Business Report on Refractory Industry in India What are Refractories? "Refractory" items according to any Standard English dictionary are materials which are hard to work with, and are especially resistant to heat and pressure. In practical terms, refractories are products used for high temperature insulation and erosion/corrosion and are made mainly from non-metallic minerals. They are so processed that they become resistant to the corrosive and erosive action of hot gases, liquids and solids at high temperatures, in various types of kilns and furnaces. Some typical specifications of Indian refractories commonly used in the furnaces and kilns in steel, cement, non-ferrous metals and glass industries are given below:- High Alumina - Silica Basic Castables/Monolithics Special Products Insulating Bricks Industry Overview:- Refractory is a term given to a class of materials which are produced from nonmetallic minerals and possess capability to withstand heat and pressure. These are products that confer properties like high temperature to corrosive and erosive action of hot gases, liquids and solids at high temperatures in various kilns and furnaces. The fortunes of the Refractory industry are very much dependant on steel industry as almost 75% of the refractories produced is consumed in steel industry. Steel consumption in India is expected to grow significantly in coming years as per capita finished steel consumption is far less than its regional counterparts. The growth in construction, infrastructure, automobile and power sector will continue to create significant demand for steel sector, which in turn will create demand for refractories. 1
Transcript
Business Report on Refractory Industry in India
What are Refractories?
"Refractory" items according to any Standard English dictionary are materials which are hard to work with, and are especially resistant to heat and pressure. In practical terms, refractories are products used for high temperature insulation and erosion/corrosion and are made mainly from non-metallic minerals. They are so processed that they become resistant to the corrosive and erosive action of hot gases, liquids and solids at high temperatures, in various types of kilns and furnaces.
Some typical specifications of Indian refractories commonly used in the furnaces and kilns in steel, cement, non-ferrous metals and glass industries are given below:-
High Alumina - Silica Basic Castables/Monolithics Special Products Insulating Bricks
Industry Overview:-Refractory is a term given to a class of materials which are produced from nonmetallic minerals and possess capability to withstand heat and pressure. These are products that confer properties like high temperature to corrosive and erosive action of hot gases, liquids and solids at high temperatures in various kilns and furnaces. The fortunes of the Refractory industry are very much dependant on steel industry as almost 75% of the refractories produced is consumed in steel industry. Steel consumption in India is expected to grow significantly in coming years as per capita finished steel consumption is far less than its regional counterparts. The growth in construction, infrastructure, automobile and power sector will continue to create significant demand for steel sector, which in turn will create demand for refractories.
The Indian refractory industry started its journey with first line of production in Kolkata in 1874. Today, the industry comprises over 100 established units, with 11 large plants, 24 medium-scale units and the rest in the small-scale sector. However, while the refractory industry in India took off in the late 19th century, the real growth came in the late 1950s when the public sector steel plants were set up and Tata Steel embarked upon its expansion plans. Currently, the Indian refractory industry has an aggregate production capacity of 20 lakh tonnes per annum. The capacity utilization, however, currently stands at around 60 percent or 11.5-12 lakh tones per annum.
About 75 per cent of the refractories that are manufactured find application in the steel industry, 12 percent in the cement industry, 5-6 per cent in non-ferrous industries, three per cent in the glass industry and the balance in other industries.
Refractories are used either where high temperature or high rate of abrasion/corrosion/erosion is involved. Traditionally, refractories are made of naturally-occurring minerals, such as bauxite, kyanite, magnesite, fireclay, chrome ore, etc. Lately, however, the industry has been using man-made raw materials, such as brown-fused alumina, tabular alumina, fused magnesia, silicon carbide, magnesia alumina, etc. Refractory plays a dynamic role not only for metallurgical but also for Shaping up chemical and petrochemical, glass, ceramic, cement and limestone industries. Major research work has so far been concentrated for the development of new refractory and also for its reduction in consumption for steel industries. Indian refractory industry, meanwhile, is required to upgrade their operations with global technologies which need huge investment.
