The paper discusses the concept of exergy, the energy and exergy balances of blast furnace ironmaking and DIOS-type direct ironsmelting processes, and exergy losses in these processes. The overall fuel efficiency of direct ironsmelting strongly depends on the utilisation of off-gas. It is shown that if off-gas is not utilised efficiently, the fuel efficiency of the direct ironsmelting process is enhanced strongly by increasing heat transfer efficiency and post-combustion ratio. Otherwise, when the off-gas is utilised efficiently, post-combustion ratio and heat transfer efficiency are less significant for the overall fuel efficiency. (c) 2005 Elsevier Ltd. All rights reserved.