Metals & Metallics

The sponge iron units are facing challenges in four fronts - rising cost of raw materials, non-availability of high grade iron ore, lack of economies of scale, and strict environmental regulations.
There is a wide divergence of cost structure among different players in sponge iron industry depending on their level of integration to access captive raw material and power. The production costs of non-integrated player is nearly 2.5 times higher compared to the ones with integrated structure. Short supply of iron ore and rising cost of both iron
ore and coal hit the margin of small scale sponge iron units.

Sponge iron industry should increase operating efficiency to improve productivity. Reduction of loss will minimize raw material consumption rate. Installation of Waste Heat Recovery Boiler (WHRB) and use of coal char to generate captive power are some of the
measures to be undertaken. Forward integration by installing small steelmaking furnace using captive power can help produce value added products. Finally, the government should regulate policies to ensure that sponge iron sector receives iron ore at regulated price.