produced if the industry has to
face the competition with substitutes of steel.
The other factor behind such change in technology is in respect of the raw
material quality and preparation of raw material burden for the furnaces. In view of the
high ash/low grade coking coal availability in India, it also becomes important to search
for technologies based on non-coking coal or other energy resources which may be used
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as reducing agents. The coal-based DR-EAF route provides this option. The other new
technology which has emerged and deserves special mention is COREX-BOF which uses
a smelting reduction process based on non-coking coal. Use of the byproduct gas from
the COREX unit in additional power generation has made this new route more attractive.
Other reduction processes following the principle of In-Bath Smelting or involving
improvements in the Blast Furnace processes in the form of oxygen blowing etc., are
also now in the various stages of development.
In view of these global technical changes in the steel manufacturing process, it
is interesting to study some of them as alternative technological routes of steel production
in India as relevant options. For the greenfield capacity of steel making in India, six
technological models, comprising the old, new and emerging, have been studied. The
focus has been on the relative position and comparison of these alternative routes in
terms of energy consumption, potential for conservation and the possible extraction-cum
utilisation of byproduct fuel.
The traditional and the newly emerging technology options of iron and steel
manufacturing have been described in the following section. While the technological
routes relevant in the Indian context have been described in detail, mention has been
made of some new routes emerging in the world steel scenario.
4.3 THE IRON AND STEEL MANUFACTURING PROCESS
4.3.1 The Conventional BF-BOF Route
This is the most widely adopted and existing technology of large-scale steel
making all over the world. The basic process can be divided into four parts.
(a) Mining and preparation of raw materials;
(b) Reduction of iron ore to pig iron;
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(c) Refining of pig iron to steel;
(d) Casting and rolling of steel to final products.
Iron ore is extracted in open-pit mines by blasting and then is crushed and sized
near the mines. The lump ores are charged directly to the blast furnace while fines go
to the sintering plant. Sintering is the process of fusing ore of different fineness and
quality into porous and coherent lumps as agglomerates. This results in high-quality and
uniformly-sized self-fluxed sinter, ready for charge in the blast furnace (BF). Coke, iron
ore and/or sinter and similarly handled limestone, dolomite are charged at the top of the
blast furnace. A blast of hot air is forced in through the tuyeres of the furnace near the
bottom and forced up through the charge. The ores are thus reduced by chemical
reactions i.e., oxygen is removed from the ferrous oxide (Fe20 3) and the purer iron is
separated in molten form. This is the pig iron which may go partly or fully for sale.
The molten hot metal then comes to the steel melting shop. Steel making is oxidation
while iron-making is reduction. Iron is refined into steel with the help of oxygen
blowing in the basic oxygen furnace (BOF), also known as the LINZ-DONAWITZ
convener. Some steel scrap and ferro-alloys are also used as coolant. The liquid steel
(after 45 minutes of heating time) is cast into ingot moulds to give steel ingots.
Conventionally, these are transported to the soaking pits and after successive hot and
cold rolling, comes out the finished flat or non-flat saleable steel products.
The BF-BOF process uses coking coal as the basic reducing agent. The quality
of coal and its ash content decides the productivity of the blast furnace to a large extent.
Other hydro-carbons such as furnace oil, light diesel oil, low sulphur heavy stock etc.
are also used. Electricity requirement is met partly by the captive plant and partly by
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the grid. The byproduct gases from the coke oven, blast furnace, LD-converter (BOF),
viz. Coke Oven Gas (CO-gas), Blast Furnace Gas (BF-gas), and LD Gas respectively
meet the energy demand of the plant to a large extent. The average energy consumption
in a typical BF-BOF plant in India is 9.2 GCal per tonne of crude steel. The above
description shows that this route of iron and steel making not only consumes a lot of
energy but also generates in the form of byproduct gases. This makes the process
significant from the viewpoint of energy conservation. The byproduct energy can be
usefully utilised throughout the plant, their wastage minimised and further used for
additional generation of power, if possible. However, it remains more appropriate for
large-scale production in terms of the technical considerations and capital-intensity.
Although new routes have come up as competitors of the traditiopal route, the integrated
plant still retains its strong candidature in terms of the quality of product, wider range
of output and engineering base.
4.3.2 The Gas or Coal-based Direct-Reduction Electric Arc Furnace Route (DR-EAF)
This technology is· based on the production of sponge iron in the OR-plant by
direct reduction of iron ores and pellets. The reductant used is natural gas or non-coking
coal. This gives a definite advantage over the BF-BOF route by totally replacing coking
coal especially in a country like India. The sponge iron is melted in the electric arc
furnace (EAF) along with a charge of steel scrap. The molten steel output is cast into
crude steel and rolled accordingly to fiat or non-fiat products, as in the integrated plants.
The use of pellets in the gas-based DR plant is customary. The share of steel scrap in
the EAF is higher than that in the BF-BOF route. The same fuels used as reductants can
also be used throughout the plant. The power demand can be met partly by the outside
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supply and partly by in-house generation. The chief advantage of the DR-EAF technique
is its flexibility in scale and replacement of coking coal by non-coking coal or natural
gas. It is the availability and price of energy resources that will decide the economic size
of the plant. Because of these various advantages, DR-EAF has become a worldwide
established technology of steel production.
4.3.3 The Scrap-based EAF Route
This technology of secondary steel production has become dominant in the
developed countries during the nineties. Purchased sponge iron or hot briquetted iron
is used in the EAF along with rerollable steel scrap. The downstream operations may
be continuous casting as in the earlier two routes. The power requirement is met by the
utility system. However, this may not entirely be comparable with the other routes which
include both iron making and steel melting.
4.3.4 The COREX-BOF Route
The basic feature of this process is smelting iron ore into hot metal using non
coking coal and oxygen as fuel in the shaft furnace. This process has a pre-reduction
shaft furnace which is vertically fitted above a melter-gasifier. Coal is burnt with oxygen
in the melter-gasifier. Any combination of iron ore, pellets and/or sinter is charged in
the pre-reduction shaft. The pre-reduction takes place in the shaft where heating is done
by the outlet gas of the melter-gasifier after gas cleaning and dirt separation. The
remaining reduction takes place in the melter-gasifier, giving the outlet gas and the liquid
sponge iron. The hot metal output of the COREX-unit, which is similar to that of the
blast-furnace, is then ready fur the steel shop. The byproduct COREX gas of high heat
content is the specific energy-advantage of this process. It can be used in the rest of the
plant and can also provide energy for other uses. The COREX gas may be used for
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alternative purposes, such as, power generation in the conventional route or combined
cycle, use in fertiliser plant, use in a DRI plant etc. The other advantage of this process
lies in the use of non-coking coal as reductant and energy resource. The steel making
process is the same BOF technology, followed by continuous casting. The scale option
is flexible too, thus giving another economic advantage. The COREX-BOF and DR-EAF
routes involve lower environmental cost by avoiding coke-making and sintering which
are the prime sources of pollution. These are associated with lower emission of
pollutants and provides a cleaner atmosphere surrounding the plant.
4.3.5 Other Emerging Technologies
(a) In-bath Smelting Reduction Process
Processes such as Hismelt, Cyclone Convener Furnace etc. are the newly coming
up routes of in-bath smelting reduction. After the pre-reduction of ore, the final
reduction takes place in the bath of the converter. These techniques offer greater heat
efficiency because of the two tier process which utilises the maximum available heat from
the given fuel. Coal and/or natural gas is injected into the bath and burnt with oxygen,
often with hot air for post-combustion. These routes do not use coke and optimises the
energy-use. However, this is not yet practiced commercially.
(b) · Full Oxygen Blast Furnace Process (FOBF)
Improvements in the iron-making process in the blast furnace require reduction
of coke consumption, improvement of energy efficiency and use of oxygen-enriched
blast. The FOBF process is. based on the use of pure oxygen and high degree of pre
reduction. This route too is yet to be operational.
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(c) Balanced Oxygen Blast Furnace Process (BOBF)
In the BOBF route, oxygen-enriched blast is injected to the blast furnace along
with coal dust. Similar to FOBF, this process also has pre-reduction of ore but avoids
extreme temperature fluctuations between the top and the bottom of the blast furnace.
The proportion of oxygen to nitrogen in the blast is crucial for the efficient operation of
this technique and its techno-economic viability.
Since these three aforementioned emerging technologies are yet to be established
as commercial options even at the global level, they have not been considered in the
Indian context. With more mature research and development, these may develop as
practicable options. Accordingly, their notional cost estimates may also stabilise along
with the operational parameters. Therefore, as alternative greenfield options in India
today, it is only the BF-BOF, DR-EAF, scrap-based EAF and COREX routes which
seem to be more appropriate and hence have been studied here.
The specific technological models studied in the thesis are presented in the next
section along with their material flow, energy balance and operational parameters.
4.4 TECHNOLOGICAL DETAILS OF THE MODELS UNDER STUDY
As has already been mentioned, six models of steel making have been analysed
from an energy-economic point of view. Each model defines a technological option of
longrun supply of steel from new/greenfield plants. The manufacturing technique, scale
of operation and energy requirement as reductant a~ well as fuel for the plant play the
crucial roles in deciding and choosing the technology.
