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MOSCOW, Oct 9 (Reuters) - Russian iron ore producer Metalloinvest has begun construction of one of the world's largest hot briquetted iron (HBI) plants, an estimated $850 million investment to strengthen its position in the European market for intermediate steelmaking ingredients.
HBI is a compacted form of direct-reduced iron (DRI) - pellets than can be melted to make steel. HBI, easier to handle and ship than DRI, is used as a supplement for pig iron and scrap in electric furnace steel mills.
Metalloinvest, controlled by Russia's richest man, Alisher Usmanov, says it has 40 percent of the global market for merchant HBI, or HBI produced for and sold to third parties.
Stung by the sharp drop in iron ore prices, as Chinese demand wanes and large, low-cost producers pump up supply, Metalloinvest has cut back or postponed spending.
But it has pressed ahead with what it says are key investments, including the HBI plant at its Lebedinsky mine in Russia's Belgorod region. It is also set to complete construction of a $450 million pellet plant at its Mikhailovsky mine early next year.
Due to be launched in 2017, the HBI plant will have an annual production capacity of 1.8 million tonnes, Metalloinvest said on Thursday. That will make it one of the largest HBI production facilities in the world, after a larger plant in Texas, expected to be completed in 2016.
Midrex and Siemens AG are building the plant in Texas - with an annual capacity of 2 million tonnes of HBI - for Austrian steelmaker Voestalpine.
Metalloinvest currently runs two HBI plants at Lebedinsky, with total annual capacity of 2.4 million tonnes. (Reporting by Polina Devitt; Editing by Clara Ferreira Marques)