Weighing the alternatives

Increases in prices, poor availability, refractory manufacturers constantly looking to substitute lower-cost raw materials in their formulations, and above all, supply concerns. These have contributed to the raw material issue that has become a brain teaser for most refractories producers.

Among the most problematic, bauxite, magnesia, graphite and zircon are unanimously identified without hesitation.

The key common denominator in the supply-demand dynamic is China, historically a significant source of many leading refractory minerals such as bauxite, fused alumina, silicon carbide, graphite, flint clay, and magnesia.

China’s influence

Magnesite mining at Haicheng, Liaoning in China. The country dominates global magnesia markets, although issues over quality continue to plague consumers.

“Another critical raw material is zirconia due to the incredible demand of the ceramic industry in China and because some mines in other countries have been closed,” he added.

China remains one of the main concerns when it comes to supply, the country being a leading producer of key refractories material such as bauxite, magnesia and graphite.

Supplies from China have been drastically reduced in the past few years due to several reasons such as the closure of shaft kilns, for environmental and safety reasons, gradual exhaustion of the high-grade deposits, and government imposed export restrictions as the domestic industry is consuming more and more raw materials.

“In addition, raw material prices, in particular bauxite, are rising rapidly,” explained Shaowei Zhang, reader in structural ceramics & refractories, department of Materials Science and Engineering, Sheffield University.

Chinese demand has grown with a subsequent shortage of raw materials for overseas refractory manufacturers. In the case of fused materials, energy consumption in the country has even increased imports of fused refractory minerals.

As a result, the search for alternatives to Chinese-based raw materials in the Western world has emerged as a growing trend.

As underlined to IM by Andus Buhr, global technical director refractories, Almatis GmbH, availability and pricing of bauxite and brown fused alumina have changed considerably over the past four years.

Supply has become tight and prices have increased dramatically driven by growing internal demand in China and changes of Chinese policy with regard to raw material export.

Alan Roughead, managing director at Queensland Magnesia Pty Ltd (QMAG), confirms the trend to IM. He believes China is becoming more problematic in terms of reduced quality, poor delivery, and increasing prices, resulting in Western suppliers with a good history of consistent reliable supply being in great demand.

“As the refractories producers fix long-term contracts with their customers, particularly in steel which is a very important market for QMAG, reliability of raw material supply and stability of price is becoming critical for the refractories producer,” Roughead said.

Chinese bauxite had been a low price material since the mid-late 1980s, and had become a standard for many high alumina refractories as refractory manufacturers switched to this lower cost input from using bauxite from Guyana and andalusite from France and South Africa.

During the last few years availability has declined owing to Chinese government policies to discourage mineral exports through various measures (export licences, taxes, quotas, VAT rebate abolition) and some plant closures due to environmental restrictions. Prices have also increased remarkably, and quality has deteriorated. The same has applied for brown fused alumina out of China.

Technical considerations

Fused alumina ingots cool at Treibacher Schleifmittel AG’s production site. BFA is dominated by Chinese players but WFA supply is strong in Europe. Treibacher Schleifmittel AG

In addition, the steel industry now tends to shift to total cost of ownership (TCO), meaning offering service contracts as cost/tonne of steel produced (CPT) and full line supply (FLS), observed Cappelli.

In other words, steel plant managers appear to now concentrate more and more efforts on their core business and everything that has to do with refractory is given into the hand of the refractory supplier.

“That means that the whole refractory industry has to move from a straight supply to an industry offering additional value with service, installation, consulting as a must, if it wants to stay competitive in the market. This kind of business has a great side effect: it allows the refractory companies to have direct access to secondary raw material that is used to produce new products for the industrial business - e.g. cement/lime, non ferrous metal, environment and chemistry, and some times also in glass,” Cappelli explained.

Cappelli added that customers are looking in the same direction as the steel plant - a tendency that seems to increase dramatically worldwide, with the exception of China.

The financial crisis also had an impact on mentalities in the industry. In the few years leading up to the financial crisis, suppliers and traders operated in an environment of rapidly increasing prices and a declining supply of quality raw materials, resulting in a surge to find alternatives.

Bauxite - full circle

Pasek’s dunite mine in Galicia, northern Spain. Dunite, which contains olivine, is an emerging source of magnesia in refractories. Pasek Espana SA

It was then relatively easy for refractory suppliers to sell new refractories with higher alumina content (using lower cost bauxite from China) to their customers, because the general perception was that higher alumina content automatically meant higher performance.

