INDIAN REFRACTORY INDUSTRYRefractory products are vital in all high-temperature processes in the making of metals, cement, glass and

ceramics. There are more than 100 refractory producers in India, out of which only around 14 are major manu-

facturers and a further 33-40 are medium sized, while the rest produce relatively small volumes of materials.

Steel plants in India consume 8-10 kg of refractory per tonne of steel on average, although the figure can be

as high as 15kg per tonne, depending on the quality or age of the steel plant. India’s steel industry consumes

75% of the country refractory output. The current capacity utilization of the industry is not more than 60 per cent.

MARKET SIZE AND GROWTH OF THE INDUSTRYThe global refractories market is projected to reach USD 36.17 billion by 2022, at a CAGR of 3.89% between

2017 and 2022. By volume, it is projected to reach 56.83 million tons by 2022, at a CAGR of 3.45% between

2017 and 2022. The market is experiencing growth due to infrastructural developments in emerging econo-

mies such as China, India, and Brazil and expansion of

non-metallic minerals industry. Growing demand for

high-grade refractories from iron & steel industries is

an important factor driving the refractories market. India

currently imports more than 50% of its refractory raw

material needs including graphite, fused and calcined

alumina, magnesite and high grade clays. India mostly

imports magnesia product from China, as India lacks this

good quality raw material. Since the steel industry is one

of the biggest consumers of refractory products accounting for nearly 60-70 per cent of their total production,

the global growth of steel demand is a crucial determinant for the growth of the refractory industry.

INDUSTRY OUTLOOK

STEEL REFRACTORY

1

MARKET TRENDS AND MAJOR PLAYERSMAJOR EXPORT

MARKETSDomestic players export to various

parts of the world, except China

and Japan. A big chunk of exports

goes to the European region.

Many players also sell in the US,

Middle East, CIS countries and

South East Asia as well.

The global players have been in India for quite a long time now

and few of them have set up their own manufacturing units.

Instead, they have acquired Indian plants. Global players like

Vesuvius (in metal flow engineering, providing engineering

services mainly to steel and foundry industries), RHI Magnesita,

Pohang Refractories (manufactures from China), Chosun

Refractories from South Korea among other players exporting to

India, some of them are also eyeing for extending trading base

and manufacturing in India.

Austria-based RHI acquired 69.6% shares in Indian Orient

Refractories Ltd. (ORL) and operates its main manufacturing

facility in Bhiwadi in Rajasthan. RHI is the second biggest global

supplier of refractories after UK-based Vesuvius. For RHI, the

acquisition is key to pursuing its growth strategy focused on

emerging markets and deepening its global market position in

the flow control business segment. ORL customers include

large domestic integrated steel producers and mini steel plants

that include Steel Authority of India, Mukund Steel, Tata Iron

and Steel Company, RINL – Vizag, Sunflag Iron, Lloyd Steel,

Usha Martin and the Jindal Group. With close to 300 small to

medium sized iron and steel producing Indian companies as

customers, ORL is a preferred vendor for a large number of

steel producers in the country. ORL has presence in the global

market place with exports to over 35 countries across the globe

including Germany, France, Spain, Turkey, Egypt, Indonesia,

Saudi Arabia, Thailand, UAE and Greece.

OCL India Ltd: OCL is the flag ship company of ‘Dalmia

Group’ of companies, set up and operating from eastern India.

The Company provided a wide range of special refractories and

monolithics to meet the needs of the iron and steel industry.

OCL’s Refractory plant is situated at Rajgangpur (industrial town

situated in the Sundargarh District of Odisha) with a total

installed capacity of 106400 MT per annum to produce the

various types of refractories. For the domestic market, the com-

pany is focusing on production of high performance bricks for

cement kilns and special quality bricks for high purity steel. The

company is also looking for alternatives for magnesia bricks to

hedge against uncertainties in raw material availability. It has

2

Airports Authority of India (AAI) has chalked out a programme for upgradation of airports with an expenditure of Rs 18,000 crore in the next four years³. The capital expenditure is projectedto be around Rs 4,100 crore for 2018-19.

earmarked close to Rs.80-100 crore towards product diversification and plant modernisation initiatives to be

undertaken in the next couple of years. This apart, the group is also looking for acquisitions overseas, specifi-

cally Europe, as a part of growing its refractory business. Recently, the refractories division of the

Rs.10,000-crore Dalmia Bharat Group has entered into a joint venture (JV) with Europe-based Seven Refrac-

tories to develop and supply a range of advanced monolithic refractory material. The joint venture entity –

Dalmia Seven – will upgrade and modernise Dalmia’s existing factory at Katni in Madhya Pradesh at an

estimated investment of close to Rs.32 crore ($5 million). Dalmia has a 51 per cent stake in the joint venture

company.