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Business Report on Refractory Industry in India
The Scope of the Industry:-The size of the Indian refractory industry has been pegged at Rs 2,300 crore and it is stated to be growing at 8-10 per cent per annum. Although the specific consumption of refractories has gone down from 30 kg per tonne of steel about 20 years ago to 12-13 kg on an average for the steel industry as a whole and as low as 7-8 kg in the case of some more efficient steel units, the scope for growth is good in view of the continuing growth in the Indian economy and the government's focus on infrastructure development. Despite downturn in steel sector, the domestic refractory industry that supplies raw materials to steel plants and industries, posted 21 percent growth in turnover at Rs 4,480 crore in 2009-10 against Rs 3,640 crore in 2008-09, when the growth was 16 percent over 2007-08. The capacity utilization of the industry was 65 percent.
Business Concerns:- Industry dependent on raw material imports from China. Use of synthetic raw materials is
driving prices higher In the event of continued high prices for crude oil and other petroleum products,
hardening of the coal prices the prices of the inputs of the refractory industry are increasing
Raw material prices have moved up 80 to 85% but prices of finished products have just appreciated 18-30% resulting in erosion of the bottom lines of the refractories companies.
Affected by the slow down in the economy In Industries like steel – trend towards lower refractories consumption per tone of steel.
Usage of new technology processes leads to reduction in refractories consumption The industry is going through an exciting and complex phase. On one hand, refractory
makers are adding capacities with the hope that demand from the steel sector will rise at a fast pace. On the other hand, none of the major announced Greenfield steel projects are yet to get off the ground.
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Business Report on Refractory Industry in India
Challenges for Industry:-
“The Refractory Industry must upgrade itself to take benefit of increased business from the steel industry” stated R K Vijayvergia, Executive Director-Operations, SAIL, at a recently held conference. In his special address, Vijayvergia said, “Steel industry forms the major end use segment for refractories consuming around 70 percent of its total annual production. The Refractory Industry has to keep pace with steel industry with regard to quality and quantity demands. Meanwhile, with the changed business scenario more and more customers are looking forward to total refractory management which encompasses creation of value added service, responsive supply chain network and understanding of customers' requirement.” The major Indian refractory manufactures need to gear up to cater the need of steel industry.
World leaders in refractories like RHI from Austria, Vesuvius from Belgium,French giant Calderys, Pohang from South Korea etc have also made their presence in India, which is a good sign for the industry. Recently SAIL has taken over Bharat Refractories Ltd which is now named as SAILRefractorry Unit (SRU). SAIL is in the process of augmenting and upgrading the facilities at SRU for higherproduction to meet the quality requirement of SAIL. Refractory producers in India have to rise to the occasion by providing ready, regular, speedy and consistent supplies, Irani said. It would also be important for Indian refractory manufacturers to focus on their raw materials security. Industry insiders do acknowledge that raw materials security is a concern especially with China imposing quantitative restrictions on export of raw materials and also jacking up prices over the last year or so. Cheaper refractory imports from China are also putting a pressure on the industry's margins. Hiring and retaining skilled manpower is a major challenge that the Indian refractory industry has to cope with.
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Business Report on Refractory Industry in India
Major listed player on BSE as on August, 2013 :-
Company Name
Location of plant
Trade price
Market Cap (Rs.
in Cr.)
SalesTurnover
Net Profit
Margins (in %)
Total Assets
SAIL – Group
Salem 47.55 19,640.65 44,598.26 2,170.35 4.86 62,525.21
Vesuvius India
Kolkata 354.90 720.31 563.79 55.76 9.89 343.25
Orient Refract
Bhiwadi 25.00 300.35 360.58 41.39 11.48 87.78
HIL 289.00 215.67 1,037.25 60.64 5.85 557.55Everest Ind
Established in 1958, TRL Krosaki Refractories Limited (formerly Tata Refractories Limited) has pioneered refractory production in India. Today, this ISO 9001 company is the No.1 refractory company in India with a wide range of products like Basic, Dolomite, High Alumina, Monolithics & Silica Refractories having a consolidated installed capacity of 3,04,760 TPA (FY’10). Its key customers are the Steel, Cement, Glass, Copper and Aluminium industries. Its main Works 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 Singapore based SPV) and TRL China Limited, 100% subsidiary of TRL Asia Pvt. Ltd. During the year 2010-11, the Company has achieved the distinction of being the first Indian refractories company to cross Rs.1000 Crores consolidated turnover.
