The Steel Authority of India (SAIL), in a JV with a Japanese firm Kobe Steel, has planned to invest Rs 1500 cr in a 0.5 MTPA iron making plant, SAIL-Kobe Iron India, in Durgapur, West Bengal. The plant is expected to be operational by 2014.

This is a significant leap in iron-making technology and is part of SAIL's plan to forge closer ties with leading steel makers. The 2 companies had earlier signed an MoU in Mar 2010, and have been jointly working on a preliminary study to utilise the ITmk3 process. The proposed plant will use ITmk3 technology to produce iron nuggets from iron ore fines using non-coking coal. The conventional blast furnace route requires iron ore lumps, sinter and coking coal to produce pig iron, which ends up being costlier. ITmk3 technology produces high quality iron nuggets that is also environmentally friendly.

ITmK3 “Eye-Tee Mark Three” stands for 'Iron Making Technology Mark Three'. This is a unique technology developed and owned by Kobe Steel, Japan, that is used to smelt iron ore fines using non-coking coal to produce high grade iron. ITmk3 technology is far ahead of our traditional technologies of iron making, and will be considered as a new source of iron, particularly for electric steel making.

As per the joint plant committee report, out of the 60% of the total iron ore fines available, 80% are exported due to technology problems that largely result in consumption of lump iron ores by steel companies. With this technology, the Indian steel players will make use of iron ore fines to produce iron in electric furnaces and in basic oxygen furnaces as a partial substitute of scrap and pig iron as a feed stock available at higher prices to produce crude steel.

ITmk3 technology provides an opportunity for Indian steel and iron ore producers to add value over iron ore fines for better utilisation. Apart from that, this technology will reduce the higher dependence on coking coal, which is largely imported due to unavailability. However, it is too early to know the exact benefits arising out of this technology.

Kobe has released a statement on its website stating that the iron nuggets from the project may be used by SAIL and Kobe in proportion to their equity holding, or the JV company may sell the output in the market.

As per a media report, the 80% iron ore fines required will come from the mines owned by SAIL for at least 15 years, while non-coking coal will be sourced locally. The JV will fund the project with 70% debt and 30% equity, along with loans taken from 2 of the Japanese banks.

The project has been sent for a feasibility study and simultaneously for the required environmental clearances and permits. It will take company 7-8 months to start the construction work of the plant.

We, at DSIJ, believe the ITmk3 is indeed a revolutionary technology that will help steel companies to reduce their dependence on lump ore and coking coal in the future. However, this will not have any immediate impact on the company’s financials and will only be beneficial in the long run once the project gets operational.