With the rising prices and deteriorating quality of raw materials the sustainability of Sponge Iron plants is in difficulty.
Sustainability of Sponge Iron plants across India is under pressure and it’s going to be the same for next two years. On one hand, the Sponge Iron prices are falling but on the other hand, the prices of raw materials used for its production are increasing. A rumor that, the royalty on Iron ore and Coal might increase is creating fear in the minds of manufacturers. The cumulative effect is a negative pressure exerted on the overall growth of Sponge Iron Industry in India. The situation of manufacturers who have backward integration to mines might be at ease but only to a limit. Now is the time, when India needs to safeguard its industries and the business houses during the adversity. Of course not at the cost of environment but at least with a suitable trade off.
Sponge Iron plants are running at 50% capacity. The sector has reported a negative growth of 15% for the FY 13. Mr. B. L. Agrawal, Managing Director of Godwari Power and Ispat suggest, ‘only those who can mitigate the risk for next 2 years should stay and those who cannot, should exit as soon as possible’. He indicates the need of price correction for the sustainability of Sponge Iron plants.
The manufacturers are in favor of producing Sponge Iron with Pellets instead of Iron ore. Although the Pellet technology is new, it is adopted more swiftly. Manufacturing by DRI route using fines or lumps might have to compromise with rising price of raw material. DRI route might witness a slowdown but it will never stop as there’s still a market for Sponge Iron.
The Scrap imports have increased 27% Y-o-Y due to mining restrictions in various states. These stringent policies have created a condition of scarcity. Hence, Sponge Iron units are using only the leftovers which is effecting the quality of production. To counter the effect, manufacturers are forced to import Scrap in order to maintain BIS standards. It appears that Sponge Iron market need to face these uncertainties.
States of Chhattisgarh, Karnataka and Goa contribute substantially to India’s GDP hence, any effect on their economy will also reflect upon National economy. Therefore the Policies, Rules and Regulations should never be compromised but they need to be framed properly for an overall win-win situation.