A typical steel plant at a greenfield site refers to the process from iron-making
to steel melting and finally to finished steel rolling. Only the scrap-based EAF route
does not have the first part of an integrated plant, viz., reduction of iron ore. All the
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options are &nsidered with the same annual final output of hot rolled coil (HR coil), in
order to avoid the non-comparability due to product-mix and operational difference in the
rolling mills. It is not only the choice of reductant but also the use of byproduct gases
in the downstream shops that differ across techniques. Therefore, a uniform finished
product has been taken for all the alternative options. However, the scale option is not
the same for all. For the purpose of comparison, all analyses have been made per unit
of final output. Table 4.2 summarises the six options for alternative steel-making
technologies in greenfield sites of India. The following sub-sections describe the
technical parameters and assumptions of the models under study.
Table 4.2: Description of Options for Steel-Making at Green-field Plants in India
Model Route Reductant Annual Final No. Capacity Product
1 BF-BOF Coking coal 1.0 mt HR Coil 2 DR-EAF Natural gas 1.0 mt HR Coil 3 DR-EAF Natural gas 0.5 mt HR Coil 4 DR-EAF Non-coking coal 0.5 mt HR Coil 5 EAF (Scrap- 0.5 mt HR Coil
based) 6 COREX-BOF Non-coking coal 0.5 mt HR Coil
Note: (1) All models are considered with continuous thin-slab casting facility. (2) 100 percent imported coking coal for BF-BOF route is assumed.
4.4.1 The BF-BOF Technology (Model 1)
Model 1 describes an integrated iron and steel manufacturing process along the
conventional BF-BOF route. The net hot metal production of one 2000 m3 blast furnace
is 1.214 million tonnes per annum. The coke oven complex comprises of one battery of
69 ovens, each 5 meters tall and produces 0. 577 mt per year of gross coke. The 1 x 180
m2 sinter plant produces 1. 755 mt of sinter for the blast furnace. Out of every 1 mt hot
metal tapped from the furnace, 0.180 mt is diverted for pig casting to be produced and
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sold as pig iron. The rest of the hot metal goes to the steel melting shop after
desulphurisation. The two 120 tonne basic oxygen furnaces, working one at a time, and
one 120 tonne ladle furnace for refining, produce 1.04 mt of liquid steel. The model
assumes a single strand thin slab caster and a six-stand hot rolling mill. The plant finally
produces 1 mt of HR Coil and 0.132 mt saleable cold pig. The auxiliary services include
boiler house for steam generation, oxygen plant for air separation, water treatment plant,
air compression unit, lime Calcining plant and raw material handling plant. The model
also allows for a captive power plant of 2 x 30 MW capacity, operating at 0.68 plant
load factor. The byproduct gases from the coke oven, blast furnace and LD-converter
are used as fuel for steam behind power generation. Purchased power from the grid is
also available over and above the in-house supply. The detailed material flow is
presented in chart 4. 1.
The model is based on the assumption of 100 percent imported coking coal in
view of the low quality of indigenous coking coal, with a maximum ash content of 10
percent and volatile matter of 26 percent. Limestone (BF'grade) is taken as the major
fluxing matenal. Table 4.3 provides the detailed input coefficients for the usage of the
materials. All the input usage coefficients for each and every material to the production
process in every shop have been computed in the framework of industrial activity
analysis.
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Coal 759.000
Coal~' 123,900
Coke <Min Complex 1 )( 69 Ovens,
5.0 M Tall
Coke breeze to sinter plant
100.000
Oxygen plant
1 >< 400 Vd
l
AMP plant 2 x 50 Vd
I
Iron ore U'I'Clll
21,000
Limp Ore 396.000
Blast furnace 1 )( 2000 M'
1.03C,OOO
Desulphurillllion &mixer
Gross hoi mecal 1,239,000 Net hoi metal 1.214.000
Iron ore.,_ 1.388,00
1,409.000
I Sinter plrll 1 )( 180 M'
BF Sin&er 1.755.000 Skip SinlBf 1,500 .cxx
100,00)
Pig casting machine
2 )( 1700 tid
Oesulphurized metal 1,019,000 I
174.000
Lime 50,000 Dolo 22.000
Basic oxygen tvrnace
1/2 )( 120 t
Cold pigs 42,000
~ TOial .:rap 63,500 Purchased
''------~ SCiliP
1,040,000
Thin slao caslef and six s!Tand
hot rolling finishing c:omple•
1 HA coils 1.000.000
1
Return scrap 28,900
1 2.900
26,000
34.600
CHART 4.1 Flowchart of the I mt/yr BF-BOF-TSC Route (Model I J
(All figures 111 ton/yr on net ur dn basis)
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Table 4.3: Material Inputs and Energy Usage in the BF-BOF Route of Steel-Making
Particulars
1. Usage of Raw Materials (a) Imported coking coal for
coke (b) Iron ore fines for sinter
(c) Limestone, dolomite, manganese and quartzite
(d) Iron ore lump for BF
(e) Steel scrap and ferroalloys for the steelmelting shop
2. Consumption of Energy (a) Boiler coal (b) Steam
(c) Electricity
(d) CO-gas (e) BF-gas (f) LD-gas (g) Gross Energy consumption
3. Recovery of Energy (a) CO-gas (b) BF-gas
(c) LD-gas
(d) Crude Tar and Benzol (e) Total Recovery of energy
4. Net Energy Consumption
Unit Input Coefficient
Ton/ton of 1.3154 gross coke Ton/ton of 0.8028 sinter Ton/ton of 0.3910 sinter Ton/ton of 0.3196 gross hot metal Ton/ton of 0.0730 LD-steel
Ton/ton of steam 0.0800 Ton/ton of 0.6919 HR coil MWH/ton of HR 0.3037 coil GCal/ton of steam 0.7220 GCal/ton of steam 0.6560 GCal/ton of steam 0.1000 GCal/ton of 9.7153 HR coil
GCal/ton of coke 1.6684 GCal/ton of hot 1. 2 94 6 metal GCal/ton of 0.1000 LD-steel Ton/ton of coke 0.0395 GCal/ton of 2.6413 HR coil
GCal/Ton of 7.0741 HR coil
Note: The calorific values of various fuels are as follows: Coking coal-7 .280 MCal/Kg.; Boiler coal-5.180 MCal/ K~.; CO-gas-4.3 MCal!Nm3; BF-gas-0.83 MCal!Nm3; LD-Gas-2.0 MCal/Nm ; Steam-0.875 M.Cal/Kg; Electricity"- 2.870 MCal/KWH.
The fuel inputs to the process include coking coal and coke breeze to the iron-
reducing process in the blast furnace. Low-grade boiler coal is used for steam
generation along with CO-gas, BF-gas, LD-gas which are recovered as byproduct energy
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sources. Electricity is captive as well as purchased from the grid. Some amount of
crude tar and benzol also come from coke making. The input and recovery of energy
have been given in Table 4.3 along with the usage of raw materials.
4.4.2 Models for DR-EAF Technology (Models 2, 3, 4)
Models 2 through 4 describe technology of iron-making in the direct reduction
plants and steel making in the electric arc furnaces. Thin slab casting and hot rolling
mills follow the production of liquid steel. These models do not use coking coal as the
reductant. Natural gas or non-coking coal is used for that purpose. The basic shop
activities therefore reduce to only four, namely, direct reduction of iron. EAF-steel
making, thin slab casting and hot rolling. In other words, this technology replaces coke
making, sintering and hot metal production by a single process, viz., direct reduction of
iron. The other facilities remain the same except for the absence of the oxygen plant.
The oxygen requirement is met by its purchase from outside. Electricity is still allowed
to be partly captive and partly purchased.
Model 2 refers to a natural'gas-based technology with 1 mt HR coil production
per annum. The two 0.440 mt OR-plants produce 0.88 mt of OR-iron (ORI) with the
only inputs of iron ore (lump and pellet) and natural gas. The EAF unit has two 1001105
tonnes Ultra High Power (UHP) Furnaces followed by two ladle furnaces of similar
capacity. The EAF charge requires a total scrap (purchased and return) of 0.258 mt.
The single strand thin slab caster has a capacity to produce 0. 97 mt of slab. The on-line
tunnel furnace will join this to the hot strip mill which produces 0.9603 mt of HR coil.
The material flow is given in chart 4.2.
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233.000 Purchased scrap
R e t u r n
s c r a p
25.000 Scrap arising
19,200
5,800
763,000 Iron ore pellet
353.000 Iron ore lump
OR plant 2 X 440,000 t
880,000 ORI -~ 1 EAF unit
2 X 100/105 t UHP F/C
1,000, 000 liquid steel
I Ladle furnace 2 X 100/105 t
I
Thin slab caster
970,000 CC slab
' i Online tunnel I furnace l
J Hot strip mill ' five strand
Scrap arising ·
960.300
HR coils
Natural gas
CHART 4_2 Flowchart of the I mt/yr Gas-Based DI~-EAF-CC Route (Model 2)
(All figures in ton/yr on net or dry basis)
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The basic energy source to the process is natural gas, required in the tune of 345
Nm3 /ton of DRI. The EAF requires merely 0.025 ton of coke per ton of liquid steel and
0.004 ton of electrode for the same. Power consumption is 0.8575 MWH per ton of HR
coil, including both purchased as well as captive. The captive power plant capacity is
taken to be 2 x 30 MW. The net recovery of energy from the process is nil.
Model 3 describes a similar technology at a lower scale, namely, 0.5 mt of liquid
steel. Unlike the former, it consists of one 0.440 mt DR plant, one 100 ton Ultra High
Power (UHP) furnace in the EAF unit and a 100 ton ladle furnace. The output of the
single strand conventional slab caster is 0.475 mt of slab per annum. Finally, the steckel
mill will produce 0.451 mt of HR coil. Chart 4.3 summarises the material flow for the
process.
