Sponge Iron industries are might shut down owing to low demand for steel in the domestic market.
Welspun Maxsteel and Tata Sponge Iron, major sponge producers of India are close to a shutdown on account of reduced offtake in steel market. Steel industry in India is facing a low demand and restricted availability of raw material such as iron ore, thermal coal and natural gas. Ban imposed on iron ore extraction has created a shortage of the material in the country, restricting its availability for the steel manufacturers. Also, natural disasters in the country added to the woes of the steel industry worth INR 40 billion.
Sponge Iron is the major material used by smaller steel mills for economic steel production, unlike large set ups, which uses Iron ore and high budget materials such as thermal coal or natural gas.
“We have requested the government to provide iron ore at a concessional rate and allocation of mines. Smaller capacity plants are performing badly with frequent break down leading to increase in maintenance cost with capital repairs of equipments. Most of these plants are running at a capacity of only 50%,” said V R Sharma, Chairman at SIMA.
Since past 11 years, India has been the largest Sponge Iron producer in the world contributing 33% of the total global Sponge Iron production at present.
Domestic Sponge Iron manufacturers are hit mainly by the non availability of Iron ore and Coking Coal in the market. Karnataka and Odisha, which produced about 37% of the India’s total Sponge Iron production, are affected by the ban imposed on iron ore mining and restrained extraction of the raw material. Sponge iron production level from these states has thus drastically declined.
A spokesperson from Essar mentions, “Prime Minister’s vision for achieving 300 MnT of steel capacity cannot be achieved if Sponge Iron units are not encouraged to create capacities for supporting the steel plants. Rise in power & fuel expenses and transportation costs further pushed up the manufacturing cost of sponge iron companies.”
Low electricity tariffs could help Sponge Iron industry as at present they have to pay heavy electricity charges which takes away half of their manufacturing costs and investments.