The Forum for Partners in Iran's Marketplace

September 2017, No. 85

Mines & Metals

Iran Ranks First Worldwide in Sponge Iron Production

Iran is gradually increasing production by relying on the export of semi-finished and finished steel as the local market is still in the doldrums.

Iran keeps ramping up the production of direct-reduced iron, refusing to yield the palm to India, which follows Iran in the list of top producers.

The trend is likely to continue in 2017, owing to strong crude steel production targets in Iran. However, India also intends to increase steel output, which might add uncertainty to the leadership battle, Metal Expert reported.

In January-November 2016, Iran produced about 14.9 million tons of DRI, up by 10.8% year-on-year, according to the World Steel Association. Higher production results are attributed to an 11% uptick in crude steel output, which reached 16.4 million tons over the period under review.

Iran is gradually increasing production by relying on the export of semi-finished and finished steel as the local market is still in the doldrums. It surpassed India in DRI production at the beginning of the year, becoming the world’s largest producer.

The rise came as global output of the product stood at around 54 million tons in 2016, down from 58 million tons the previous year.

Iran’s sponge iron production will further increase given the inauguration of new projects as well as plans to augment national steel production capacity, the association has predicted.

Over January-November, Indian companies slashed DRI output by 14.8% to around 13 million year-on-year despite the growth of crude steel production (+7.1% y-o-y to 87.5 million tons). The reason was increased use of scrap instead of DRI in the production chain due to changes in the environmental law.

Iranian market players are optimistic about further developments, believing that the trend will continue in 2017. Their confidence is based on a competitive production technology.

Iran’s DRI production is based on natural gas due to vast reserves and one of the cheapest gas prices in the world.

“The problem for Iran is how to use its vast gas reserves. Neighboring countries are reluctant to purchase gas from Iran at market prices … What Iran can do instead with its gas is to turn it into products derived from gas,” says Bahador Ahramian, a board member of the Iranian Steel Producers Association.

With high-quality natural resources, Iran will be able to maintain its leading position in the global DRI segment.

Moreover, for the first time ever, two Iranian companies, namely Golgohar Iron and Steel and Persian Gulf Saba Steel, started HBI (hot briquetted iron) production that may add 2 million tons to future results, in case the market for merchant metallized products is favorable.

At the same time, for India, it will be quite difficult to catch up with Iran. According to India’s Sponge Iron Manufacturers Association, total DRI production capacity in the country is 48.6 million tons per year, of which around 75% (36 million tons) are coal-based.

Moreover, India is the only country in the world making DRI using coal gasification.

“Coal gasification of DRI plant became a real game changer. Proved economic viability helps spread this technology across the country. But in the current market conditions, it doesn’t look as attractive as before,” a market insider told Metal Expert.

As coal is more pollutant than gas, Indian environmental authorities levied taxes on steel producers, which increased the cost for Indian producers.

Trying to maintain efficiency, many turned to scrap. As a result, in H1 2016, India increased scrap imports by 19.1% to almost 3.8 million tons, according to the Bureau of International Recycling.

India is likely to ramp up crude steel production next year by at least 5%, according to WSA. This means that the raw material sector will get some support, but the question remains as to who wins at the end of the day–scrap suppliers or DRI-based steel mills.

Iran exported 324 thousand tons of sponge iron worth 85 million dollars in the first four months of the Persian year 1396 (started 21 March 2017). The figure shows a growth of 24% compared to the same period a year before. The main destinations of Iranian sponge iron were Oman (40%), Kuwait (38%), India (8%) and Spain (7%). 

Iranian Experts Indigenize Iron Ore Direct Reduction Method

Situated in Khuzestan Province, the first sponge iron production plant in the world based on the innovative method of Persian engineers called PERED has successfully completed the experimental and production capacity tests and is ready for official use operation.

This unit marks the first direct reduction plant in the country equipped with the so-called PERED indigenized iron ore direct reduction method developed by Iranian engineers. As of June, the plant has gradually increased its output to 70 tons per hour and practically come on stream.

That plant is located in southwest Iran, close to Iraq, and will be able to meet some of Iraq’s future crude steel demands.

The new projects will add a combined 4.8 million tons/year of sponge iron capacity to Iran’s current nominal capacity of 17.3 million tons/year by December.

The module uses a domestic Iranian DR technology called PERED or Persian Reduction, invented and patented by MME Co., an Iranian engineering company registered in Germany.

This is the first DRI module to use the technology. Three of the projects under construction will also use PERED technology. 

What Is DRI?

Direct-reduced iron (DRI), also called sponge iron, is produced from the direct reduction of iron ore (in the form of lumps, pellets, or fines) to iron by a reducing gas or elementary carbon produced from natural gas or coal. Many ores are suitable for direct reduction.

Reduced iron derives its name from the chemical change that iron ore undergoes when it is heated in a furnace at high temperatures in the presence of hydrocarbon-rich gases, carbon monoxide, or elementary carbon. Direct reduction refers to processes which reduce iron oxides to metallic iron at temperatures below the melting point of iron. The product of such solid state processes is called direct reduced iron.

The reducing gas is a mixture of gases, primarily hydrogen (H2) and carbon monoxide (CO). The process temperature is typically 800 to 1200 °C. 


Direct reduction processes can be divided roughly into two categories: gas-based, and coal-based. In both cases, the objective of the process is to drive off the oxygen contained in various forms of iron ore (sized ore, concentrates, pellets, mill scale, furnace dust, etc.), in order to convert the ore to metallic iron, without melting it (below 1200 °C).

The direct reduction process is comparatively energy efficient. Steel made using DRI requires significantly less fuel, in that a traditional blast furnace is not needed. DRI is most commonly made into steel using electric arc furnaces to take advantage of the heat produced by the DRI product. 


In modern times, direct reduction processes have been developed to specifically overcome the difficulties of conventional blast furnaces. DRI is successfully manufactured in various parts of the world. The initial investment and operating costs of direct reduction plants are low compared to integrated steel plants and are more suitable for developing countries where supplies of coking coal are limited.


Sponge iron is not useful by itself, but can be processed to create wrought iron. The sponge is removed from the furnace, called a bloomery, and repeatedly beaten with heavy hammers and folded over to remove the slag, oxidize any carbon or carbide and weld the iron together. This treatment usually creates wrought iron with about three percent slag and a fraction of a percent of other impurities. Further treatment may add controlled amounts of carbon, allowing various kinds of heat treatment (e.g. “steeling”).

Today, sponge iron is created by reducing iron ore without melting it. This makes for an energy-efficient feedstock for specialty steel manufacturers which used to rely upon scrap metal.


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  September 2017
No. 85