The energy requirements and input usage are the same, as in model 2, if
considered at a per unit basis. The power plant size is however smaller, namely, 1 x 30
MW. This model too gives no recovery of energy from the process.
Model 4 is similar to the previous one in scale and steel-making facilities.
However, the difference lies in the use of non-coking coal in direct reduction of iron.
The DR plant involves two rotary kilns each of 0.150 mt annual capacity. Moreover,
this technology does not allow iron ore pellets in the DR plant and uses only lumps along
with coal. The material flow, presented in chart 4.4, shows an almost similar process
diagram to the previous.
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381,500 I ron ore pellet
176,500 Iron ore lump
R e t u r n
s c r a p
97,100 Purchased scrap
31,900 1---------l
1 OR plant
1 X 440,000 t
DRI 440,000
EAF unit 1 X 100 t UHP Ftc
500.000 liquid steel
Ladle F/C 1 X 100 t
Slab custer 1 x 1 Strand
475,000 slab
Steckel mill
451,000 slab
HR coils
I Natural gas
CHART 4.3 Flowchart of the 0.5 mt/yr Gas-Based DR-EAF-CC Route (Model 3)
(All figures in ton/yr on net or dry basis)
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229,100 Purchased scrap
R e t u r n
s c r
I a p
31.900
Iron ore lump 436.000
Coal 356,<XXJ
2 X
DR plant -,
150,(X)() t KLIN i
302.400 ORI (lump + briquettes)
EAF & LF 1 X 100-105 t
UHP F/C
500,000 li quid steel
j .,
1 X 1 strand slab caster
475,(XX) Cast slab
Steckel mill
I
451.000
j •
HR coil
CHART 4.4 Flowchart of the 0.5 mt/yr Coal-Based DR-EAF-CC Route (Model 4)
(All figures in ton/yr on net or dry basis)
The energy balance changes with the use of coal in the DR plant and fuel oil in
all the main shops. The coke requirement in steel making is higher too while that of
power in direct reduction is less. However, consumption of electrode, steam etc. remain
the same. This model too, assumes a 30 MW captive power plant and a net energy
recovery of the order of 0.4909 GCal per tonne of HR coil.
The material input usage, energy consumption and recovery for the three
aforementioned DR-EAF routes are summarised in Table 4.4. A simultaneous
presentation of coefficients would make the comparison clear.
Table 4.4: Material Inputs and Energy Usage for the DR-EAF Technology
Particulars Unit Input Coefficients
Model 2 Model 3 Model 4
1. Usage of raw materials
(a) Natural gas in DR GCal/ton of DRI 3.0015 3.0015
(b) Non-coking coal Ton/Ton of DRI
(c) Iron ore lumps Ton/Ton of DRI 0.4011 0.4110
(d) Iron ore pellets Ton/Ton of DRI 0.8670 0.8670
(e) Ferro-alloys addi- Ton/Ton of Steel 0.2710 0.2710 tives and scrap
(f) Lime stone ·for lime Ton/ton of lime 2.6400 2.6400
2. Consumption of Energy
(a) Coke
(b) Electrode
{c) Electricity
(d) Steam
(e) Fuel oil
(f) Gross energy consumption
Ton/ton of steel 0.0250 0.0250
Ton/ton of DRI
MWH/ton of HR coil Ton/ton of HR coil Ton/ton of HR coil GCal/ton of HR coil
0.0040 0.0040
0.8587 0.9272
0.0364 0.0988
5.8350 6.5040
Note: Calorific values of the various fuels are as follows:
1.1772
1.4420
0.5350
2.6400
0.0400
0.0040
0.8397
0.0988
0.0435
7.6470
Natural gas - 8. 700 MCal/Nm3; Non-coking coal-5.180 MCal/kg; Electrode-8.0 MCal/kg; Fuel Oil- 10.0 MCal/kg. The others are as given in the note of Table 4.3.
4-21
4.4.3 Purchased DRI and Scrap-based EAF Technology (Model 5)
This route does not refer to integrated iron and steel making. However, a modern
steel making process, similar to those in models 2 through 4, is provided in model 5.
It uses purchased DRI and scrap for charge in the EAF in a ratio of 80:20. One 100
tonne UHP furnace and the ladle furnace produce 0.5 mt liquid steel from which finally
comes 0.451 mt of HR coil through a process same as earlier. Chart 4. 5 describes the
material flow chart of the process.
The energy balance of this model is different from the earlier in the sense that
DRI now becomes a congealed source of energy, and charged with scrap to the EAF.
Purchased DRI is assumed to have a calorific value of 5.747 MCallkg and a high DRI
to scrap ratio of 80:20 implies a high energy intensity of the process. The other
significant point in this model is the absence of captive power plant. All electricity
requirement of the process is met by power purchased from the utility. Table 4.5 gives
the input parameters and energy details of model 5.
4-22
Purchased DRI
450,000
Purchased scrap
87,100
EAF & LF 1 x 100 t UHP F/C
500,000 liquid steel
I Slab caster
I 1 x 1 strand
475,000 cast slab
Conditioning
Two strand steckel1 _________ ___,
Mill
451,000 HA Coil
R e t u r n
s c
a p
31.900
Cl:!ART 4.5 Flowchan of the 0.5 mt/yr Scrap-Based EAF-CC Route (Model 5)
(All figures in ton/yr on net or dry basis)
4-23
Table-4.5: Material Input and Energy Usage for the EAF Technology (Purchased DRI and Scrap-based)
Particulars Unit
1. Usage of raw materials (a) Steel scrap Ton/ton of EAF steel (b) Limestone for lime Ton/ton of lime
calcining
2 . Consumption of Energy (a) Purchased DRI Ton/ton of EAF steel (b) Coke Ton/ton of EAF steel (c) Fuel oil Ton/ton of HR coil (d) Electrode Ton/ton of EAF steel (e) Electricity MWH/ton of HR coil (f) Steam Ton/ton of HR coil (g) Gross energy GCal/ton of HR coil
consumption
Note: Calorific value of DRI is taken as 5. 747 MCal/kg. The others are as given in the preceding tables.
4.4.4 The COREX-BOF Technology (Model 6)
Input Coefficient
0.2380 2.6400
0.9000 0.0400 0.0424 0.0042 0.6913 0.0988 8.7170
The COREX process of iron-making, using non-coking coal is a comparatively
new technique. Only iron ore lump is charged into the melter-gasifier since the process
doe,s not require any sinter and can do without iron ore pellets. The net hot metal
production from the COREX unit is 0.627 mt per annum, of which 0.085 mt is diverted
for pig casting and 0.542 mt for desulphurisation and steel melting. The steel shop is
the same basic oxygen. furnace although of a lower capacity. For 0.5 mt annual
production of final output, it is one 65 tonne BOF and a 65 tonne ladle furnace which
produces 0.550 tonnes of liquid steel per annum. The model assumes one single strand
conventional slab caster and a two stand steckel mill for hot rolling. Model 6 provides
for 0.5 mt of HR coil per annum. Chart 4.6 represents the material flow of the 0.5 mt
COREX-BOF technology.
4-24
194,000
Fluxes (Gross)
Umestone Dolomite Quartzite
1. 18 MGCAL 1.69 MGCAL
Export gas Export gas to outside
0.51 MGCAL Export gas consumption
inside plant
1,073,000
NorKx>king coal (Gross) 1.110.000 Iron ore (Gross)
1 1 J
COR EX C-200)
Gross hot metal 640,000 Net hot metal 627,000
j 542,000 Metal
Oesulphurization & mixer
Desulphurized metal 534,000
BOF 1 X 65 I Total
PCM
82.000 Cold pigs
------------- -- -1+------y--- Purchased 60.500 lF
1 X 65 t 1,000
550.000 liquid steel
Slab casts 1 x 1 - strand
528,000 slab
Steckel mill two stand
500,000
HR coils
16,700
14,100
._ scrap 28.700
CHART 4.6 Flowchart of the 0.5 nH/yr COREX-BOF-CC Route (Model 6J
(All figures in ton/yr on net or dry basis)
4-25
Table-4.6: Material Inputs and Energy Usage for the COREX-BOF Technology
Particulars Unit Input Coefficient
1. Use of Raw Materials
(a) Non-coking coal Ton/ton of hot metal 1.2000
(b) Iron ore lumps Ton/ton of hot metal 1.5572
(c) Dolomite, lime- Ton/ton of hot metal 0.3185 stone, Quartzite
2. Consumption of Energy
(a) Electricity MWH/ton of HR coil 0.2159
(b) Oxygen '000 Nm3/ton of HR 0.7041 coii
(c) Steam Ton/ton of HR coil 0.0600
(d) CO REX gas GCal/ton of HR coil 0.4514
(e) LD gas GCal/ton of steam 0.1000
(f) Gross Energy GCal/ton of HR coil 10.9306 consumption
3. Recovery of Energy
(a) COREX gas GCal/ton of hot 2.6520 metal
(b) LD gas GCal/ton of liquid 0.1000 steel
4. Net Energy GCal/ton of HR coil 7.8849 Consumption
Note: Calorific value of CO REX gas is 1. 700 MCal/Nm3. The others are as given in the notes of Tables 4.3 and 4.4.
A distinct advantage of route is the high arising of byproduct COREX gas. The
0.5 mt COREX plant generates about 1.69 million GCal of export gas with a high
calorific value of 1. 700 MCal!Nin3. Based on this rich surplus gas, the plant can run
the power plant for own requirement and can also generate exportable surplus power.
