Valley Cottage, NY -- (SBWIRE) -- 06/19/2020 -- Analysis of the Coronavirus Effect: Disruptions in Steel Production and Construction Sectors Weakens Demand for Direct Reduced Iron (DRI) – Future Market Insights

Companies producing direct reduced iron are increasing efforts to enter into long term contracts with steel manufacturers, which will help to keep up competitiveness in quality and pricing post pandemic
Future Market Insights, Dubai: Falling demand and disruptions to supply chains arising from the coronavirus outbreak has adversely impacted the direct reduced iron market. The impact of coronavirus on the industry include restrictions on logistics, travel, and labor shortages and a slowdown of industrial activity. Suspension of steel production and construction activities is likely to continue in the latter part of 2020.
As per a FMI report, the direct reduced iron (DRI) market is expected to reach a valuation of US$ 17 Bn through the end of the projection period in 2030. The effects of the virus on the DRI industry is expected to be temporary and this will lead to a surge in demand once the epidemic passes, and pending delivery orders are completed.

"The adoption of direct reduced iron allows steel manufacturers to generate carbon steel more cost- efficiently and with high levels of accuracy in specifications. Furthermore, the rapid rise in the cost of steel scraps coupled with strict regulations on the imports of such scrap contribute to the need for direct reduced iron in the steel industry. These trends bode well for the DRI market after the end of the pandemic," says the FMI analyst.

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Direct Reduced Iron Market – Major Takeaways

- Coal based production processes remain highly sought after. However, gas-based operations are gaining ground backed by environment concerns.
- Steel production remains the primary end use application, driven by demand from multiple application verticals.
- Direct reduced iron pellets hold a substantial lead over lump alternatives owing to superior results in processing.
- Asia Pacific is a dominant force in the direct reduced iron market owing to the prominent role of China as an iron and steel producer in the global industry.

Direct Reduced Iron Market – Top Driving Factors

- Rapid expansion of steel industry in China, India, and Vietnam will support growth of the direct reduced iron market.
- Fiscal stimulus provided by governments and strong business confidence in the iron industry is set to support market growth.
- Prospects of high demand for steel in automotive and construction industries indirectly fuel growth in the DRI market.
- Rise in volume of sea-borne DRI trade on a global scale also contributes to market development.
Direct Reduced Iron Market – Key Constraints
- Direct reduced iron poses a risk of self-heating and fire. Such safety hazards restrict handling and its transportation activities in the market.
- DRI is very vulnerable to rusting and oxidation when left exposed to the environment, restricting market operations.

Anticipated Impact of COVID-19

The strong activity of the construction sectors in major economies such as China and the United states has come to a jarring halt owing to the coronavirus pandemic. Regional and nationwide lockdowns along with large-scale labor shortages not only in construction, but also the steel industry will impact the direct reduced iron market.

The problems will also be aggravated in the short term by pressures of cash flow and supply chain issues which will result in substantial delays in order schedules. However, demand for DRI is likely to recover strongly after pandemic regulations are relaxed and workers move back into regular operations.

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Competition Landscape

Players in the direct reduced iron market include but are not limited to Nucor, ArcelorMittal, Mobarakeh Steel, SIDOR, and Jindal Steel. Leading players are primarily seeking long term contracts with steel producers and are also investing in capacity expansions.

For instance, JSW Steel is expanding its captive iron ore mine capacities with the development of up to 7 integrated facilities within India. Similarly, Port Hedland DRI facilities in Western Australia, with multiple players including Rio Tinto, and Pilbara Minerals among others are expected to reach production capacities of 547.5 million tons by the end of 2023.

More About the Report

The FMI's market research report gives exhaustive insights on Direct reduced iron market. The market is analyzed in terms of production process (coal-based and gas-based), application (steel production and construction) and form (lumps and pellets) across six key regions (North America, Latin America, Europe, East Asia, South Asia & Pacific, and Middle East and Africa).