Particulars FY 12(Figures in Cr.)
FY 11 (Figures in Cr.)
Turnover 1,000 926Profit before tax (PBT) 18 67Profit after tax (PAT) 10 44
During first quarter of Financial Year 2011-12, Tata Steel Limited sold its 51% equity stake out of total 77.46% equity stake in Tata Refractories Ltd. (TRL) to Krosaki Harima Corporation, Japan. Consequently, Tata Steel and its subsidiary’s holding in TRL (now known as TRL Krosaki Refractories Limited) has reduced to 26.62%. Accordingly, it has ceased to be a subsidiary and
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Business Report on Refractory Industry in India
became an associate.TRL Krosaki has maintained its leadership position in refractories market in India, producing and supplying the full range of refractories products required for Iron and Steel and other core industries. The Company’s performance was impacted by the economic downturn which severely subdued the demand for industrial goods. Gross production at 222k tonnes was lower by 5% as compared to 235k tonnes during Financial Year 2010-11.Similarly, sales volume was also lower by 6% at 299k tonnes as compared to 318k tones during Financial Year 2010-11. Despite lower sales volume, the Company was able to achieve higher revenue primarily due to better product mix leading to a higher average realisation. Higher input cost of raw materials, fuel and power along with increase in finance cost during Financial Year 2011-12 resulted in 47% lower profit before tax (PBT) as compared to Financial Year 2010-11.
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Business Report on Refractory Industry in India
2.) IFGL Refractories Ltd.
It is a Kolkata based company, engaged in manufacturing of Specialized Refractories mainly used in Steel industry. Company started its first plant of slide gate refractories in 1984. During 2006, company acquired Monocon group with production facility in many countries in the world. During 2008, company acquired Hoffman group with manufacturing plant in Germany and Czech Republic. Currently IFGL have manufacturing facilities in India, Brazil, China, Czech Republic, Germany, UK and USA. IFGL Exports Ltd a subsidiary company of IFGL Refractories Ltd, earlier associate company, has setup a new Continuous Casting Refractories (CCR) plant in Kandla Special Economic Zone in Gujarat. Being a technology provider to the company, Krosaki Harima Corporation, a subsidiary of Nippon Steel Corporation Japan, has 20% stake in IFGL Exports Ltd.
Financials Performance :-
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Business Report on Refractory Industry in India
Indian Steel ScenarioIndia maintained its ranking as the 4th largest steel producer in the World with a production of 71.3 million tonnes in 2011, registering a growth rate of 4.4% over 2010, as per WSA. According to JPC estimates, domestic finished steel consumption posted a growth of 6.8% during 2011-12 to 70.92 Million Tonnes. The World Steel Association has projected a growth of 6.9% for steel consumption for India during 2012, which is higher than the growth in steel consumption projected for China (4%). In 2013, the growth rate is forecast to accelerate to 9.4%. A growth rate of 8-9% in the next few years is expected to be sustained mainly by factors such as the 1 trillion USD investment envisaged for the infrastructure sector in the 12th Five Year Plan, greater emphasis on increasing growth rate of the manufacturing sector, higher rates of urbanization, rising middle class population and tapping the potential of the rural market. Also, in terms of per capita consumption of finished steel, India at 57 kg lags behind the world average of 214.7kg, indicating a huge potential for growth. In terms of imports and exports, India has become a net importer of steel since 2007-08, with the net imports at 3 million tonnes during2011-12. An important reason for the high level of imports has been the domestic non-availability or limited availability of sophisticated/ specialized steel products.
Conclusion:-
Refractory business is a capital intensive industry which requires heavy investment in technology and basic raw materials. The business is heavily dependent on steel industry (nearly 75%) and on the contrary steel industry is upgrading technology to reduce its dependence on refractories products. The other industries where refractories can cater to are cement, sponge iron, chemical, petrochemical, glass , ceramic and limestone industries. The slowdown in the Indian economy has affected the steel industry resulting in lower top lines in refractory industry. Also, the increase in cost of raw materials, coals, petrol prices, etc. has affected the bottom lines. This is a highly specialized industry and depending upon the production capacities, plant location, technology implemented a competitive advantage can be structured and better performance can be expected in future.