That is when the global refractory industry became very dependent on Chinese bauxite and brown fused alumina (BFA).

However, the scenario dramatically changed during the 2000s with the steady development of China, followed by the growth of its steel and therefore refractories industries. China then shifted its supportive attitude over raw material exports to controlling quotas, limiting volumes by export licences, taxes and fees.

The overall trend resulted in a steep price increase in the market. From cheap prices flirting with $70/tonne some years ago, bauxite has now crossed the $500/tonne threshold, prompting the industry to find alternative materials.

“Who could have predicted that?” a source from the industry told IM. “The situation would have seemed inconceivable before.”

“One of the main problems of [refractory] non-metallurgical bauxite is that China is and will always be the main producer,” commented another source. This is supported by the fact that the only producer outside of China of refractory grade bauxite is Chinese owned Bosai Minerals Group (Guyana) Inc., in Guyana.

As a consequence, the industry has to step back where it was some twenty years ago as alternative aluminosilicate high alumina materials could face a revival in applications where they had previously been replaced by bauxite.

Hence the intense interest from producers of andalusite and mullite in investing in capacity expansions, as reported recently in IM, many of which are expected to come on stream in the next two to three years, not to mention new sources of supply of these minerals looking to emerge.

Buhr believes that “a partial replacement will for sure take place and has started already” even though “a complete replacement seems rather unlikely” with regard to high volumes.

“It will also depend on Chinese policies to what extent further new alternatives will be developed,” he added.

It is very likely that most refractory producers in mature regions such as Europe will pursue alternatives to Chinese raw materials in order to at least reduce their dependency from Chinese supply.

“This strategic aspect has become important during the past years and it is not expected that this general situation will change,” commented Buhr.

At present, alternatives for bauxite are andalusite, sillimanite, Mulcoa 60 and 70. “These alternatives often show better thermo-mechanical properties,” explained Andus Buhr to IM, however, pointing out that “lower alumina content when compared to bauxite can be a disadvantage when slag basicity is too high”.

Brown fused alumina can be replaced by synthetic alumina based materials in addition to tabular alumina or white fused alumina as synthetic alumina based materials provide higher chemical purity and very often a better performance.

“When the pricing gap between brown fused and synthetic materials narrows tabular alumina becomes an even more economical solution,” commented Buhr.

“The density difference between fused and sintered aggregates of about 7% results in a lower material demand with sintered aggregates which also contributes to the economic result. Such replacement of brown fused alumina by tabular alumina is already taking place eg. in blast furnace runner mixes and AluMagCarbon bricks,” he added.

Among new products, Almatis has recently launched BSA 96, a new sinter aggregate with 96% Al₂O₃ produced in Ludwigshafen, Germany, which “is independent from Chinese raw materials”.

Buhr explained that the manufacture of BSA 96 is identical to the production of tabular alumina and sintered spinels, providing a homogeneous sintered product with the same chemical composition across all size fractions.

“It is free of carbide or metallic contaminants which can disturb the performance of fused high alumina aggregates in monolithic and brick applications,” he said. Almatis has invested in an additional crushing and sizing line in Ludwigshafen to support the high growth of tabular, spinel, and the new aggregate BSA 96.

“Another trend in the coming years is to produce homogenous bauxite using lower-quality bauxite deposits,” commented another source, adding that a few plants are working on using a different process to produce homogenous bauxite high quality (85-92% alumina).

Magnesia

Andalusite extraction at Andalusite Resources’ operations in Limpopo province South Africa. The mineral is an alternative, if not a returning, source of alumina. Andalusite Resources

Magnesia faces some of the same issues of supply and quality as bauxite. The 8m. tpa world production (derived from magnesite) is dominated by China (49%), leading to similar concerns of raw material supply, exports controls, taxes and fees. Other leading producers include Austria, Brazil, Greece, Russia, Slovakia, Spain, and Turkey.

World synthetic magnesia production - derived from seawater and brines - is about 925,000 tpa, from Brazil, Japan, Mexico, the Netherlands, Norway, the Republic of Ireland, Russia, South Korea, and the USA. Refractories is the main market for magnesia (dead burned and fused grades) with 52% share of the market.

Australian magnesia producer Queensland Magnesia Pty Ltd (QMAG) reported that refractory companies are constantly looking to substitute lower-cost raw materials in their formulations.

“Whereas previously many would use high levels of electrofused magnesia in a formulation, now they will look to substitute as much dead burned magnesia as possible to try and reduce cost whilst not compromising performance,” Alan Roughead, QMAG’s managing director, commented to IM .

