India’s Direct-Reduced Iron Sector Feels the Pinch of Low Steel Prices

India tops the list of direct reduced iron (DRI)-producing nations, but what remains hidden from the world are the many problems faced by the country’s domestic industry, which has been facing an uphill production task for the last 4-5 years.

Why Manufacturers Need to Ditch Purchase Price Variance

High costs and lower demand are just two of the problems plaguing India’s DRI sector. DRI is used by the steel industry in flat as well as long steel product segments, and is also used in infrastructure projects.

Low Steel Demand Hits DRI Producers, Too

According to figures put out by the World Steel Association, in the first quarter of 2015, India, with over 4,500 tons of DRI, headed the list of 14 nations that accounted for 87 % of the world’s total DRI production. The Sponge Iron Manufacturers Association has estimated India to have an installed capacity of 37 million metric tons, although it’s difficult to arrive at an accurate figure due to a general lack of proper research.

EAF and Induction Resources

India’s DRI industry has nurtured secondary steel producers who largely use electric arc or induction furnaces to make their steel, for which DRI comes as handy substitute for scrap.

Experts here in the world’s largest democracy say as many as 50% of DRI (sponge iron) units in India have been shut down in the last 4 years. Even in existing units, production was reduced to half the installed capacity during this period.

Now, India’s DRI sector is hoping for sops from the government and a clarity in the overall steel policy to see it through, what many have dubbed, “its most critical phase ever.” What is worrisome is that the falling demand for steel ,especially construction steel, globally, could further, negatively impact the DRI sector.

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  • I believe the entire discussion of production numbers of DRI and steel coming from India should be evaluated based on hot metal yield. As a majority of India’s DRI output comes from coal based rotary kilns and the normal DRI quality is stated to be around 75% metallic iron, as compared to gas based DRI at around 90% metallioc iron on a worldwide basis. This means that gas besed DRI will have at least 90% hot metal yield vs 75% for coal based. The prices should reflect this for DRI, as well as the efficiency of steel production. In essence, given all the factors, the cost of making steel in India is that much higher. If it weren’t for the subsidies and low wages, India could not compete on any market basis without high tarriffs on imports and high subsidies on exports.


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