End User Focus: Reconstruction revives refractories in Japan

By Mike O'Driscoll
Published: Thursday, 26 January 2012

Sluggish steel outlook tempered by cement stimulus from post-quake rebuilding programme

Japan, along with South Korea, Taiwan, and more recently China, has been one of the great refractory markets of recent times. One of its key characteristics is that it has always been at the cutting edge of refractory development and refractory raw material usage - driven in large part by its pioneering steel and metals industries.

Another characteristic has been the market’s reliance on imported refractory minerals, the country being poor in natural resources for this key industrial mineral market.

Despite its “ahead of the pack” badge of honour in refractory development, like most developed countries, Japan’s refractory market is also hostage to the peaks and troughs of the national economy as well increasing efficiencies in steelmaking technology.

Since 2001, Japanese refractories production has dropped by about 117,000 tonnes, despite an overall increase in the country’s steel production (see charts).

From 2003 until 2007, refractories production was maintained at just under 1.2m, peaking at 1.2m in 2007 matching the peak in steel output at 121m. in the same year.

Although industrial refractory markets (eg. glass, cement, lime etc.) play an important part, the industry is driven by demand for steel refractories, which usually accounts for 70-75% of Japan’s refractories production.

The two most noticeable trends have been the increase in refractory monolithics use at the expense of shaped refractories, and the overall decrease in specific refractory consumption in end product manufacture (ie. steel, glass, cement etc.).

Shaped production declined from 478,300 tonnes in 2001 to 379,000 tonnes in 2010, while that of monolithics has been more or less maintained at around the 750,000 tonne level. The ratio at present is around 66% monolithics to 34% shaped refractories produced in Japan.

As is the lot of the refractory business worldwide, its principal customers demand higher quality products in order to reduce their overall refractory consumption.

During the last few decades, Japan has seen an overall declining specific refractory consumption per tonne of steel produced, which now stands around 7.4kg/t steel overall (see chart).

In contrast, the consumption rate in 1980 for Japan was 15kg/tonne steel. For perspective, in China it was 55kg/tonne steel in 1980 and is now around 20kg/tonne steel, although this is expected to drop further and more quickly as modern technologies are implemented.

It is in the shaped refractories sector where the more significant decline in Japan’s refractory consumption rate has occurred, from 3.1kg/tonne steel in 2001 to just 2.2kg/tonne steel in 2010.

Consumption of monolithics dropped from 5.6kg/tonne steel in 2001 to 5.2kg/tonne steel in 2002, but has remained more or less at that level since.

Steel is by far Japan’s top market for refractories, accounting for 80% of monolithics and just over 70% of shaped refractories.

However, with steel demand on the wane at present, the industrial markets of cement and in incinerators are showing encouraging signs of growth in demand for refractories (see below).

Regarding production of refractory type by composition the main workhorse products remain based on refractory clays, aluminas, and magnesia.

In recent years there have been notable decreases in Japanese refractories based on fireclay, silica, chromite, dolomite (actually ceased in 2010), spinel, zircon, and graphite.

The main influencing factor here has been scarcity in certain raw materials combined with changing mineral requirements as new refractories are developed.

Steel setback

Japan’s steel industry is experiencing a setback at present, which is not expected to be revived, at least significantly, in the near future.

According to the World Steel Association (WSA), world crude steel production for November 2011 was recorded at 116m tonnes, just 1.1% higher than November 2010.

Japan produced 8.7m tonnes of crude steel in November 2011, a decrease of 3.2% compared to the same month in 2010.

Elsewhere in Asia in comparison for that month: China’s production was 49.9m tonnes, a slight decrease of 0.2%; South Korea’s was 5.8m tonnes, up 12.4%.

During 2011, Japan’s monthly crude steel output fluctuated between 8.4-9.8m tonnes, and for the eleven months to November 2011, was down 1.2% over 2010.

Owing mainly to disruptions caused by the Tohoku earthquake in Japan in March 2011, in its short term outlook for 2012-13, the WSA expected Japan’s steel use to decline by 2.7% to 61.8m tonnes in 2011, while apparent steel use in Japan for 2012 is forecast to show a growth of just 0.8%, to 62.3m tonnes. This represents just 77% of Japan’s 2007 level.

Leading Japanese steel producers recently announced their production forecast for 2012 as 6-7% down on 2011.

Dr Masanori Ueki, secretary general of the UNITECR 2011 organising committee and of Krosaki Harima Corp., told IM: “Since the demand of refractories in Japan is proportional to the production of steel, refractories demand will be decreased 5% or 6%.”

Although little at this stage can be ascertained for 2013, Ueki pointed to the impending merger of Nippon Steel Corp. and Sumitomo Metals Industry as creating some potential new demand for refractories for anticipated overseas operations.