According to QMAG, high grade dead burned magnesia (DBM) 97% MgO plus with a CaO:SiO₂ ratio greater than 2.5 appears to be” increasingly problematic in the long-term given the scarcity of natural resources available”.

Synthetic producers, which can produce this material, face continuing increases in energy costs and environmental challenges. The same can be said for high grade fused magnesia (FM).

The difference stands with Chinese producers “that are constrained by poor availability of suitable feed material” explained Roughead, managing director. As a consequence, increasing energy prices continue to impact quality, availability and pricing. “Not to mention the issue with export quota availability,” added Roughead.

While bauxite can find alternatives, magnesia remains more problematic. “There are no new alternatives for magnesia. These could potentially be reduced but elimination is not likely,” underlined Roughead.

Fused magnesia can, however, be substituted with high quality DBM in certain application areas, as long as the silicate phases are of high refractoriness and grain density is high.

“A potential alternative to magnesia in steelmaking applications is doloma [calcined dolomite] but this is in quite limited steelmaking application areas where the slag chemistry is compatible with the dolomitic system,” commented Roughead.

Graphite

World graphite production is 1.13m. tonnes, the main producing countries being China, India, Brazil, and Canada.

The largest market for graphite is the refractories industry with 24% of the market share. But it is expected that demand from the lithium ion (Li-ion) battery market could create the need for additional supply sources in the long term, although the debate continues over natural versus synthetic grades (see Market Monitor p.29).

At present, it is difficult to quantify the amount of raw material which will be needed within the next decade to supply this promising sector. Graphite is the second largest input material by volume used in Li-ion batteries, and it has been estimated that an additional 1m. tonnes graphite will be needed by 2020 , a figure - although controversial - which remains a source of concern for the refractories industry as the battery market would be more lucrative for graphite suppliers compared to the refractories industry.

As reported by IM, it is estimated that whereas flake graphite, the starting product for spherical used in refractories to boost performance, trades for an average of $2,500/tonne, a battery material manufacturer can pay between $8,000-10,000/tonne for spherical grades.

“Natural graphite presents a huge demand from hybrid car batteries so the refractory market has been moved to a second level,” said Roberto Caballero from Pasek Espa–a SA.

In the near term, a graphite shortage is expected as demand, which cautiously increased during H2 2009, started to pick up quickly at the beginning of 2010. As a result, graphite prices keep growing steadily, particularly in China.

“Price increases from China are driving refractory producers to buy from sources in other areas of the world and to focus R&D on looking for alternatives to this mineral,” a source from the industry underlined to IM.

But as Giorgio Cappelli, COO division steel and member of the management board of RHI AG told IM, “at the moment there is no alternative to graphite”. For now, refractory producers are discreetly working on finding replacement materials for the long term.

Cappelli remains confident, believing that it will be possible to replace graphite “in some years”. Several research projects are focussing on that, he added.

Meanwhile, the more immediate options are to use less, and possibly consider the use of nanotechnology to support this, according to another source from the industry.


Typical data of high alumina raw materials for refractories

As reported by IM, the future forecast shortage in zircon supply has been brought forward owing to strong demand in China. The question now is, across all applications worldwide, how to allocate approximately 1.3m. tpa of zircon produced when demand exceeds supply by more than 100,000 tpa in 2011.

Zircon was one of the key refractory raw materials used in steelmaking until the end of the 1980s when it was replaced by superior alumina-spinel compositions.

As consultant Alister MacDonald explained, zircon refractories have today been mostly replaced by fused zirconia refractory materials produced from zircon owing to their low cost compared to chemical zirconia materials. They are used extensively for glassmaking and steelmaking refractories.

It is estimated that approximately 100,000 tpa of zircon is used to produce fused zirconia products.

“However, it is expected that increased zircon prices will allow zirconia derived from polymetallic ores to be competitive as an alternative to fused zirconia when new sources of production are available,” underlined MacDonald.

According to TZ Minerals International, the share of zircon usage for refractory applications has decreased from 17% in 2000 to 13% in 2008 with a forecast 11% for 2012.

In glassmaking refractories, monoclinic fused zirconia is added with zircon to form alumina-zirconia-silica (AZS) refractories used to line glass tanks for flat glass manufacture.

“Most liquid crystal display (LCD) and plasma display panels (PDP) use high zirconia refractory blocks in the furnace linings where minimal impurities are desirable,” commented MacDonald.

Steelmaking refractories also use monoclinic fused zirconia as the main raw material for producing stabilised zirconia refractory materials.

