After completing a successful 10-million tonne per annum expansion program at its Hazira plant, India's Essar group announced it will start using cheaper, low-grade iron ore fines to make steel.

"Most of our raw material will be low-grade fines which is much cheaper and abundantly available in the country. A bulk of our iron ore needs have been secured through off-take agreements with key players such as NMDC and captive mines in Jharkhand and Chhatisgarh," Prashant Ruia, group CEO of $15-billion Essar group said, adding the company has set-up benefication plants to facilitate the process.

Iron ore fines are generally dumped since Indian steelmakers lack the technology to process the low grade raw material into iron. For iron ore benification, Essar Steel licensed the technology from Sweden-based Metso while German-based Lurgi technology for pellets.

Analysts estimated using iron ore fines will help the company reduce operational costs by as much as 60 per cent. Profits could also correspondingly increase.

Essar holds long-term power purchase agreements with Essar Power. It will also gain have access to cheaper coal-based power from its captive plants to ensure and maintain power sustainability for its projects.

Essar also makes iron ore pellets through benefication. Every million tonnes of steel requires 1.4 million tonne pellet for manufacturing.

Once its Orissa benefication plant goes on line in March 2012, Essar Steel will have 20 million tonne pellet making capacity operational. The final six million tonnes at Orissa will be operational in a year's time.