The model assumes a total of 100. MW power generation capacity, one of 40 MW and
4-26
one of 60 MW, operating at 68 percent plant load factor. The other source of energy
recovery is the LD-gas from the steel-melting process. The auxiliary services include
the oxygen plant for air separation, air compression unit, water treatment plant, and the
lime calcining shop. The material and energy balances for this route has been
summarised in Table 4.6.
All the material flow sheets, energy balances and related data have been collected
from the Metallurgical and Engineering Consultants of India Limited (MECON),
Ranchi. The detailed input coefficient matrix for linear activity analysis has been
computed for each model on that basis.
4.5 THE LONGRUN MARGINAL COST OF SUPPLY: COST OF ENERGY, LABOUR, MATERIAL AND CAPITAL INPUTS
The long run marginal cost of supply is the primary basis of comparison across
alternative techniques of production. As has been discussed earlier, it is the comparison
of cost due to the basic factors of production, viz., capital, labour, energy and materials,
which helps in deciding about the energy-economic technology and substitutability of
energy vis-a-vis other factors. However, the real choice question is not only in terms
of the cost, but also the physical usage pattern and the fuel type to be used. Thus, the
choice of technique would also depend on the choice of fuel from among coking coal,
non-coking coal, gas or oil, especially in a country like India. The purchase of utility
power as against captive generation is another element in the choice decision. The
comparison in terms of overall energy consumption, recovery of energy, especially
power, also becomes significant for assessing the scope of energy conservation in steel-
making technology. While the energy-use pattern has been discussed in a later section,
the following section develops an optimisation model to work out the efficient works cost
4-27
of producing 1 ton of HR coil along each of the six aforementioned technological routes.
The works cost accounts for those of raw materials, labour and energy. The cost of
fixed and working capital has been dealt separately. The total cost is a sum of these
components. The substitution possibility among these factors and the possible trade off ..
if at all, in terms of their cost implications, has been analysed in this study.
4.5.1 Works Cost Calculation by Linear Optimisation
The works cost has been estimated by a linear optimisation exercise (Kambo) for
each model option of steel making at greenfield sites in India. Detailed input coefficient
matrices matrix of shop activities have been constructed from the industrial process flow
sheets and made use of in formulating the objective function and constraints of all the
models. The complicated flows of materials and energy balances have been utilised to
build up the activity matrices along each model option. The optimisation exercises have
been based on an activity analysis framework. However, the scope of intra-process
optimisation has been limited and the linear optimisation technique has been mainly
computational. The optimisation models have been run for estimating cost and energy
use in a typical plant for each technological option separately.
Model 1, describing the BF-BOF route, consists of twenty shop activities, of
which the main production departments are ~ coke making, sintering, iron-making, pig
casting, steel melting, slab casting and hot rolling. The other activities arise from the
auxiliary services and their sale and/or purchase, if required. The primary raw materials
to the coke ovens, sinter plant, blast furnace and LD converter comprise the cost of
material inputs, given 'their prices. The cost of fuel includes those of primary purchased
fuels like boiler coal for steam. The costs of purchased power from the utility and raw
water have also been taken into account as cost of utility items. The cost of reductant
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has been treated as a raw material to the blast furnace. The byproduct arisings of the
process, viz., coke breeze, granulated slag, scrap, benzol and tar products etc. have been
given credit at their respective sale prices. The credit items in that sense constitute a
negative cost. The other component of cost is that due to the operation of the plant,
which includes labour, overheads and other operating costs. The total works cost has
thus been formulated as a sum-total of
(a) primary materials cost;
(b) fuel and utility cost;
(c) labour and operating cost; net of the
(d) credit due to byproducts arising and saleable intermediary (say, pig iron).
The optimisation problem has been framed as one of minimisation of the cost thus
defined. The constraints have been generated from the inter-shop balances of
(a) intermediate materials;
(b) intermediate fuel items including byproduct gases like CO-gas, BF-gas, LD-gas etc. ; and
,, (c) intermediate utility services such as air separation in the oxygen plant,
steam raising, air compression, water treatment, self-generation and distribution of power etc.
Apart from the inter-shop balances of material and energy (constraints of less than or
equal to type) there also exist
(d) a final output demand; and
(e) a capacity constraint of the power plant operating at a load factor of 0.68.
The optimisation problem can thus be summarised as:
Minimise costs of materials plus fuel plus utilities plus operations net of credit due to byproduct arising subject to constraints due to input -output balances for intermediate resources of the plant, capacity and nonnegativity of the activity levels.
4-29
Symbolically,
minimise C = Pm Mx + Pu Ux- Pe Ex+ p1 Fx +Po Ox
Subject to Bx :=::;; 0,
Hx :=::;; 0,
Ax:=::;; 0,
Gx;:::: I,
X;:::: 0.
where C: Cost of producing 1 ton of HR coil;
x:. Vector of shop activities;
M: Input coefficient matrix of raw materials usage;
U: Input coefficient matrix of purchased non-fuel utilities usage;
F: Input coefficient matrix of purchased fuel usage;
E: Input coefficient matrix of credit arising;
0: Input coefficient matrix of operating items;
Pm: Price vector of raw materials;
Pu: Price vector of utilities;
P( Price vector of fuel items;
Pe: Price vector of credit items;
p0
: Price vector of operating items;
·>
B: Input coefficient matrix of intermediate materials;
A: Input coefficient matrix of intermediate utilities;
H: Input coefficient matrix of intermediate fuel items;
G: Final output coefficient matrix.
4-30
0 0 0 (1)
0 0. (2)
The elements of the matrices mentioned are input coefficients to particular shop
activities. An intermediate shop output is represented as a negative input coefficient in
such matrices. The final output is represented as a positive entry. The elements in the
objective cost function represent the cost components relating to materials, utilities, fuel,
operation and maintenance and a negative cost for credit arising. The first three
constraints refer to the inter-shop balances, the fourth to the demand for final output and
the fifth implies non-negative levels of activity in the shops.
Similar optimisation problems have been formulated for the other five models as
well. The similar composition of cost according to the respective input and energy usage
and credit arisings has been worked out for each model. The constraints have similarly
been formulated according to the inter-shop balances, final demand and capacity.
However, all the problems have been formulated for the final output at the level of I ton
of HR coil irrespective of their total capacity. The total number of shop activities also
differ from one technology to the other, depending on the type of iron reduction unit and
steel melting shop. The utility services are also not the same across the technologies and
the cost and/or constraints have been modified accordingly. For example, models 2
through 5 use purchased oxygen, the cost of which is added to the cost of purchased
primary non-fuel utilities while in models 1 and 6, own oxygen plants are allowed.
Similarly, power also varies in its role as a wholly purchased item (model 5) or a
partially purchased and partially captive item (models 1 through 4) or an entirely in-plant
item (model 6). The constraints modify accordingly.
The per unit purchase prices of raw materials, fuel items, utilities and sale prices
of credit items are evaluated at mid 1994 prices. Table 4. 7 shows the unit rates of the
major raw materials and other items used in the various routes.
4-31
Table 4. 7: Unit Rates of Materials, Services and Auxiliaries (Mid 1994 prices)
Item
1. Primary Materials Including Reductants
Unit
(a) Coking coal for BF-BOF (imported) tonne (b) Non-coking coal for DRI tonne {c) Non-coking coal for COREX(imported)tonne (d) Iron ore fines for BF-BOF tonne (e) Iron ore fines for DRI tonne (f) Iron ore lump for BF-BOF tonne (g) Iron ore lump for DRI (gas-based) tonne (h) Iron ore lump for DRI (coal-based) tonne (i) Iron ore lump for COREX tonne (j) Iron ore pellets tonne (k) Dolomite for BF-BOF and COREX tonne (1) Limestone for BF-BOF and COREX tonne (m) Limestone for DRI (coal-based) tonne (n) Manganese ore for BF-BOF tonne (o) Quartzite for BF-BOF tonne (p) Quartzite for DRI-EAF tonne (q) SMS Ferro-alloys and additives tonne (r) Natural gas for DRI (gas-based) '000 Nm3
2. Fuel, Services and Auxiliaries
(a) Electrode (b) Power (c) Raw water (d) Fuel oil (e) Oxygen (f) Boiler coal
3. Credit Items
(a) Coke breeze (b) Granulated slag (c) Scrap iron (d) Scrap steel (e) Ammonium Sulphate (f) Benzol Products (g) Tar products (h) Cold pig
tonne MWH '000 Nm3
tonne '000 Nm3
tonne
tonne tonne tonne tonne tonne tonne tonne tonne
Unit Price (Rs/uni t)
2350 850
1950 300 310 340 800 350 350
1500 625
1150 300 745
80 120
25000 3150
75000 2000 1500 6500 2500
850
1360 200
6000 6700 2400 8364 8850 7500
The linear optimisation programmes for all of the six models, formulated as
explained above, are provided in Appendix A-4. The specific constraints referring to
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various primary and intermediate inputs and shop activities for the six models will be
clear from a look at the optimisation problems. The linear programmes were solved
using the computer package LINDO (Linear Interactive and Discrete Optimiser).
4.5.2 Results of the Optimisation Exercise and Sensitivity of Cost with Fuel Prices
The solutions of the optimisation problems provide the minimum value of the
objective function, viz., the works cost of producing one tonne of HR coil for each route
separately. The levels of shop activities necessary for sustaining the unit level of
production are also obtained from the results. The cost figures have been presented in
Table 4.8.
