Cheap gas to increase US direct reduced iron self sufficiency
* Nucor, Severstal, Voestalpine investing in DRI plants * Third wave of US investment in DRI more likely to succeed * Venezuela has production issues, Russia boosts output By Silvia Antonioli MIAMI, Jan 29 (Reuters) - The availability of cheap shale gas will help the U.S. to increase its self-sufficiency for direct reduced iron, a main steel ingredient, and will likely curb imports of Brazilian pig iron, the president of the iron metallics industry body said on Tuesday. Cheap energy prices in the United States are pushing steel mills to invest in direct reduction plants, which convert natural gas and iron ore pellets into high quality direct reduced iron (DRI), a feed used alongside steel scrap to produce various steel products in electric arc furnaces. U.S. steelmakers such as Nucor and Severstal North America and also foreign producers such as Austria's Voestalpine for example, are investing in construction of direct reduction iron making facilities in North America. "There is definitely a trend in the US, there is more interest in building captive direct reduction plants," Alberto Hassan, the president of the International Iron Metallics Association (IIMA) said in an interview on the sidelines of a CRU Metallics meeting. The metallics complex includes steel raw materials such as steel scrap, pig iron, DRI and its processed form, hot briquetted iron (HBI), which can in some cases substitute each other in steelmaking. "If these new plants materialize there will be a rearrangement of the metallics industry. There might be less demand especially for the Brazilian pig iron," Hassan added. The U.S. is currently a large importer of Brazilian pig iron and Venezuelan HBI, but if the country completes construction of its own direct reduction plants it might start importing less HBI and pig iron and more iron ore pellets to process it domestically. Twice before, in the 1970s and in the early 2000s, low gas prices have triggered a similar trend in the U.S., but this was then reversed fairly quickly when the energy prices increased again. This time however, things might be different, according to Hassan. "This time it seems that the companies have been able to lock in future gas prices, for example Nucor has locked in a 20 year contract. So at least it guarantees some stability." Nucor is building a $750 million direct reduction facility in St. James Parish, Louisiana, expected to produce two and a half million tonnes of direct reduced iron a year. VENEZUELAN ISSUES Venezuela, which thanks to its ample availability of natural gas and iron is on paper an ideal producer of both DRI and HBI, has seen its production volumes shrink in the last few years three years or so. The industry has been largely nationalized in 2009. The country has an HBI capacity of 7 million tonnes a year but in 2012 it produced only about 2 million tonnes. This was mainly due to the lack of investment, which has caused domestic plants to shut downs in recent years, and lack of iron ore pellet, market players said. The country is expected to produce once again about 2 million tonnes of HBI in 2013. This compares with peak production of around 5 million tonnes in the early 2000s, Hassan said. Partially making up for the Venezuelan contraction is a production expansion in Russia, where Metalloinvest is ramping up capacity at its Lebedinsky facility, Hassan said.