Cement for post-earthquake construction

Japan’s cement industry has been somewhat stagnant in recent years and thus not a particularly healthy outlet for refractories, but the reconstruction programme in response to the March 2011 earthquake is expected to galvanise the Japanese cement business for 2012.

Construction work that had been suspended across Japan because of the disaster has now resumed, leading to a spike in cement demand.

The Japanese government has decided on a JPY12 trillion reconstruction budget in the earthquake disaster area. This will be used for the reconstruction of large infrastructures such as rivers, seashore, roads, railroads, airports, and ports.

Sales have also been strong for cement used in concrete blocks for breakwaters, and with nuclear reactors closed, cement was used in construction to boost output at fossil- fuel-burning power plants.

The Japan Cement Association estimates that 10m tonnes of cement will be used for such reconstruction projects.

As a result, post-earthquake reconstruction demand is expected to boost pre-tax profits for leading Japanese cement producers - Taiheiyo Cement Corp., Sumitomo Osaka Cement Co., Mitsubishi Materials Corp., and Ube Industries Ltd - by a combined $411m until 2016.

Taiheiyo Cement accounts for almost 40% of the market in Japan’s north-eastern Tohoku region. Reconstruction demand is expected to increase its cement sales by nearly 4m tonnes, translating to a $37.4m contribution to pre-tax profit annually for the next five years.

Of course the other silver lining, or rather cement rotary kiln lining, from this reconstruction programme is the anticipated demand for cement kiln refractories during 2012 as cement producers raise kiln utilisation rates to meet the projected demand boost.

This will see increased demand for magnesia-spinel and dolomite refractory bricks in particular.

Dr Ueki commented: “Demand for cement producers will increase by up to 10% owing mainly to reconstruction from the disaster in March last year.”

“Eco-Refractories” on the horizon

The evolution of a new generation of industrial furnaces driven by new and emerging energy sources is envisaged as an important new application area for future refractories development and consumption.

The subject was well presented by Dr Kiyoshi Sugita in his paper, “An introduction to the ‘Age of Eco-Refractories’”, at last November’s UNITECR 2011 Congress in Kyoto, Japan.

Essentially, greener-types of energy sources such as solar, wind, tidal, geothermal, hydrogen, nuclear, and biomass will demand new furnace technologies including furnace design, control systems, refractories, and insulating materials.

Also increased utilisation of alternative fuels, such as waste and recycled materials, will also change furnace design concepts.

The move to larger and more continuously operated blast furnaces, where Japan has always led, will also continue its trend in raising energy efficiencies and reducing CO2 emissions.

There is expected to be more electrically powered furnaces in operation in the future with more elaborate heating patterns and more precisely controlled atmospheres.

The development of hybrid or combined heating systems for furnaces, ie. a shift away from single heating system furnaces, is also likely in the future according to Dr Sugita.

In summary, future refractories will be expected to address:

- energy conservation

- lowering CO2 emissions

- material design utilising abundant natural raw materials and recycled waste

- higher performance and more suitable refractories to meet demands of more diversified furnaces

- multi-functional intelligent refractories by utilising functional materials

- restructuring refractories technology and R&D methodology

Raw materials in short supply sought outside China

The accompanying table and chart show the variety and volume of refractory raw materials that are consumed by Japan’s refractories market.

Of note is the reliance on imported materials. Japan only has significant domestic sources of calcined aluminas, synthetic dead burned magnesia, spinel, and some refractory clays.

In 2010, of the total 943,000 tonnes of refractory raw materials consumed in Japanese refractories, about 40% (373,200 tonnes) was derived from imports.

Another 40% (361,000 tonnes) was derived from processed raw material, of which it is considered at least 50% is imported as well.

Therefore, the total import reliance of Japanese refractory raw materials could be as much as 60% of total consumption.

China has historically been an important source of certain refractory minerals for Japan. Japan has had a high dependency ratio from China for brown fused alumina (95%), bauxite (95%), graphite (90%), sintered mullite (85%), dead burned magnesia (85%), fused magnesia (70%), chamotte (45%), spinel (35%), silicon carbide (25%), and white fused alumina (25%).

Like other consumers, Japan is having to seek alternative sources elsewhere as Chinese supply becomes constrained, unreliable, and unpredictable in both pricing and supply consistency.

Dr Ueki told IM: “Sourcing graphite, especially, is quite a serious difficulty, as it is with magnesia. Purchasing divisions of refractory producers are struggling every day to seek any cheaper sources other than China. Battery use of graphite is making demand tight for refractories.”

Other key refractory minerals imported from outside China, include zircon, zirconia, and chromite.