It is important to study the sensitivity of the obtained optimal costs to variations
in fuel prices. Sensitivity data are a valuable qid to the evaluation of the robustness of
the results to such fluctuations. Furthermore, the sensitivity analysis has been carried
out with the objective of studying the variation in merit ranking of the technological
options due to variations in fuel prices against the merit ranking as per the base prices.
For the purpose of this study, variations in all the fuel prices between ±20 percent of
the base prices have been considered which may incorporate the possible future
fluctuations in fuel prices. This also accounts for any possible variations/errors that
might have occurred in the notional fuel prices used in the optimisation. Sensitivity has
been considered with respect to the prices of the fuels
(i) coking coal,
(ii) natural gas,
(iii) non-coking coal and
(iv) the tariff for purchased power,
which are used as fuels in the different technological routes.
4-33
Variations in the fuel prices lead to changes in the coefficients of the objective
function. Large variations may result in a change in the solution basis, in which case the
optimal solution must be re-evaluated. Within a small range of variation, the basis
remains unchanged and it is sufficient to recompute the objective function with the
changed coefficients (Kambo). The recomputed cost figures for the augmented and
diminished fuel price scenarios have been presented in Table 4.8 along with those at the
base prices. The percentage variations in cost due to variations in the prices of various
fuels and their relative contributions have been presented too.
Table 4.8: Fuel-Price Sensitivity of Cost
Models
1 2 3 4 5 6
Optimal Value of cost (Rs/Tonne) 5294.42 9819.18 9669.00 9167.45 10573.49 7626.41
Merit Rank 1 5 4 3 6 2
Optimal Value at 5690.47 10268.18 10231.00 9457.55 10869.89 8191.41 augmented fuel prices (Rs/Tonne)
Merit Rank 1 5 4 3 6 2
Optimal Value at 4898.16 9370.18 9107.00 8877.3S 10285.49 7061.41 diminished fuel prices (Rs/Tonne)
Merit Rank
Variation in cost due to fuel price variation (%)
Contribution of various in total variation (%)
Coking coal
Natural Gas
Non-coking coal
Coal for DRI
Purchased Power
1
±7.5
±6.6
±0.9
5 4 3
±4.6 ±5.9 ±3.3
±2.2 ±3.2
±1.5
±2.4 ±2.7 ±1. 8
Note: (-) indicates non-usage of fuel in the particular technology.
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6 2
±2.8 ±7.4
±7.6
±2.8 +o .2
The variations in cost due to fuel price variations have been the highest for the
BF-BOF and COREX-BOF routes, followed by the gas-based DR-EAF and other EAF
routes. The alternative technological routes have been ranked according to the optimal
values of the cost computed using the base prices of the different fuels, and also at the
augmented/diminished prices. The merit ranking has remained unchanged in the different
fuel price scenarios. The BF-BOF route has emerged as the cheapest, followed by the
COREX-BOF, coal-based DR-EAF, gas-based DR-EAF and the scrap-based EAF routes
respectively.
Table 4.9: Technology Ranking on the Basis of Works Cost with Base, Augmented and Diminished Fuel Prices
Optimal Cost at -
Base Prices Merit Rank
Augmented Prices of principal fuel (20%)
Merit Rank
Diminished Prices of principal fuel (20%)
Merit Rank
Models
1 2 3 4 5 6
5294.42 9819.18 9669.00 9167.45 10573.40 7626.41 1 5 4 3 6 2
5642.47 10049.66 9972.20 9325.41 10861.89 8213.27
1 5 4 3 6 2
4946.16 9588.6 9365.8 9009.49 10285.09 7039.50
1 5 4 3 6 2
Principal Fuel Input Coking Power ·coal
Natural Power gas
Power NonCoking coal
Augmented prices of natural gas (40%)
Merit Rank
5294.42 10373.17 10277.14 9167.45 10573.40 7626.41
1 5 4 3 6 2
For each process, the optimal cost has been re-examined with respect to
fluctuations in the price of its principal fuel input only. It is possible to re-rank the
technologies on the basis of the augmented/diminished prices of the principal fuels
4-35
considered individually. Table 4.9 shows the costs computed with the base prices
together with those computed with the augmented/ diminished prices of the principal fuel
inputs. The ranking obtained in each case is also shown in the same table.
Table 4.9 reveals that the relative rank of alternative technologies remains
unchanged with variations in the prices of principal fuels up to ± 20 percent. While the
total costs of BF-BOF and COREX-BOF routes are more sensitive to the reducing
agents, viz., coking coal and non-coking coal respectively, the cost of the DR-EAF
routes turn out to be more sensitive to the power tariff. However, in case of the gas
based DR-EAF route, the large scale of operation (1 mtpa) has caused greater sensitivity
to power than natural gas whereas the smaller scale option (0.5 mtpa) has caused greater
sensitivity to natural gas. This is because the consumption of natural gas in the
downstream casting and rolling shops are higher in the smaller plant, thus pushing the
total usage per tonne of HR coil to 384.2 Nm3 while that for the larger plant is 340.2
Nm3 per tonne of HR coil. The lower requirement of natural gas in the larger plant has
been due to economies of scale.
In view of the possibility of larger variations in the future international oil prices,
the oil-linked gas prices may be studied with larger variations too. It is interesting to
examine the impact of such rises in oil prices on the Indian steel industry through its
impact on the price of natural gas. The gas-based DR-EAF routes will be affected by
such price rises, while the other technological routes will remain unaffected. Since the
price of coal and solid fuel-based electricity are mostly administered in India, their prices
are not liable to variations as much as oil and oil-linked gas prices. Therefore, a rise of
40 percent in gas prices only has also been considered here as an extremely pessimistic
case of severe rise in oil and gas prices. Under such a high price scenario, the gas-based
4-36
DR-EAF routes (models 2 and 3) incur further higher costs. Compared to the other
routes at base fuel prices, these two model options retain their already high merit ranks.
Although the cost of the larger DR-EAF route is more sensitive to the power tariff, the
effect of a 40 percent hike in gas price has been larger than that of a 20 percent hike in
the power tariff. The smaller plant has already been more sensitive to natural gas and
has reacted more to a larger hike in its price. Such augmented costs of models 2 and 3,
others being unaffected by rises in gas price, have been presented in Table 4.9 along with
their merit ranks. Use of natural gas in these technological routes are intense not only
in the DR unit but also in the captive power plants. However, captive generation may
not be replaced by utility power because of the unreliability associated with the grid
supply which may affect the entire plant operation adversely. Furthermore, it is
interesting to observe that the scrap-based EAF route has remained the costliest even
when the gas-based DR-EAF routes face a 40 percent hike in the gas price.
In view of the fact that the merit ranking of the alternative technological routes
is not altered by ±20 percent variation in all fuel prices and also a 40 percent hike in gas
prices separately, it may be concluded that the results obtained in the optimisation
exercise are robust. Therefore, these results have been used later as components of total
cost for cost comparison. between alternative technologies. Since the total cost consists
of (a) works cost, (b) working capital cost and (c) fixed capital servicing charge, the
following subsection deals with the computation of capital cost.
4.5.3 Investment Requirement and the Cost of Capital
An important factor other than the works cost for determining the total cost of
supply of steel from greenfield sites is the capital cost. The investment requirement for
each tech~ology route as provided by MECON has been presented in Table 4.10. The
4-37
shop-wise break-up and the total capital cost for all the facilities are also provided for all
the six routes.
Table-4.10: Shop-wise Break-up and Total Capital Cost (mid 1994 prices)
Facilities Total Capital Investment (Rs. Cr.)
Models
1 2 3 4 5 6
1. Raw material handling 150 100 75 75 75 2. Coke Oven and by- 160
product plant 3 . Sinter Plant 180 4. Blast furnace 325 5. DR Plant 675 350 180 6 . COREX Plant (C-2000) 475* 7. Basic Oxygen Furnace 330 90 8. Electric Arc Furnace 250 125 125 125 9. Thin slab caster 100 100
10. Conventional Slab 100 100 100 100 Caster
11. Hot Strip Mill 800 800 12. Steckel Mill 380 380 380 380 13. Services and 885 619 255 230 180 665
auxiliaries 14. Power plant 190 162 81 95 270 15. Preliminary expenses, 125 110 65 55 40 85
land and site development
16. Total 3245 2807 1431 1240 825 2140* 17. Interest during 318 268 143 134 85 204
construction ( IDC) 18. Taxes and duties 318 332 160 128 80 235
* An alternative estimate for the cost of the COREX plant has also been studied as Rs. 757 crores instead of Rs.475 crores. This changes the total cost from Rs.2140 crores to Rs.2422 crores. This is due to the wide variation in available notional estimates for this new technology.
The economic value of capital servicing has been calculated on the basis of these
data in order to m·ake it a component of long run marginal cost of supplying steel. The
capital servicing charge has been estimated as investment cost net of all taxes and duties
and interest during construction, amortised over the economic life time of the plant, viz.
4-38
20 years. A 12 percent rate of return has been allowed on the capital investment in mid
1994 prices, to compute the economic cost. The 12 percent rate of return has been taken
as the opportunity cost of capital for the Indian macro-economy. On the other hand, a
20 percent rate of return has been considered as the opportunity cost of capital in the
organised industrial sector and hence has been used to compute the financial cost. A 1:1
debt-equity ratio has been considered for the investment.
The norm of investment, gestation lag, salvage realization and phasing of output
have been furnished in Table 4.11. The longrun cost of capital, economic as well as
financial, has been analysed in the next section where works cost estimates also appear.
