Trend likely to reverse with more capacity addition through the blast furnace route

Production of direct reduced iron (DRI), also known as sponge iron, clocked a compound annual growth rate (CAGR) of 8% to 51.5 MT in fiscal 2024 from 34.7 MT in fiscal 2019, outpacing the 5% growth in crude steel output.

Demand for DRI comes from long steel manufacturing. The share of long steel production rose from 51.5% in fiscal 2019 to 54.8% in fiscal 2024 driven by construction and infrastructure activities.

That said, the trend is likely to reverse over the next Three years as the share of flat steel production is expected to rise with large players enhancing their capacity through the blast furnace-blast oxygen furnace (BF-BOF) route. In absolute terms, though, production of long steel is likely to be higher than that of flat steel.

Most of the mid-sized and small players blend DRI to produce long steel through the electric arc furnace or induction furnace (EAF or IF) route and major players manufacture steel predominantly through the BF-BOF route.

Also, large players may use these additional capacities for long steel production. Long steel demand is forecast to increase 7-8% and lower EAF/IF crude steel production growth will moderate sponge iron output growth over fiscals 2025 to 2030.