Direct-reduced iron (DRI), also called sponge iron, is produced from direct reduction of iron ore (in the form of lumps, pellets or fines) by a reducing gas produced from natural gas or coal. The reducing gas is a mixture majority of Hydrogen (H2) and Carbon Monoxide (CO) which acts as reducing agent. This process of directly reducing the iron ore in solid form by reducing gases is called direct reduction.
The conventional route for making steel consists of sintering or pelletization plants, coke ovens, blast furnaces, and basic oxygen furnaces. Such plants require high capital expenses and raw materials of stringent specifications. Coking coal is needed to make a coke strong enough to support the burden in the blast furnace. Integrated steel plants of less than one million tons annual capacity are generally not economically viable. The coke ovens and sintering plants in an integrated steel plant are polluting and expensive units.
Direct reduction, an alternative route of iron making, has been developed to overcome some of these difficulties of conventional blast furnaces. DRI is successfully manufactured in various parts of the world through either natural gas or coal-based technology. Iron ore is reduced in solid state at 800 to 1,050 °C (1,472 to 1,922 °F) either by reducing gas (H2+CO) or coal. The specific investment and operating costs of direct reduction plants are low compared to integrated steel plants and are more suitable for many developing countries where supplies of coking coal are limited.
The direct reduction process is intrinsically more energy efficient than the blast furnace because it operates at a lower temperature, and there are several other factors which make it economical:
- Direct-reduced iron is richer in iron than pig iron, typically 90–94% total iron (depending on the quality of the raw ore)  as opposed to about 93% for molten pig iron, and an excellent feedstock for the electric furnaces used by mini mills, allowing them to use lower grades of scrap for the rest of the charge or to produce higher grades of steel.
- Hot-briquetted iron (HBI) is a compacted form of DRI designed for ease of shipping, handling, and storage.
- Hot Direct Reduced Iron (HDRI) is iron not cooled before discharge from the reduction furnace, immediately transported to a waiting electric arc furnace and charged thereby saving energy.
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