The working capital cost has been calculated too. It has been taken as 3 months' block
of works cost with an interest charge of 12 percent and 20 percent respectively for
economic and financial cost calculations (Sengupta, 1990 and 1995).
Year
1 2 3 4 5 6 7 8-22 23 24
Table 4.11: Norms of Capital Cost Estimation
1 mtpa capacity plants (models 1 and 2)
Share of % of output investment capacity
20 30 35 15
-5
35 80 95
100 100
0.5 mtpa capacity plants (models 3 through 6)
Share of % of output investment capacity
20 40 40
-5
70 90
100 100 100
Note: The phasing shows gestation lags of 4 years and 3 years respectively for plants of different capacity. The plant life is 20 years for both types and a 5 percent salvage in the last year.
4-39
4.5.4 Total and Factor C{)st Across Technology: A Comparison
The total cost of producing 1 tonne of HR coil from greenfield plants along the
alternative technological routes have been computed as explained above. The total cost
consists of
(a) works cost I.e., cost of materials, fuel, utilities and operation net of credit;
(b) working capital cost as 3 months' block of net works cost; and
(c) fixed capital servicing charge amortised over its life time output.
The linear programming result gives the optimal (minimum) works cost at unit levels of
output. From the levels of activities supporting the unit level of production, one can
easily work out the cost components, given the price vector. Table 4.12 presents the
gross works cost with break-ups and credit from sales of byproducts, pig iron and power,
wherever arise. The total cost for materials has been divided into those of reductants and
raw materials other than the reductants. The fuel cost has been shown as a sum of the
cost of power and primary fuel purchase. The non-fuel utilities cost include that of the
purchase of water in all models and of oxygen in models 2 through 5 because models 1
and 6 have own oxygen plants. The operating cost has also been broken up into labour
cost and other operating costs (repair and maintenance, stores and spares, overheads
etc.).
4-40
Thble 4.12: Works Cost Per Tonne of Hot Rolled Coil for Different Technology Routes
Unit: Rs/Tonne
Item
1
1. Raw materials 3846
(a) Reductants 1739 (coal & gas)
(b) Other primary 2107 materials
2. Fuel 469
(a) Power purchase 243 (b) Primary fuel 226
3. Non-fuel utili- 347 lities* (water & oxygen)
4. Operating
(a) Labour (b) Other
operating
5. Credit
(a) Power (b) Pig iron (c) Others**
6. Gross Works Cost
2626
186 2440
1994
855 1139
7288
7. Works cost net 5294 of credit
2 3
4784 4662
1108 1058
3676 3604
1888 2029
1152 1295 736 834
302 295
3030 3050
169 165 2860 2885
175 467
175 467
9994 10136
9819 9669
Models
4
4818
1013
3805
1715
789 926
361
2762
130 2632
489
489
5
6236
6236
2021
1442 579
160
2619
96 2523
461
461
9656 11036
9167 10575
@ The corex route does not need any purchase of power or other fuel. * Models 1 and 6 have own oxygen plants.
6
5221
2934
2287
0 0
1212
1995
286 2709
1801
77 1046
678
9428
7627
** Others include steel scrap, iron scrap, benzol and tar products as are relevant to the concerned technology.
As mentioned earlier, model 6 i.e., the COREX-BOF being a new technology
involves alternative estimates of notional cost. The investment requirement for the
COREX -unit has therefore been considered at two alternative values, namely, Rs.475
4-41
crores and Rs. 757 crores. The cost of capital has accordingly been varied and has been
referred to as model 6 and model 6A henceforth. However, this estimate may go further
down in future as the technology stabilises.
Table-4.13: Total and Capital Costs Per Tonne of Hot Rolled Coil for Different Technology Routes
Unit: Rs/Tonne
Models
1 2 3 4 5 6 6A@
1. Interest for Working Capital
(a) @12% 159 295 290 275 317 229 229 (b) @20% 265 490 484 458 528 381 381
2. Fixed Capital Servicing Charge
(a) @12% 5174 4661 .4954 4290 2882 6754 7608 (b) ®20% 9617 8822 9109 7827 5178 12240 13837
3. Total Charge of capital Servicing
(a) Economic ®12% 5333 4956 5244 4565 3199 6983 7837 (b) Financial ®20% 9882 9312 9593 8285 5706 12621 14218
4. Works Cost net of 5294 9819 9669 9167 10575 7627 7627 credit
5. Total economic cost 10627 14775 14913 13732 13774 14610 15464
6. Total financial cost 15176 19131 19262 17452 16281 20248 21845 ,,
@ Model 6A refers to the alternative cost of Rs. 757 cr. for the CO REX plant.
All the estimates of capital cost have been furnished in Table 4.13, along with the
net works cost and total cost, both economic and financial. In table 4.14, the total cost
and its broad break-ups as those of capital, labour, energy and materials (KLEM) have
been summarised.
4-42
Thble-4.14: Analysis of Cost Per Tonne of Hot Rolled Coil Unit:Rs/Tonne
Cost Models
1 2 3 4 5 6 6A
1. Raw materials 2107 3676 3604 3805 6236 2287 2287 (excl. reductants)
2. Energy 2208 2996 3187 2728 2021 2934 2934
(a) Primary fuel 226 736 834 926 579 0 0 (b) Power 243 1152 1295 789 1442 0 0 (c) Reduct ants 1739 1108 1058 1013 2934 2934
3. Labour 186 160 165 130 96 286 286
4. Capital* 5333 4956 5244 4565 3199 6983 7837
5. Capital** 9882 9312 9593 8285 5706 12621 14218
6. Total Economic Cost 10627 14775 14913 13732 13774 14610 15464
7. Total Financial Cost 15176 19131 19262 17452 16281 20248 21845
* @ 12 percent per annum **@20 percent per annum
Energy cost has been worked out as the sum of fuel cost (primary), power
purchase and the cost of reductants. However, intermediate inputs like coke, produced
out of coal and further used as reductant-cum-fuel are not separately given any credit.
'fhe cost of the primary purchase of coal has only been considered in the energy cost.
Non-fuel utilities costs due to purchased oxygen and raw water have been kept out of the
comparison of the basic factors of production. However, the energy requirement behind
the running of such plants (oxygen plants in case of models 1 and 6) have not been
ignored in the sense that they have otherwise occurred in the primary fuel purchase. The
costs of raw materials and labour have been obtained by multiplying the corresponding
price vectors by the levels of activities at unit levels of output as obtained from the
optimisation exercise.
Table 4.14 may be studied in order to find out the interrelationship of the major
factors of production. The comparison has been made in terms of the total economic
4-43
cost as well as components of cost to reach any possible conclusion about the choice of
technique, economic usage of energy and its conservation potential, and the trade-off in
terms of other factor costs. The observations have been summarised below.
I. The total economic cost of producing I tonne of HR coil varies between Rs. I 0627
and Rs.l5464 while the range of variation in the financial cost is Rs.15176 to Rs.21845.
The BF-BOF conventional route has proved to be the cheapest as compared to the DR
EAF routes and the emerging COREX route. The gas-based DR-EAF technology has
worked out to be the most expensive in terms of economic cost followed by the COREX
BOF route if the lower estimate of capital cost (Rs.457 cr) of the latter is considered.
The coal-based DR-EAF routes have counted comparatively cheaper than the gas-based
routes because of the lower price of non-coking coal; although imported. However, the
gas-based DR-EAF routes become cheaper than the COREX-BOF route in terms of the
financial cost even with the lower estimate of the latter's capital cost. This is due to the
high capital cost of the COREX-BOF route which gets more augmented when discounted
with a 20 percent rate of return as per the financial cost estimation. Thus the COREX
BOF route proves to be the costliest if the financial costs are considered.
2. . As far as the primary materials are concerned, the BF-BOF route is still cheaper
than any other route. The purchased DRI and scrap-based EAF route (model 5) has
recorded the highest cost despite the fact that it does not use any reductant material.
However, energy is congealed in the purchased DRI. Only DRI and scrap steel account
for as high a purchasing cost as Rs. 6236 per tonne of HR coil. The materials cost of the
CO REX route is also not very high as compared to the BF-BOF one if the reductants are
excluded. The DR-EAF technologies have intermediate levels of raw materials cost.
3. Coming to the energy cost, it may be observed that the COREX-BOF model
involves the third highest energy cost, marginally lower than the gas-based DR-EAF
routes. The interesting point to be noted is that it does not use any purchased power or
other primary fuel. It is only the high consumption of reductant non-coking coal that
accounts for the energy bill. On the other hand, the other technologies do not involve
higher cost of fuel even though they all purchase some power and primary fuel. Model
5 has recorded the lowest energy bill due to its consumption of purchased power and fuel
but no reductant. Since DRI and scrap are considered as raw materials, although these
have congealed energy, the energy bill has not gone up. Therefore, the low energy bill
in model 5 may not be considered as an index of energy-saving. Accordingly the cost
of materials in model 5 has been substantially high. The BF-BOF technology has
emerged to be more economical from the view point of the fuel bill among all the routes.
However, the BF-BOF model registers a sufficiently high cost of reductants, next
to the COREX-BOF route, but the lowest for other primary fuels, say boiler coal. The
DR-EAF routes have high cost of primary fuel as well as power purchase. Model 5 has
no provision for power plant and hence spends the maximum on purchasing power from
outside. Therefore, one may consider the BF-BOF route to be actually at the top in
terms of energy cost, ignoring the EAF model 5 which has no reduction process. In
terms of the energy bill, COREX also proves to be somewhat expensive. However, this
route has significant amount of surplus power generation which fetches a high return for
the plant. ~he COREX-BOF plant is not only self-sufficient in power but also has the
potential for export to the grid. This can be marked as a distinct advantage in terms of
energy use in the process. The other merit of this route is the use of non-coking coal
instead of coking coal, particularly in India where the quality of indigenous coal is low.
