The buoyancy in the market has also perked the sick sponge iron companies with buyers queuing to take over some of the units, which have been referred to the Board for Industrial and Financial Reconstruction (BIFR). Bankers said a few projects were also planned near Goa, Uttar Pradesh and Hospet in Karnataka.
Most of the greenfield projects are being set up in Orissa and Chhattisgarh, with a few promoters also eyeing Jharkhand. They added that the eastern states were the preferred location due to their proximity to iron ore and coal mines as also iron and steel plants, which used sponge iron as a substitute for scrap.
Steel companies were reducing their dependence on steel and opting for sponge iron as it was more efficient, said a banker. Typically, sponge iron projects, with a capacity of around 300 tonnes per day, require an investment of Rs 65-80 crore.
Such a facility will include two furnaces of six tonnes each and a captive power plant with 8-10 Mw capacity. Bankers, however, said they received a large number of applications for plants with smaller capacity.
But banks were not in a hurry to clear loans since they said the steel sector typically witnessed a cyclical demand trend.
