Sponge iron sector might report negative growth due to coal crisis: SIMA

The domestic sponge iron industry might report a negative growth in the ongoing December quarter "if the shortage of coal is allowed to continue", according to apex industry body SIMA.

Sponge Iron Manufacturers Association (SIMA) Executive Director Deependra Kashiva said India is expected to report a 60 per cent quarter-on-quarter (q-o-q) fall in its sponge iron output during the July-September 2021 period, amid the ongoing coal crisis.

As per the JPC data, the sponge iron production growth in April-June 2021 was 70 per cent, compared with January-March 2021. This is expected to come down by 60 per cent to a level of 10 per cent in the second quarter ended September 30, 2021, due to the coal crisis, he said without providing any figures.

"If the situation is allowed to continue...if the shortage of coal is allowed to continue then I am expecting that in Q3 (October-December), the growth will be negative," Kashiva told PTI in a telephonic interaction.

He said the JPC data for September will be released by the next week.

The Joint Plant Committee (JPC), under the Ministry of Steel, is the only institution that collects and maintains data on the Indian steel and iron sector.

Speaking further on the situation, he said Coal India Ltd (CIL) recently announced to give coal to only thermal power plants.

"They have said that except for the power sector, we are stopping supply to all industry users, and sponge iron and cement are the two big consumers after the power sector," the Kashiva said.

He added that the industry consumes about 40 million tonnes of coal annually and has provided three lakh direct and indirect jobs.

Sponge iron or direct reduced iron (DRI) is used in producing semi-finished steel items, ingots and billets, which are further used to make various finished steel items. Coal is a key raw material used to produce sponge iron.

"The production is coming down. The players are using the coal in their inventory...but if the situation continues, the sponge iron industry will be in trouble," he added.