According to the industry, there is no readily available substitute for zircon in over 80% of applications.

“Where substitution is possible, this is mainly due to the use of other zirconium-derived raw materials, such as naturally occurring zirconium dioxide, baddeleyite, or zirconium from complex polymetallic ores, explained MacDonald.

“At the moment there is no alternative to zirconia,” confirmed to IM Giorgio Cappelli, COO division steel the member of the management board of RHI AG.

“There is an alternative using a synthetic grade but only for few application in the steel industries, but up to now there is no alternative for the production of fused alumina zirconia blocks for the glass furnace,” he added.

Recycling

Recycling is among the new trends to try to find a solution to these raw materials issues. As explained by president of Belgium-based Federation Europeenne des Fabricants de Produits Refractaires (PRE), Robin Schmidt-Whitley, the proportion of recycled material has increased slightly over the last decade.

“A further increase would be possible if the user industries were more willing to accept recycled products,” Schmidt-Whitley commented to IM.

According to PRE data, less than 20% of refractories placed in furnaces have to be dumped at present, and more than 80% are either recycled as raw materials for refractory or non-refractory re-use, or dissolved in the slags of the user industries.

Damien Caby, vice president & general manager, Minerals for Refractories & Oilfields - Global, Imerys, explained in an interview to IM that “while recycling is of real interest for managing the refractory products’ life cycle and can provide cost savings - especially in the environment described above where primary raw material prices are increasing - it also poses its technical challenges, related to raw material consistency and the importance of sorting out all material that has had direct contact with steel” (see p.33).

“In concrete terms, two thirds of the refractory lining is worn down by use. The remaining one third is removed and can be recycled.  Only materials that have not had direct contact with the steel can be recycled back into refractory applications,” he added.

As reported by IM, RVA is an example of recycling refractories materials. The France-based company, which is working on developing its new product Valoxy, takes slags from aluminium smelters and recycles them into three value-added outputs, including an unconventional source of alumina for non-metallurgical applications (see p. 70).

Challenges

Over the last two decades, the challenges faced by the world of refractories have multiplied. With no surprise, issues about raw materials supply and increase in prices remain the main concern.

“Price of raw materials coupled with non-availability has been a matter of great concern,” said V.V. Rajgopalan president marketing at India’s IFGL Refractories Ltd. “In the Indian context, developing an indigenous source is the biggest challenge,” he added.

As a consequence, the challenges for refractories producers are to close long-term contracts, in a win-to-win approach with the customers. “Our focus lies in using the appropriate refractory materials to improve their productivity, to reduce the refractory costs per tonne of steel, use and improve our know-how of their production processes. This will allow us to improve the supply chain from the raw materials to the finished products and to have a better planning of our production capacities”, underlined Giorgio Cappelli, COO division steel and member of the management board of RHI AG.

This works either way, for both refractories manufacturers as well as raw material suppliers. “From a raw materials supply perspective the challenge is to restore stable long-term supplier/customer relationships,” confirmed Alan Roughead, QMAG’s managing director, so that suppliers can “secure a price sufficient to allow them to reinvest in the industry in order to maintain continuity of supply”.

From a buyer’s perspective, the idea is to ensure continuity and security of supply in addition to minimising costs and inventory holding. “Unfortunately far too many buyers only ever focus on today’s price with no regard to value in use, total cost or the long-term viability of the material,” regrets Roughead.

The energy consumption for the production of raw materials is another aspect which is gaining importance.

As Andus Buhr, Almatis’ global technical director refractories, underlined to IM, apart from andalusite, all high alumina raw materials require firing at high temperatures to produce a dense and shrinkage resistant refractory aggregate, and the energy input is quite high due to the high refractoriness of the material. This results in higher energy costs for refractories producers.

“Considering the overall impact of high energy consumption and the corresponding impact on greenhouse gas emissions, it becomes obvious that the sinter process is the more sustainable process route for the manufacturing of high alumina aggregates,” Andus Buhr said, as sinter processes run at lower energy levels when compared to the fusion process.

The financial crisis also had an important impact on the refractories industry. Refractories companies were becoming increasingly concerned about security of supply and consequently built significant inventories of raw materials.

As Roughead underlined, during the crisis many buyers stayed out of the market altogether and the previous orderly supply chain broke down somewhat. “Now buyers try and operate a ‘just-in-time’ type scenario which has put extraordinary pressure on the supply chain,” Roughead commented, explaining that it is extremely difficult to operate a ‘just-in-time’ system for bulk industrial minerals unless local warehousing is invested in, as QMAG do in the European and African markets.