TRL Krosaki Refractories Limited (formerly Tata Refractories Limited or TRL) has pioneered refractory produc-

tion in India, with range of products like Basic, Dolomite, High Alumina, Monolithic, Silica, Flow Control and

Tap Hole Clay Refractories having a consolidated installed capacity of 4,66,290 TPA, with key customers in-

Steel, Cement, Glass, Copper and Aluminium industries. Its main work is located at Belpahar in the district

of Jharsuguda in the State of Odisha, India. The company has two subsidiaries viz TRL Asia Pvt. Ltd. (a Singa-

pore based SPV) and TRL China Limited, a 100% subsidiary of TRL Asia Pvt. Ltd. After the acquisition of 51%

shares of Tata Refractories Limited (TRL) by Krosaki Harima Corporation (KHC), Japan from Tata Steel, the

name of the company has been changed to TRL Krosaki Refractories Limited. Tata Steel continues to hold a

26.62% equity stake in TRL Krosaki. With the association of KHC, a leading refractory player with global pres-

ence and advanced technology, TRL Krosaki will be able to access the latest technology and diversify its prod-

uct offering. It will also provide TRL Krosaki an opportunity to easily access markets outside India. KHC and

TRL Krosaki have jointly emerged as the 5th largest refractories manufacturer in the world. TRL Krosaki is the

only company in the world that links vertically to three Steel Manufacturers - Tata Steel, Nippon Steel & Sumi-

tomo Metal Corporation Japan and Steel Authority of India (SAIL).

Calderys, Bharat Refractories, IFGL Refractories, SAIL Refractory (a subsidiary of SAIL) are other major players.

Calderys the foundry division of France-based minerals group- Imreys, entered India by acquiring domestic

producer ACE Refractories in 2007. It’s manufacturing units are loacated in Katni-Madhya Pradesh and Nag-

pur-Maharashtra. It produces a range of monolithic, high-alumina and insulating bricks with an installed

capacity of 170,000 tpa refractory products with an additional capacity of 67,000 tpa from its franchised

operation. Some refractory manufacturers have magnesia carbon brick manufacturing plants in China -- like

Vesuvius, RHI, Tata Krosaki Refractories, OCL, etc.

4

3

FUTURE OUTLOOKRefractory industry has the largest application in the

steel industry globally. The increasing infrastructure

and construction activities in the developing econo-

mies such as India, Brazil, Mexico, Russia, and other

economies worldwide are contributing abundantly to

the steel consumption and henceforth increasing

refractories usage. Asia-Pacific region represents larg-

est market share in the global refractories market. Rise

in population drives construction industry which further

drives the refractories market in emerging economies.

Indian refractory industry is currently dependent on

China for the supply of raw material, particularly mag-

nesite. Currently, magnesite deposits are produced

from sea water and available from some Indian mines

having low quality magnesite deposits. However,

favorable development in this regard is that whereas

earlier, apart from finished products, nearly 40 per

cent of the raw materials for refractory bricks — such

as magnesite, graphite, fused and calcined alumina

and high grade clays — were imported from China.

However, in the recent years China clamped down on

mining and introduced stringent pollution control

norms. As a result of which the supply of raw materials

has been impacted, shifting the focus to some extent

on to domestic refractory makers. Large international

players who have the technology are coming to India

directly, which will also upgrade the technical

know-how further. Competition would be in supplying

good quality refractory, which is expected to be

ensured by the global players who have acquired

Indian plants by bringing the required technical

know-how. The tie-ups between Indian and foreign

companies take place due to twofold mutually benefi-

cial factors: foreign companies want to take advantag-

es of low-cost manufacturing; whereas Indian compa-

nies can be benefited via improved technology that

foreign companies import.

