The Hindu Business Line : Sponge iron makers' concern over meeting demand

SPONGE iron producers are both happy and worried over the growing demand, especially after steel producers have started charging sponge iron in their blast furnaces to overcome the imported coking coal crisis.

They are happy because the industry is recording steady growth and it is likely to continue for the next few years. They are also worried because they may not be able to meet the total market demand.

Mr S.S. Bhatnagar, Director of the Sponge Iron Manufacturers' Association (SIMA), said India, the world's largest sponge iron producer, manufactured 8.08 million tonnes during 2003-04. In 2004-05 it is expected to touch the 10 million-tonne-mark.

All the big producers like Jindal Steel & Power Ltd, Essar Steel, Vikram Ispat, Ispat Industries, Monnet Ispat and Tata Sponge Iron have charted out major growth plans. However, the recent decision of Steel Authority of India Ltd (SAIL) to charge sponge iron in their blast furnaces might push the demand to such an extent that there can be a scarcity in the domestic market.

To avert the coking coal crisis, the four integrated plants of SAIL are slowly changing their blast furnace mix. They are trying to replace iron ore with sponge iron to reduce the dependency on imported coking coal. Three of the four plants have started building stocks of sponge iron. Rourkela Steel Plant has already placed an order of one lakh tonnes. Bhilai and Bokaro steel plants too are considering similar steps.

Sponge iron producers are yet to work out the total sponge iron demand of SAIL but Mr Aditya Jajodia, Managing Director of Jai Balaji Sponge Iron, said that it should be in the range of 10 lakh tonnes per annum.

Mr Bhatnagar said that the industry was not in a position to meet this huge demand. He felt that SAIL should create its own sponge iron units and create the extra capacity to meet this increased demand.

According to him, the domestic sponge iron industry was handicapped on the raw material supply front and urged the Union Government to take immediate corrective steps. He said that there was an acute shortage of iron ore and coal supplies from Coal India.

"Even if we improve the efficiency level of coal and iron mining by 10-15 per cent then the raw material crisis could be averted," he said.

Raw material transportation is another major problem faced by the sponge iron producers due to the non-availability of railway rakes and trucks. Import of iron ore is also ruled out because of high duty and freight charges.

"In such a scenario can any producer work out fresh capacity expansion plans? Who will assure regular supplies of raw materials to the producers?" Mr Bhatnagar asked.

Despite all these, Essar Steel increased its sponge iron capacity to 2.4 million tonnes per annum from 1.76 million tonnes per annum. However, everything will be used for its internal consumption.

By the end of 2004-05, Jindal Steel & Power will increase its sponge iron capacity by 6.6 lakh tonnes per annum to 13.1 lakh tonnes per annum.