4-45
4. The COREX-BOF technology bas the highest labour cost component too. The
BF-BOF route is next highest in terms of the wage bill but way below. The gas-based
DR-EAF routes record marginally lower bills while the coal-based DR-EAF route is even
less. As expected, model 5 has the lowest bill for labour which is associated with only
EAF steel-making without any reduction process.
5. The final component of cost comes in terms of capital servicing. The CO REX
technology is the most capital-intensive and much above the rest under both the
alternative estimates. Both in case of a 12 percent rate of return and 20 percent rate of
return, the capital cost for model 6 keeps a high margin over the other four, while model
5 again remains the cheapest as expected. As compared to the conventional route of steel
making (model 1), the DR-EAF routes prove to be more capital-saving. This may be
due to the absence of the conventional coke ovens and sinter plants. The COREX-unit
on the other hand costs high because of its complicated structure. However, it is only a
very initial stage for the implementation of the COREX plant. As the technology
matures, the nominal cost estimates may go down in reality and COREX may cease to
be so capital-intensive. Similarly, with stabilisation of the technology, intensity of
material and fuel use may also go down.
6. Finally, a merit ordering of the alternative technologies has been made in terms
of all the factor costs. While the merit ranking of total cost helps in the choice of
technique as a whole, the ranking in terms of individual factors help is studying the inter
factor relationship and energy-substitution possibility, if at all. This may further help in
finding out the substitutability or complementarity among the factors across steel making
options. Table 4.15 reports an ordering according to the total cost and its components.
4-46
'Thble 4.15: Merit Ordering of Technologies According to Total and Input Costs
Models Cost
1 2 3 4 5 6
1. Total Economic 1st 5th 6th 2nd 3rd 4th
2. Materials 1st 4th 3rd 5th 6th 2nd
3 . Energy & 2nd 5th 6th 3rd 1st 4th Reductant
4. Labour 5th 3rd 4th 2nd 1st 6th
5. Capital 5th 3rd 4th 2nd 1st 6th
The ranking of technologies has shown an identical ordering for capital and
labour. The COREX-BOF and BF -BOF routes record the highest and second highest
costs both in terms of labour and capital. The DR-EAF routes possess the same
ranking of second to fourth for the two factors. This may be considered to be indicative
of the complementary nature between capital and labour. The cost of materials, on the
other hand, has an almost reverse ordering. The least capital-intensive plants involve the
~ highest cost for primary materials. The COREX-BOF and BF-BOF models have been
observed to spend less on materials while spending most on capital and labour.
Conversely, models 4 and 5 spend more on materials and less on capital while models
2 and 3 lie intermediate. Substitutability of both capital and labour with materials may
thus be pointed at. However, the energy cost ranking has neither a direct nor a reverse
relationship with any of the factors. The gas-based DR-EAF routes have come up as the
most expensive ones in terms of the energy bill followed by the COREX-BOF route. The
coal-based DR-EAF and conventional BF-BOF technologies seem to be incurring lower
energy costs. Model 5 records the lowest, the reason for which has been explained in
terms of the treatment of DRI and scrap. This random ordering of energy cost vis-a-vis
4-47
those of capital, labour and materials prevents one from making any direct comment on
the possibility of energy substitution by others. However, in view of the fact that model
I occupies the second cheapest position in fuel cost, lowest in materials and second
highest in labour and capital, it may be commented that energy and materials are
inversely related to labour and capital. In that sense, energy and material stand against
the complementary pair of labour and capital in model I. However, high labour and
capital bill for the COREX routes is associated with a medium energy bill while medium
ranking DR-EAF routes (in terms of capital and labour) involve the highest energy bill.
Thus, it is difficult to infer anything definitely about the relationship of energy vis-a-vis
the other factors in the process-level study. The scrap-based EAF model shows the
lowest energy cost along with capital and labour and the highest for materials. This
model being less comparable with the others, does not help in any way to arrive at a
definite conclusion. The substitutability among all factors obtained in the econometric
study in chapter II is not established in this process-level study of the Indian steel
industry. The inconclusiveness regarding energy substitution by 'other factors restrains
one from establishing such a result or the reverse and one cannot directly infer about the
energy-conserving nature of the concerned technologies. In order to have a better
understanding of the energy economics of the individual routes, a more detailed study on
energy consumption, recovery and intensity in physical units needs to be carried out.
The economy's true choice question depends on all of the followings, viz., the fuel
intensity, fuel-cost and fuel type which are specific to the economy's geographical and
socio-economic context. The shadow price of energy may not be reflected properly in the
cost estimates and thus calls for an analysis of energy consumption in real physical units.
4-48
The following section deals with such aspects across the six technologies and tries to
choose the most energy-efficient technology of steel making in India.
4.6 ENERGY CONSUMPI'ION, RECOVERY AND INTENSITY OF THE VARIOUS TECHNOWGY OPI'IONS
The near-similar correspondence between the rankings of technology according
to the total cost and energy cost points at the vital role played by energy as a factor of
production in determining the total cost of production. The gas-based DR-EAF route has
proved to be the most expensive and at the same time ranks the highest in terms of total
energy cost including reductants. The COREX route (model 6) ranks the next both in
terms of energy and total cost. Despite no purchase of power and primary fuel other
than reductants, the COREX route involves a high energy cost. It is only the non-coking
coal used as a reducing agent that accounts for the high bill. The BF-BOF model, coal-
based DR-EAF model and EAF model occupy the lowest three positions in merit ranking
in alternate permutations among them in terms of their total cost and energy cost.
Although the share of energy in the total cost varies between 15 and 24 percent and that
of capital varies between 33 and 50 percent, the ranking of total cost is more similar to
that of energy.
However, it is not only the energy cost that should be analysed to choose the most
energy-economic technology. The shadow prices of energy items are not always
reflected properly in the cost figures. The intensity of energy use in real physical units
(in GCal/ton of product) as well as the type of the fuel also need to be examined. The
choice of fuel, especially of coal, is crucial for India. The gross energy consumption
may be disaggregated according to fossil fuel, hydrocarbons, electricity or in terms of
the use of reductants, other primary fuel and recovery of energy from byproduct arisings.
4-49
In view of the highly energy-intensive nature of the iron and steel industry, the question
of relative energy intensity becomes important for ascertaining the scope of energy
conservation. The other aspects of conservation are the possible choice of coal from
among coking coal and non-coking coal, use of coal or gas-based routes and the potential
for extraction-cum-utilisation of byproduct energy. Net arising of byproduct energy and
their use as fuel in the plant saves the primary purchase of fuel. In-house power plants
may further reduce the energy bill by curtailing the purchase from the utility. The
possibility of export or sale of surplus power, as in model 6, adds a further dimension
to energy conservation for the specific plant as well as for the macro-economy as a
whole.
In order to carry out a comparative study of energy usage across technology
routes, the followings need to be looked at as:
(a) The use of reductants and other fuels per ton of HR coil (i.e., thermal energy intensity);
(b) Byproduct arisings of energy items which may be credited;
.(c) Intensity of electricity consumption net of sales, if any.
(d) Total energy intensity;
These have been summarised in tables 4.16 and 4.17. While Table 4.16 presents the
gross and net thermal energy consumption in different technology routes, Table 4. 17
describes the use of electrical energy, gross and net.
A detailed tabular presentation of energy balances for each route is given m
appendix tables A-4. 7 through A-4.12 in Appendix A-4.
4-50
. Table 4.16: Comparative Usage of Reductants and Other Fuels and Byproduct Arisings Per Tonne of Hot \Rolled Coil
Components Unit
1. Reductants (a) Coking coal GCal/ton
Ton/ton (b) Non-coking GCal/ton
coal Ton/ton (c) Natural GCal{ton
gas 'OOONm /ton 2. Other Fuels (a) Coke breeze GCal/ton
Ton/ton (b) Boiler coal GCal/ton
(c) Electrode
(d) Fuel oil
(e) DRI
Ton/ton GCal/ton Ton/ton GCal/ton Ton/ton GCal/ton Ton/ton
3. Gross Thermal Energy GCal/ton Consumption
4. Arisings (a) CO-gas
(b) BF-gas
(c) LD-gas
(d) Tar and
GCal{ton '000 Nm /ton
GCal{ton '000 Nm /ton
GCal/ton '000 Nm3/ton
GCal/ton Benzol Ton/ton
(e) Coke breeze GCal/ton Ton/ton
(f) Coal fines GCal/ton Ton/ton
(g) COREX gas GCal{ton '000 Nm /ton
(h) Net Arising GCal/ton 5. Net Thermal
Energy Consumption GCal/ton (Reductants and fuel)
1
5.387 0.744
1.957 0.267
7.345
9.181 0.042 0.556 0.669 0.104 0.052 0.199 0.022 0.449 0.073
1.480
5.855
2
3.823 0.439
0.160 0.026
0.033 0.004
4.017
4.017
Models
3
4.112 0.473
0.170 0.028
0.035 0.004
4.318
4.318
4
4.134 0.798
0.273 0.044
0.035 0.004 0.435 0.043
4.877
4.877
5
0.273 0.044
0.037 0.004 0.521 0.052 5.734 0.998
6
11.053 1.505
6.565 11.053
;J..704 0.232 3.326 1.956 5.030
6.565 6.023
A close look at Table 4.16 shows a higher thermal energy consumption in the BF-
BOF and COREX routes, both in gross terms as well as net of in-plant ar:isings. The
DR-EAF routes appear to be less intensive in the use of thermal energy. Their relatively
higher energy bills may be attributed to the higher prices of electrode, viz.,
Rs.75000/ton, and natural gas, VIZ., Rs.3150/'000 Nm3 , and high consumption of
4-51
electricity, as will be revealed later after analysing the pattern of electrical energy
consumption. Interestingly, the COREX route has the highest thermal energy intensity,
although it stands at the middle in terms of cost. The lower price of non-coking coal in
the COREX route pushes its fuel bill down despite the high usage coefficient. The use
of non-coking coal further improves its attractiveness because it can replace the imported
coking coal in India. Indigenous coking coal having a high ash content has made India's
conventional routes expensive and import-dependent. Moreover, it has a very rich
byproduct gas, viz., the CO REX gas, which may be further utilised for other purposes,
especially for generating power over and above own requirement as considered in model
6. The other routes except for model 5, have captive power plants but none has surplus
for sale. These aspects of electrical energy usage and production have been presented
in Table 4.17 for examination.