“An alternative to this is the move to refractories companies preferring to purchase on consignment stock basis in order to minimise the effect of strategic raw material stocks on cash flow and working capital,” he said.

While most suppliers and buyers previously held reasonable volumes of material in inventory which allowed optimum logistics solutions, moving large volumes cost effectively, such large inventories are almost nonexistent today, and shipment sizes are smaller.

It is likely that there will be continuing fluctuations in price as buyers are frequently forced to pay above market levels to secure material at short notice.

“Unfortunately it goes the other way as well with some suppliers having an abundance of material in the wrong place at the wrong time, or an abundance of export licenses at the wrong time of the year, or then again no licenses available when required. So the orderly marketing previously seen in the industry has broken down a little,” said Roughead.

Outlook

During the next decade, it is very likely that supply will affect the sustainability of the industry and the properties and performance of the refractory products, owing to the use of low grade materials.

Although the refractories sector is not close to fixing its raw materials issue, the focus is on finding solutions to adapt to the new constraints of the market.

Among the priorities, the race to find new sources of raw material is more than ever the main concern at every level of the industry as refractories producers now tend to acquire their own mineral sources (exemplified by the enhanced vertical integration priorities of RHI and Magnesitas Refratarios - see p.36).

As a result, it is expected that more large refractories producers will become more vertically integrated through acquisition of magnesia, graphite, and bauxite production facilities in order to ensure stability of supply for their customers and to try and ensure a controllable cost structure.

“It is a must to refractory producers to increase the self-supply with raw materials. Without having 70-80 % of your own MgO sources it will be difficult to survive,” told IM Cappelli from RHI.

Alan Roughead, QMAG, believes refractory raw material buyers will have to “support production and investment in raw materials from sources other than China” and to “enter into long-term supply contracts with various suppliers that provide sufficient return on investment to ensure security and continuity”.

“Unless the industry moves towards this type of market (or something similar) the availability in the long term is going to be compromised,” he warned, pointing out that improved collaboration between refractories and raw material producers is a must for the future of the industry.

Andus Buhr from Almatis said to IM that “the strategic sourcing of raw materials will be an important factor for Western refractory producers”.

“Cheap supply of raw materials from China to Western refractory producers will never come back,” he commented, underlining that “Western producers are facing competition from Chinese refractory exports where Chinese producers are not suffering from licenses, taxes, and fees for their raw material supply”.

On the other hand, refractory producers will have to keep focusing on R&D, optimising industrial process and investing. A service previously considered as ‘secondary level’ will become a priority.

“The refractories industry will do a new effort of imagination developing new solutions,” Roberto Caballero from Pasek commented to IM while Rajgopalan from India’s IFGL warned that “price is going to be the deciding factor”.

Shaowei Zhang from Sheffield University believes that “partial replacements might be possible” although in most cases a complete replacement without compromising properties and performance would be difficult”.

Developing existing and new alternatives, maximising recycling, increasing technology to upgrade lower-grade raw materials, combining purer materials with lower grade materials, investigating alternative materials, chemical beneficiation, and reinforcing R&D are among the main trends to answer the raw material supply issue.

But this comes at a price. “The challenge is to balance the increasing production costs by passing it on to the customer,” believes Cappelli from RHI, underlining that “the effort that all big refractory players have to make is to increase R&D to find alternatives/substitutes to these raw materials”.

Cappelli expects in the next five to ten years a strong consolidation process of the refractory industry especially in China. “Today there are more than 3,000 producers, and as already said, the service component of the refractory business will increase and TCO (total cost of ownership), CPT (cost/tonnes of steel produced), and FLS (Full Line supply) will be the standard business in the refractory industry,” he said.



Refractory fundamentals

What are refractories?

Refractories materials have resistance to extreme conditions of heat and corrosion during the containment of hot and molten substances and gases. In essence, refractories act as heat insulating materials.

In general, products which are applied at temperatures >600¡C are referred to as refractories. The standard DIN 51060/ISO/R 836 defines the following classes:

Fireproof <1,500 ºC

Refractory >1,500 ºC

Highly refractory >1,800 ºC

Refractory products & minerals

Refractory products are manufactured as either shapes (bricks) or dry granular or cohesive plastic materials (monolithics).

They can be classified broadly into four main categories: acidic, basic, special, and insulating. The following table illustrates a classification of key refractory minerals and selected refractory application temperatures.

Main end user sectors