The growth of the refractory industry is largely depen-

dant on the growth of the steel industry. Refractory

industry faces issues of capacity utilisation and price

pressures due to bottlenecks in the steel industry. Proj

CHALLENGES IN THE INDUSTRY

ects are mostly stalled in silica brick segment. The refractory industry is jammed with dues amounting to more

than half of their profits with a number of steel firms facing insolvency process under National Company Law

Tribunal (NCLT). The capital-intensive steel industry has been one of the major contributors to the non-per-

forming assets (NPAs) of bank. Given its small size, a steep haircut would adversely impact the refractory indus-

try. India’s refractory industry suffered badly in 2016 due to decline in the price of steel, which has been com-

pounded by accelerated dumping of Chinese steel products in the Indian market and slowdown in the steel

sector. Domestic producers also have to contend with competition from low cost raw materials, particularly

from China. Restrictions on the use of refractories due to growing environment concerns, monopoly of China

over raw material supply, and fluctuating iron ore prices are the key factors restraining and challenging the

growth of the global refractories market. Skill-based training and quality manpower in this industry are issues,

as manpower in the ceramics industry is less compared to the requirement. It may also be noted that while the

5

FOOTNOTES

price of refractory products has increased by 30-50 per cent, that of the raw materials surged by 10-150 per

cent across various categories. The Rs.6,500-crore domestic refractory industry, which has not taken any

‘significant’ price hike in the last three to five years, has managed to pass it on to its consumers thus far. How-

ever, any further price hike would be difficult to manage. Another emerging risk is further weakening of the

rupee that might put pressure on margins as about 50% of the refractory raw materials are being imported

and given the hedging cost, the small players might find it difficult to absorb. The margin depends on the

extent of the composite refractory management contracts, which are generally fixed price contracts where

players import a part of the refractory and supply together but they get paid in the Indian currency. In such

instances, for a short to medium term, players have to absorb that cost. On the other hand, exporters would

be benefitted given the weakening rupee as this will increase their export competitiveness in the global market.

There is a need to support the refractory industry with a better mining policy, and allocate funds for research

and development (R & D) for generating high-quality supply of domestically produced raw material in India,

as well as providing export incentives to encourage domestic production. The growth prospect of the refractory

industry in India will depend entirely on growth of the steel industry which is also dependent on growth in the

infrastructure sector. Development and expansion in ports is also crucial since the refractory industry is depen-

dent to a large extent on imported raw materials. Hence infrastructural supports will definitely be a boon to

the industry. Furthermore, Economising on logistics costs is also a key. Refractory management, i.e., installa-

tion and managing the refractory at the customer plant-end, as well as interaction with the customer, providing

manpower for maintaining the products are also major challenges. All such issues can be formulated in a

National Refractory Policy within the National Steel Policy for providing future roadmap for the industry.

CONCLUDING REMARKS

6

1The future growth of iron & steel industry in India is crucially linked with the growth of infrastructure and construction sectors. Building of roads, bridges, ports, airports, metro projects, dams etc. will give a boost to steel demand in the country. 2 Latest news, http://www.orientrefractories.com/ourbusinesses.htm; http://www.orientrefractories.com/pdfs/Latest%20News.pdf 3 A new line will be put up at the plant at Katni to manufacture value added and premium range of monolithic refractory products. The new line will be operational by the end of the calendar year 2018. 4 http://www.trlkrosaki.com/aboutUs/corporateProfile.aspx

5According to Sameer Nagpal, head of advocacy, Indian Refractory Makers Association (IRMA), the refractory industry may have to take haircuts to the tune of Rs.400 crore, a big blow for the industry whose profit generation is to the tune of Rs.600 crore. See, “Refractory industry banks on revival of infra projects for demand pick-up” (23November2017), URL: https://www.thehindubusinessline.com/economy/refractory-industry-banks-on-revival-of-infra-projects-for-demand-pickup/article9970885.ece; accessed on 25 April 2018. 6 According to Parmod Sagar, Chairman, India International Refractories Congress (Irefcon); see: https://www.thehindubusinessline.com/econo-my/as-chinese-imports-decline-domestic-refractory-makers-eye-larger-market/article23040300.ece.

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