Table-4.17: Comparative Usage of Electrical Energy Per Tonne of Hot Rolled Coil
Components Unit Models
1 2 3 4 5 6
1. Power generation MWH/ton 0.357 0.357 0.357 0.357 1.190
2. Power purchase MWH/ton 0.121 0.576 0.647 0. 394 0.721
3. Sale of power MWH/ton 0.039
4. Net Power MWH/ton 0.478 0.933 1.005 0.752 0.721 1.151 Consumption GCal/ton 1.374 2.679 2.885 2.153 2.069 3.304
Note: Calorific value of electricity is 2.87 MCal/KWH.
The intensity of power consumption is still the highest for the COREX route as
was in case of the thermal energy. However, it is the only route which is self
sufficient in power and has surplus for sale, whereas all the other routes purchase a
substantial quantity of electricity. The BF-BOF model has the lowest power intensity as
well as purchase from the utility system. The 2 x 30 MW captive power plants for
4-52
models I and 2 and I x 30 MW plants for models 3 and 4, operating at a plant load
factor of 0.68 generates power to the tune of 0.357408 MWH/ton of HR coil in each
route. The requirement of purchased power is not very high for model 1 as compared
to the others. Model 5 relies entirely on outside power as it is only an electric arc
furnace based on purchased scrap and has no byproduct fuel from iron making which can
be used in captive power plants. The use of byproduct gases in the conventional route
of iron and steel-making may be sited as the possible reason behind the low energy
consumption of this technology. The total input of thermal energy sources gets
transformed into these gases which can now be· used in the downstream mills and for
steam generation. The DR-EAF routes show high intensity of electricity which can
easily be explained by the electricity-gobbling electric arc furnaces for steel melting. The
total energy intensity as well as their thermal and electrical components have been
summarised in Table 4.18. A merit ranking according to energy intensity has also been
presented along with.
Table 4.18: Energy Intensity and Merit Ordering of the Model Options Unit:GCal/Tonne of HR Coil
Models
1 2 3 4 5 6
1. Thermal Energy 7.345 4.017 4.318 4.877 6.565 11.053
2. Electrical 1.374 2.679 2.885 2.153 2.069 3.304 Energy
3. Total Energy 7.693 5.671 6.177 6.010 6.566 10.942 (Thermal and purchased power)
4. Merit Rank 5th 1st 3rd 2nd 4th 6th
'
4-53
Electrical energy intensity here refers to the total including purchased and
generated components of power consumption. But total energy intensity involves thermal
energy and purchased power because the total thermal energy consumption includes the
amount diverted for power generation as well.
The new COREX technology has proved to be less energy-efficient, followed
closely by the conventional one. But the relaxation in terms of the quality of coal and
the scope for generating exportable surplus power makes it attractive from the energy
point of view. However, the COREX-BOF route will be beneficial in the Indian macro
economic context only if (i) it uses indigenous non-coking coal instead of import and (ii)
it diverts the export COREX gas for power generation instead of the alternative uses in
fertiliser plants or DRI plants. The high energy-intensity of conventional steel making
may also be defended on the ground that it uses byproduct gases to a large extent. Such
advantages are missing in the DR-EAF options even though they record lower overall
energy intensities. The DR-EAF routes also produce captive power to the same tune but
uses purchased fuel, and a large quantity of electricity. This may be considered as a
drawback of this technological option in a power-scarce country like India. Therefore
the BF-BOF and COREX-BOF routes seem to have definite advantages in terms of the
overall energy system despite their high intensities. However, it may be noted that these
two models produce pig for sales realisation too and this additional activity requires a
greater amount of hot metal production, thus raising the energy requirement. Among
the DR-EAF models, it is the coal-based route which uses comparatively less power.
However, its coal consumption has pushed its thermal energy requirement up, thus
making its total energy intensity somewhat at par with the gas-based routes. The scrap
based EAF route has not emerged to be very energy-efficient because of the high
4-54
consumption of power in the electric arc furnace, entire dependence on the grid power
a~d also in view of the fact that the purchased DRI, used as a material, has congealed
energy too. The economy in terms of energy cost obtained earlier was due to the use of
DRI as raw material and cannot be taken as an indicator of energy-economy per se.
To conclude, it can be said that all the alternative routes have attractiveness in
different aspects. The choice of the optimal route has not been unique. While the
optimisation exercise has given the efficient cost of production only, the final choice
needs to consider also the choice of fuel, intensity of energy-use and the utilisation of
byproduct fuels which prevents further depletion of virgin fuel. The capital investment
requirement and physical energy intensities are high for the BF-BOF and COREX-BOF
routes as compared to the DR-EAF ones. The total cost of supplying a tonne of HR coil
has also come out to be the maximum for COREX. In that sense, the DR-EAF routes
are advantageous. However the BF-BOF and COREX-BOF routes do not lose their
credibility. The cost difference is also not much between BF-BOF and COREX-BOF
with the DR-EAF routes, although the latter are less capital-intensive and consume less
physical energy. Keeping all these in view, the conventional steel making process stakes
its claim to be chosen still as the most competitive. However, its limitations exist in
terms of the large scale of operation and the associated lower flexibility, lower scope for
technological modification and dependence on high-quality imported coking coal. The
COREX-BOF route offers a distinct advantage in terms of the type of coal used and the
lower burden of importing coking coal. Moreover, the high supply price of COREX
steel is offset by its other advantages in terms of the additional power generation from
COR~X gas and sales realisation. It also stands as an environmentally cleaner option
than the BF-BOF technology. It is this route which is gaining worldwide acceptance
4-55
today and India too has started its COREX unit for iron and steel production. However,
the COREX-BOF plant at Vijaynagar under installation is based on I 00 percent imported
non-coking coal, thus being unable to reduce import. It is interesting to note that the
scrap-based routes have gained importance in the developed countries where demand for
steel may be comfortably met by re-rolling old steel scrap. This eliminates the need for
integrated routes. However, the Indian economy still requires more steel production and
hence depends more on integrated routes, rather than the scrap based ones. Moreover,
BF-BOF route offers cost-economy as well. If energy conservation is not confined to
only a lower intensity of energy consumption, then DR-EAF routes do not stand out as
energy-efficient. Lower dependence on utility power, greater capacity for in-house
power generation, greater use of byproduct fuels and gases as against purchased fuel and
above all the potential for power supply to the grid may be considered as the extended
dimensions of energy conservation. In that sense, the BF-BOF and COREX-BOF
technologies become attractive options of steel making at greenfield sites in India. While
these two options offer advantages in terms of cost, 'fuel choice, less dependence on the
grid, use of byproducts etc., the DR-EAF routes involve lower capital cost and physical
energy intensity. The optimal choice of steel-making technology for green-field sites in
India should therefore be a proper-mix of alternative routes.
4.7 SUMMARY
The process-analysis of the Indian iron and steel industry along six alternative
technological routes for greenfield plants has attempted to throw some light on the choice
of technique from an energy-economic viewpoint. The total cost and its components,
viz., capital, labour, energy and materials have been computed and analysed to find out
the route with the least cost. A further attempt has been made to analyse the inter-
4-56
relationship of the factors of produciion and substitutability of energy vis-a-vis other
factors for all the routes. This has been done with the aim to answer the question of
energy conservation via factor substitution. However, the inconclusiveness in that
respect has further drawn the attention to physical energy usage and intensity, both
thermal and electrical, across the techniques. The study has pointed out the relative
merits of the various conventional and emerging steel making routes in different aspects
and hence at the mix of alternative technologies as a possible answer to the aggregate
economy's question of choice. An extended and flexible view on energy conservation
in terms of the choice of fuel, byproduct fuel use, less dependence on grid, potential of
generating exportable surplus power etc., along with the consideration of cost has made
the BF-BOF and COREX-BOF routes attractive for India. The energy advantages of
these routes and possible technical changes within the process have further been taken
up for study in the next chapter. Additional power generation leading to further self
sufficiency, lower dependence on grid and supply of power to the grid, if possible, are
the aspects of energy efficiency and conservation which have been looked into there.
Exact definitions of the technological modifications and the resulting benefits on the
plant's internal techno-economics have been worked out in relevant places there. This
would give a more intense process-level understanding of the energy economics of the
Indian iron and steel industry at greenfield sites.
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