India Steel Market Watch
October 28: Even as domestic coal production has increased sharply in the current year (2015-16), the Indian sponge iron (DRI) industry is facing shortage of 5-19 million tons (mt) of coal per annum, an official of a leading sponge iron maker said.
“At present, the Indian sponge iron industry requires 25-30 mt of non-coking coal (Grade B or C). Present domestic supply levels are at around 15 mt and 4-5 mt are being imported for usage by the coal-based sponge iron industry,” the official said.
The average requirement of coal is 1.6 tons per ton of sponge iron. “If the grade of coal is lower, then requirement increases to 2-2.5 tons of coal per ton of sponge iron,” he said.
The shortage of domestic coal has accentuated after the government reduced linkages to 37.5% from the earlier 75%, said the official.
“Good quality coal is being allocated to power and cement plants while supply of lower grades, ie, D, E and F varieties, are being given to sponge iron plants, with high percentage of fines,” he said.
“Sponge iron production requires at least 40-45% FC coal whereas linked coal has less than 40% FC. Hence, players go for blending with imported coal from South Africa,” he added.
The shortage of coal, along with subdued prices of sponge iron in the country, he said, has resulted in a decline in the growth rate of coal-based production in recent years.