Direct Reduced Iron (DRI), also known as Sponge Iron, offers an alternative steel production route to BF-BOF and Scrap-EAF routes. In DRI, iron ore is reduced in its solid state – unlike BF process where a liquid metal is formed during reduction. DRI can then be transformed to steel in electric arc furnaces. DRI production is common in Middle East, South America, India and Mexico. DRI offers an attractive option due to its small scale low capital investment requirements and its suitability to local raw material situations. Consequently production has been expanding rapidly over the past three decades. However, the small scale of DRI operations also act as a barrier for energy efficiency investments.

Natural gas and coal are the two primary fuels used in DRI production. Whereas more than 90% of the global DRI plants use (lower grade) natural gas, production in India is primarily coal based. The energy consumption in natural gas based DRI production is well known and established to be 10.4 GJ/t-DRI. Natural gas based DRI production also leads to lower CO₂ emissions, with emissions ranging from 0.77 to 0.92 ton of CO₂ per fon of steel, depending on the type of electricity used. The most common technologies used for DRI production are MIDREX and HYL III, both using natural gas (IEA, 2007. p.132).

DRI processes can be divided up by the type of reactor employed, namely:

• shaft furnaces (Midrex®, HyL) 
• rotary kilns (SL/RN process)
• rotary hearth furnaces (Fastmet®/Fastmelt®, and ITmk3®)
• fluidised bed reactors (Circored®) (IPPC, 2009)

As there is no melting and no slag phase in DRI production, all gangue elements of the iron ores remain in the DRI and need to be separated via a slag in the EAF. This increases the electrical energy consumption of the EAF compared to steel scrap melting. If hot DRI is immediately transferred to the EAF melt shop, the heat from the direct reduction process lowers the cost of melting the DRI in the EAF, significantly cutting these energy costs and electrode consumption (IEA, 2009. p.68)

In DRI production India deserves special attention, not only because the country is the larges producer of DRI, but also because production is primarily coal based. In india DRI plants can be easily erected with the help of local suppliers, and the investment in a 100 t/d capacity DRI plant can be recovered in 12 to 18 months. There is a large number of DRI producers in India, and their numbers are continuously increasing.

Thermal loads for DRI production are mainly linked to the quality of coal and to a lesser degree to the reducibility of iron ore. High proportion (32% on average) of non combustible constituents (ash and moisture) of the coal commonly used in the Indian DRI plants result in higher specific energy consumption. Typical coal use in Indian DRI plants is in the range of 1.2 to 1.5 t-coal/t-DRI. The coal use in advanced plants is between 1.05 – 1.2 t-coal/t-DRI, which equals 20 – 25 GJ/t-DRI. This is significantly larger than the 15 - 19 GJ/t-DRI value obtained by using coal with 16% non-combustable fraction in South Africa. The counter-current rotary kilns used for DRI production in India only allow about 60% of the heat to be used for reduction, revalorization of the remaining 40% that is discharged from the kiln offers a significant potential for energy efficiency improvements. (IEA, 2007. p. 132-133)